Corporate Cash Gap Widens

Tax policy that traps U.S. multinationals' cash overseas is causing the richest 1 percent of companies to get even richer relative to all other organizations.

Income inequality has company—make that companies. A new wealth gap is opening among U.S. corporations, where cash holdings are growing more concentrated as the rich get richer.

Eighteen American businesses held 36 percent of corporate wealth in 2013, up from 27 percent in 2009, according to a report from Standard & Poor’s. The bottom 80 percent have lost ground, with just 11 percent.

While that borrowing has kept money circulating in the U.S. economy, it’s a holding pattern that can’t be sustained if interest rates rise and prospects for tax legislation dim. That’s why more and more executives are weighing mergers with foreign companies in order to lower taxes, said Douglas Holtz-Eakin, an unpaid adviser to the Alliance for Competitive Taxation, a Washington business group lobbying for tax reform.

“They’ve given up, they think there’s no hope,” said Holtz-Eakin, an economic adviser to former President George W. Bush. “And when the headquarters go, they’re likely to put R&D next to the headquarters.”

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