The election of Donald Trump will be a moment of reckoning for America’s tech firms, which hold an unprecedented amount of power in the face of a president who holds an unprecedented disregard for basically everything. We’ll see, gradually, if Silicon Valley bows to Trump, remains neutral, or tries to counter his genuinely destructive agenda.
Today, we’ve learned one thing: IBM is ready to make money from the Trump administration.
It’s safe to assume some firms with substantial existing government contracts (like Palantir) will continue business as usual. Amazon CEO Jeff Bezos, despite direct threats from Trump to destroy his company, went out of his way to publicly make nice with the president-elect just two days after the election.
In a letter obtained by CNBC, IBM CEO Ginni Rometty personally congratulated the president-elect and stated, “I know that you are committed to help America’s economy grow in ways that are good for all of its people.” She then laid out six separate ways in which IBM’s business could dovetail with Trump’s national agenda — including information services available to the most erratic, dangerous presidency in American history. Those services included a “cognitive computing system” for the Department of Veterans Affairs, artificial intelligence for infrastructure, and “data analytics, data center consolidation, and the use of cloud technologies” to cut government costs.
One of the items on Rometty’s list doesn’t involve IBM (and companies like it) exchanging services with the government for money. Instead, IBM (and companies like it) would get the money in exchange for nothing.
The current statutory tax rate for U.S.-based multinational corporations is 35 percent on profits earned anywhere in the world. However, tax law allows companies to defer paying taxes on profits they earn overseas until they bring the money back to the U.S. This has given corporations a huge incentive to do two things: 1) Use accounting chicanery to make as much of their profits as possible seem to have been “earned” in other countries, and 2) Leave those profits overseas until they can arrange a special sweetheart tax deal for themselves.
Because of this, American companies now hold a staggering $2.4 trillion in other countries. That’s more than all the profits every U.S. company makes in a year combined, or, looked at another way, about 14 percent of the size of the entire U.S. economy.
Donald Trump’s official economic plan calls for the $2.4 trillion to be taxed at a special, one-time rate of 10 percent. Then the statutory rate going forward would be lowered from 35 percent to 15 percent.
About $68 billion of that $2.4 trillion belongs to IBM, the 5th largest amount of all U.S. corporations. Trump’s proposed tax rate of 10 percent could therefore theoretically save the company — and cost the U.S. Treasury — as much as $13.6 billion. (For various reasons it would be somewhat less than that in practice.)
In her letter, Rometty calls the current tax system “outdated and punitive” and said Trump’s plan will “free up capital that companies of all sizes can reinvest in their U.S. operations, training and education programs for their employees, and research and development programs.”
This is exactly the kind of claim made by U.S. corporations when lobbying for a previous tax holiday in 2004. After that corporate bonanza, U.S.-based multinationals actually cut jobs and decreased spending on research and development. According to Bill Clinton, George W. Bush “got so mad that he signed the five and three-quarter percent repatriation bill and, he said, none of it was reinvested.”
Instead corporations used the money for stock buybacks and to pay executives more. Compensation for the top five officials at the largest affected companies went up about 60 percent in the two years after the tax holiday.
IBM, in fact, was one of the main beneficiaries of the 2004 bill. Rometty’s predecessor as CEO, Samuel J. Palmisano, received a total of $8.3 million in compensation in 2004. He then made $14.4 million in 2005, and $21.3 million in 2006. When he left IBM in 2011 he received a golden parachute valued at $170 million.
So, now we know where IBM stands. Maybe Rometty doesn’t like Trump, or condone his views. Maybe Rometty voted against him. But we know, at the very least, that she’s eager to profit from his victory.
Let’s call it what it is Ginny, “New Collar Jobs” = Cheap Labor! God help us all if President Elect Trump starts taking advice from the very people who have cost countless millions of Americans their jobs, homes & futures.
