Apple’s announcement that it will put a new $1 billion campus in Austin, Texas, is being read as a sign that the 2017 Republican-backed tax cut is bringing jobs back to the United States.
The Cupertino, California, company announced Thursday that it will hire at least 5,000 new employees in Austin, on top of the 6,200 it already has there. San Diego, Seattle and Culver City, California, will also get new offices of more than 1,000 employees.
It’s part of a spending surge that the company said earlier this year was prompted by the nearly $252 billion it planned to bring to the United States as a result of the tax overhaul. The company has promised to add 20,000 new US jobs by 2023.
President Donald Trump celebrated that in January. “Great to see Apple follow through as a result of TAX CUTS,” he tweeted at the time. “Huge win for American workers and the USA!” He’s recently turned against the company, threatening tariffs in September if the iPhone maker won’t move production to the United States, which CEO Tim Cook has said is not in the cards.
But the world’s richest company, worth about $810 billion, has spent a whole lot more on share purchases than on expanding its US operations.
In May, Apple announced a fresh round of $100 billion in stock buybacks, more than 40% of the cash it said it would repatriate from overseas.
That was on top of the $210 billion round it completed between August 2012 and March 2018, plus the billions of dollars it has returned to shareholders in the form of ever-increasing dividends — an unprecedented streak of payouts.
Apple isn’t alone in returning more cash to shareholders than it is re-investing in the business.
The 2017 Tax Cuts and Jobs Act imposed a 15.5% one-time tax on companies’ overseas cash reserves, whether companies repatriated them or not, and then freed overseas earnings from US taxation altogether.
According to a note published in September by economists at the Federal Reserve, the first quarter of 2018 saw approximately 30% of offshore cash holdings transferred to the United States. That fueled a dramatic increase in share repurchases — but very little additional investment on top of what the top 15 cash-hoarding companies had been spending already.
“Because the top 15 cash holders are large firms, they are unlikely to have faced notable constraints or costs to accessing capital markets to fund investment before the Tax Cuts and Jobs Act,” the authors wrote.
Amazon, by contrast, said it didn’t have enough cash stored overseas for the one-time tax charge to matter.
Apple, which dropped its announcement overnight, is getting some credit from places like Bloomberg and Business Insider for not having engaged in the public beauty contest that Amazon staged in deciding where to put its 50,000 new jobs last month.
But that doesn’t mean Apple hasn’t also asked for perks. According to the Austin American-Statesman, the company is likely to receive $25 million from the state and a 15-year property tax abatement from the county where its 133-acre new campus will be located; the city of Austin offered no subsidies.
And just because Apple didn’t negotiate in public doesn’t mean it didn’t conduct a quiet multi-city bidding war behind closed doors, even as Amazon solicited public bids.
Since 2009, the non-profit Good Jobs First has documented $692 million in incentives that states and localities have granted to Apple, including $21 million from the state of Texas for Apple’s initial campus in Austin.
“Ninety-nine point nine-nine percent of these auctions occur privately,” said Greg LeRoy, director of Good Jobs First. “They may well have played Austin against Denver, Charlotte, and Raleigh.”