GOP Takes Bigger Bite From Apple, Microsoft, Google To Seal Trump Tax Cuts

Republican tax negotiators finalized their nearly $1.5 trillion in tax cuts on Friday after another raid on the overseas piggy banks of Apple ( AAPL ), Microsoft ( MSFT ) and Google-parent Alphabet ( GOOGL ).

The finalized version of the Tax Cuts and Jobs Act imposes a 15.5% tax on cash held overseas by those tech titans and other companies to avoid being taxed at the current 35% corporate rate, along with an 8% tax on illiquid assets such as real estate, raising $339 billion.

That's $40 billion more than the bill that passed the Senate in early December and $154 billion more than the initial Senate plan released one month ago. That original version would have set a 10% tax rate on cash and 5% on illiquid assets. Apple has $252 billion parked overseas , while Microsoft holds $128 billion and Alphabet $52 billion.

The S&P 500, Dow Jones industrial average and Nasdaq composite all rallied strongly Friday, hitting record highs on the stock market today amid growing confidence that the tax deal was nearing completion and had

Republicans are racing to get the legislation passed next week, before the GOP Senate majority shrinks, following Democrat Doug Jones' victory in Alabama's special election on Tuesday. At the moment, the bill can pass if two GOP senators oppose it, but the margin of error shrinks to one after Jones is sworn in sometime after Christmas. Yet those concerns pretty much evaporated on Friday afternoon, when Tennessee Sen. Bob Corker, the lone Republican to vote against the bill in early December, said he plans to vote for the final version. Maine's Susan Collins, another wavering vote, also signaled she was a yes Friday evening.

Major changes from the bill that passed the Senate include a 21% corporate tax rate, instead of 20%, but a start date of 2018, not 2019. The GOP deal also allows individuals to deduct $10,000 in state and local taxes of any kind, not just property taxes, as in the original version, to mollify California Republicans. The final bill also lowers the top individual tax rate to 37%.

IBD'S TAKE:The bull market won't go on forever, so read IBD's The Big Picture column every day to stay on top of the market direction, a key indicator that lets you know when you can be aggressive and when you should move to the sidelines. As long as the current "confirmed uptrend" - the equivalent of a green light - stays in place, leading stocks breaking above a buy point are more likely than not to have the wind at their backs. Here's a good place to start looking for stocks that may be poised to move higher.

Republicans also satisfied Sen. Marco Rubio's demand that a bigger slice of the expanded child tax credit be made refundable in order to help working-class families with no income-tax liability.

The GOP bill expanded the child tax credit by $1,000, but the prior version only made $100 of the additional credit refundable. On Friday, Republicans bumped the expanded refundable portion to $400.

In addition to the corporate tax cut, the vast majority of businesses whose profits are taxed via individual tax returns also get tax cuts. Individual tax cuts, including a doubling of the standard deduction, lower rates and a bigger child tax credit are expected to expire after 2025, in line with the Senate bill. If those tax cuts are extended, as Republicans say they will be, the legislation will end up costing far more than the $1.5 trillion price tag.


Federal Reserve Gives Trump Tax Cuts A Green Light

Sen. Collins' Rescue Plan May Blow Up Insurance Markets

One Of The Hottest Dow Stocks Has A New Buy Point: Investing Action Plan

Looking For The Best Stocks To Buy And Watch? Start Here

How To Invest In The Stock Market: Start With A Simple Routine

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.