Sometimes going into debt can actually save you money. Just ask Apple.
Our favorite maker of shiny distractions went $17 billion into debt on Tuesday, despite having $145 billion in cash. This is crazy talk in the Age of Austerity. But in borrowing money, Apple might be saving itself from a $9 billion tax bill, the Financial Times estimates.
Apple recently promised to pay its shareholders, who have been scratching and clawing for a taste of its cash, $100 billion over the next couple of years. But it has less than $45 billion in the U.S. -- the rest of the cash is being held overseas, where it is safe from the grabby claws of the U.S. government, which selfishly would like some of the money to maintain an army and feed the poor.
In order to make its shareholder-payoff plan work with the cash it already has, Apple would need to bring about $26 billion in cash from overseas, estimate the bean-counters interviewed by the FT. The tax hit on that might be $9 billion, leaving Apple with the $17 billion it needs. Hence Tuesday's bond sale -- which has been hungrily snatched up by bond investors, by the way.
Apple declined to comment to the FT.
Of course, going into debt is not cost-free. Apple will pay about $300 million a year in interest on the debt, estimate the FT's accountants. But at least Apple will be able to deduct $100 million of that interest when it files its taxes.
That is just one of many corporate tax breaks that cost the U.S. government $180 billion per year, according to a recent estimate by the Government Accountability Office. Among those many loopholes are tax breaks on cash stashed overseas -- a loophole that is currently temporary, but which companies would like to make permanent -- part of what they like to call "tax reform."