Markets Would Struggle to Digest Corporate Tax Reform - Bloomberg View

Markets Would Struggle to Digest Corporate Tax Reform - Bloomberg View



...But that overseas "cash" isn't just sitting in cash. As Bloomberg reported last year, Apple, the



 largest holder of overseas cash, has been using it to buy U.S.-denominated corporate 



debt. The trend has been for a cohort of multinationals to amass overseas cash and then park



 it in U.S. corporate bonds issued by other companies in that cohort. All the while, deferred tax



 liabilities have grown.

With tax reform, this process could unwind. As mentioned earlier, if a trillion dollars gets repatriated at 15 percent, that's an immediate $150 billion tax bill that corporate America will owe. Rather than Apple using its overseas cash to buy Microsoft debt, and Microsoft using its overseas cash to buy Apple debt, they might both be sellers of each other's debt as they bring their cash home. Some of that repatriated cash will be used for stock buybacks, which would cushion the blow to equity markets, but even here all of that retirement of stock means that someone -- individuals and funds -- will be sellers of that stock, and they will have to pay capital gains taxes on those sales, creating yet another liquidity demand to pay taxes.