Global CIO: Cisco's Chambers Calls Out Obama's Job-Killing Protectionism
CEO Chambers is telling all who will listen that high U.S. corporate tax rates are forcing businesses to do most of their investing and hiring elsewhere.
Money talks and, we are learning painfully, money also walks—particularly away from environments that are increasingly hostile to the businesses based there. And so it is that Cisco CEO John Chambers deserves a lot of credit for trying to warn U.S. lawmakers that the hostile business environment they've created here will continue to force other corporate leaders to invest where they'll get the best return—and that will most assuredly not be in the U.S. of A.
Cash-rich Cisco Systems is sequestering $40 billion of its cash outside of the U.S. and away from our brutally high tax rates to use for investments and acquisitions and hiring, while keeping only one-fifth that amount—$8 billion—inside the U.S. for acquisitions and stock buy-backs. And the trend will only get worse as Cisco generated $3 billion more in cash during its most-recent quarter—and understandably wants to invest that treasure as wisely as it can.
Yes indeed, a whole lot of Cisco money has walked--$40 billion—and it's not coming back, says Chambers, unless the Obama administration revises its tax policies for U.S. companies doing business around the world. (Quick clarification: don't confuse the $40 billion in cash to which I'm referring here with Cisco's annual revenue, which is also coincidentally about $40 billion.)
And Chambers certainly isn't holding his breath in anticipation of such an enlightened change, which means that all that ready cash—$40 billion—will be plowed into investments and new hires and new businesses and acquisitions and R&D outside the U.S. because this country's corporate tax policies have become too expensive for us to compete effectively in today's global economy.
You may not like Chambers' logic, and you might try to argue, as our government does, that those new hires are "our jobs" and that if we just tighten down the thumb-screws on Cisco and Chambers and other global corporations, why then, they'll have no choice but to keep all their money here.
And you would be wrong.
But hey—don't take my word for it—just listen to Chambers himself, a guy whose dynamic company is growing at about 25% in today's still-challenging economy. To get a sense of the types of warnings Chambers has been sending Washington's way, with plain language that's about as blunt as a 2x4 across the face, take a look at some of the comments he's made recently in an attempt to convince the White House that the only certain outcome of higher corporate taxes and increasing efforts to control private-sector behavior will be the exodus from the U.S. of more cash, more jobs, and more opportunities.
Here's what Chambers recently told a Sanford Bernstein investment conference in New York City, as reported by Reuters:
[Chambers] said Cisco is likely to invest more aggressively overseas, and took the opportunity to call on the U.S. government to ease taxes on corporations' overseas profits.
"Part of it depends on, does the U.S. make a logical decision about allowing the repatriation of cash or not. I'm assuming they're not going to. We'll watch for probably another year. If that doesn't occur you're going to see us be very aggressive outside the U.S.," he said.
"However, if I were a leader in the U.S., I would bring back what could be as much as $900 billion of cash to the U.S. to make $30 or $40 billion in taxes, and tie it to headcount increases here and apply it locally."
(One more quick clarification: the $900 billion figure Chambers cites is his estimation for the total cash assets held outside the U.S. by Cisco and other U.S.-based corporations that, like Cisco, are seeking to avoid the high corporate tax rates in the U.S. Chambers goes on to say that Cisco and other companies holding huge piles of cash outside the U.S. would be willing to bring that money back into the U.S. at reasonable tax rates—ones that would yield the $30 billion to $40 billion in tax revenue he cites.)
And after a meeting of the Boston College Chief Executives Club, Bloomberg says that Chambers said the following: