As a matter of public policy, it is advantageous to limit the amount of cash a corporation can hold indefinitely. An elimination of the corporate income tax would have to contain such a proviso. But I admit that setting guidelines for these limits is far above my understanding of corporate finance.
Again, I don't understand why you think so. Why is it advantageous to encourage corporations to be less able to expand, less able to survive a downturn?
That simply doesn't make sense!
And even more ironic, it's exactly what so many were complaining about during the recent downturn! "Banks didn't hold enough reserve capital"........ they didn't HOARD CASH!?!??
So we were complaining bitterly how banks didn't have enough on hand cash to avoid crashing, and now you are saying we need a policy to limit the amount of cash corporations can hold indefinitely? WHY?!?! Isn't that completely inconsistent?
See here's the deal.
You
seem..... to be looking at this from the "Scrooge McDuck" version of economics. Where if companies are allowed to keep their money, then they'll build a big holding bin in the back yard, filled with money and gold, and swim through it every Friday.
This is fiction. Not reality.
In the real world, there is only 3 things people, all people, and corporations are made up of people, do with money.
You can save it.... invest it.... and spend it.... Whether you are 2-years-old, with a quarter from your parents, or you are 90 years-old and retired, whether you are a hot dog stand, or an international company.... these are the only 3 things you can do.
Spend.
Save.
Invest.
That's it. And *ALL THREE* benefit the economy.
Spending is obvious. You buy something, and other people have business, which earns them money, and they do with their money, save, spend, invest.
Investing, is either expanding your own company, or it's investing in another company or business. In either case, the money is used to grow the economy.
Saving. Now saving is used for three purposes.
One, a rainy day fund. Now I hope it doesn't take an MIT degree to figure out that during an economic down turn, having the company with money to survive the downturn is good for the entire country.
Two, saving up to buy something bigger. Most people can figure out that saving up money for a car, is a more economically beneficial thing, than blowing all your money on beer and cigarettes. Same is true of corporations.
Three, saving up for a larger investment. The owner of my company, saved up money while working there as an employee, until the owner decided he wanted out. He gathered up a ton of money, and bought the place from the owner, who wanted to close it down.
Corporations do the same. They save up and buyout weak competition, or other large investments.
Now the key with savings, is that people think up until the corporation does something with their savings, that this money is just sitting in the Scrooge McDuck vault somewhere.
NOT TRUE.
What does a corporation do with saved money? Same thing we do. Put it into a bank.
What does the bank do with the money?..... Same thing we do. Save, spend, invest.
Banks make investments into assets, or commodities, or buy into businesses, or make loans to corporations, or loans to new startups.
Banks spend money on upgrading their buildings, opening new branches, offering new services.
Banks save money for a rainy day, such as the 2008 crash.
And where does a bank save money? At other banks, and the cycle repeats over and over throughout the economy.
There is *NEVER* a time where it's sitting in a pile on a floor of a vault somewhere, with cartoon characters swimming through it.
There is *NOTHING* that a company can do with money, that doesn't benefit the entire economy. So... just let them do with their money, what they see fit. Let the people who actually run the company, and who know best what they need money for, do what they need to do.
Honestly...... I don't like banks. I actually don't like banks. My utopian view, would be that all the corporations saved up MONEY, instead of borrowing. I think it would be wonderful if zero corporations had debt, and instead they all 'savings'.
That would kill off a good chunk of the financial sector, and I'm... ok with that. Imagine if during the 2009 down turn, almost no companies went out of business, because none of them had any debt?
I think that would be wonderful. But unfortunately, the banks have convinced the American public, that corporations who have money is horrible, and we have to punish responsible CEOs, and tax the hell out of money not spent. So all the corporation spend every penny they get, and borrow money from banks, and then stupid Americans complain about rich bankers. Idiots.
