Investment U Explains: Tax Inversion
Here's a fact that infuriates more than a handful in Washington: The nation's top 15 companies now hold nearly $800 billion worth of cash outside of U.S. borders.
Apple (Nasdaq: AAPL) has over $50 billion locked up overseas. General Electric (NYSE: GE) has over $100 billion. And Microsoft (Nasdaq: MSFT) has over $75 billion.
Some call it unpatriotic while others look at it as necessity.
But the politics of this debate is not what we're here for. We're here to build and protect wealth. Time and time again, the math shows us the more we avoid Uncle Sam, the quicker our journey to financial independence.
A bit of research this week proves the point.
Dozens of major companies have picked up their American headquarters and set up shop in a land with lower corporate tax rates. Just yesterday, Obama likened the trend to "herd mentality."
All the cool companies are doing it.
We wanted to see if the companies Obama's wagging his finger at are truly getting an advantage. We wanted to see if these "tax evading" businesses are worth our dollars.
To do it, we took our "Tax Evaders Index" - which is comprised of Fortune's list of the top 28 tax avoiders - and compared it to the S&P 500.
The chart tells the story.
Over the last five years, the 28 companies that purposely incorporated outside of American borders nearly doubled the gains of the broad market.
Cause and effect? We can't say for sure. But it definitely gets our attention.
If lowering our personal tax burden expands our wealth in big ways, surely slashing the tax burden on a few billion dollars in corporate profits trickles into share price. The chart certainly hints at the idea.
So what's our solution? You should know by now... do what you legally can to lower your taxes. You'll be wealthier for it.
And our advice to Uncle Sam?
It's simple. Start looking at the other side of the equation. Instead of stretching for every last penny in revenue… spend less.