We know what you did IBM. You strategically targeted & laid off tens of thousands of experienced, skilled professionals, cloaked as “skills re-balancing” for nothing more than cheap offshore labor, while destroying their lives & futures.
Now we see our once “professional” level jobs, previously earned on only upon decades of experience & great educational investment going to the unskilled & uneducated (read: low salaried) labor who do not even have to complete high school.
Wow, that’s something to be proud of — your customers must be lined up around the block to jump the IBM ship.
Let’s get real. There is no lack of jobs, there is only Corporate Greed standing in between the millions of us who you tossed to the curb like garbage.
Now, you have the audacity to come back & spit in our faces one last time with these “new collar jobs” with an education requirement of GED?
Congratulations Ginny, you & IBM have sunk to an all new low, now please stop insulting America by pretending to give a damn about our jobs problem, the one that you created.
When we voted for change, we meant it. We will accept nothing less than real change this time.
So, Ginny, please just slither off and leave the governing to those whom we elected.
Signed,
Long term unemployed, former IBM’er, 30+ years experience & $30,000+ in debt for a college education & retraining effort that was surely not worth a dime.
“… in the face of a president who holds an unprecedented disregard for basically everything.” Really? Everything?
First, a 35% tax rate is ridiculous.
Second, corporations are pieces of paper (and really shouldn’t pay any taxes). PEOPLE pay taxes, through many mechanisms that our politicians have codified to great success.
Third, companies spend money, lots of it; and the amount of money that is tied up overseas is just plain stupid and does NOTHING for America.
Let me rephrase … idiot politicians who have de-incentivized American companies are stupid by setting the rate at 35%.
Reduce the rate, and if politicians want to add their usual hard hand restrictions, mandate companies who repatriate profits back to the US to spend it on capital or employees … but get the rate reduced. Trump will get the rate reduced, and it will likely get passed … a good thing.
We can all complain about capitalism, or IBM, but there is no society that does not run on greed. And there is no system yet devised that can compare to capitalism combined with a mostly free society that creates massive wealth for a vast majority of its citizens; we’re rich enough to give people free cell phones to the poor and yet land on the moon.
Government is absolutely necessary to protect its citizens from foreign concerns and each other, and yes only a government can build an infrastructure and help the poor rise, but that’s about it.
IBM should be free to do what it wants … so long as politicians who set their own rules do the right thing. To date, that’s been a huge problem … which is why Trump won the presidency. Too many people in the middle have been screwed by elected politicians whose focus was not on protecting us, but more interested in their long term careers in politics (and the money that flows as a result).
She then laid out six separate ways in which IBM’s business could dovetail with Trump’s national agenda
1) Ve could help target the people
2) Ve could provide automatic missile launch coordination
3) Ve could count ze bodies for you
4) Ve could count ze gold extracted from ze bodies for you
5) Ve could plan ze most effective routes from gold collection zites to Trump gold repositories, using traveling salesman algorithms and Monte Carlo methods
6) Ve could optimize ze amounts of gold zus collected, to be installed on all of your bathroom applianzes.
So IBM just lay down and spread it’s legs for Donny.
Regarding the fact that IBM made a fortune with organizing the Holocaust, this headline in the context of a president planning mass deportations makes me sick to my stomach.
http://www.huffingtonpost.com/edwin-black/ibm-holocaust_b_1301691.html
IBM must have some tabulation machinery left over from helping the Nazis keep track of non-Aryans in WW II.
Exactly, and as that proved to be so profitable, they must be thrilled to serve a president planning mass deportations and data bases of non-white Americans in the US. And his Jewish son-in-law appears to have no scruple to eagerly support such an energetic, goal-oriented government.
Which again proves that belonging to a victimized group doesn’t make you a better person.
Common sense would suggest that any reduction in corporate taxes should be an exemption based on how many Americans they hire. Each job represents a savings of government resources, so fine, give them a tax credit for it. If they spend a whole lot on payroll fairly divided among small earners, it should go right down to zero and we could treat them like a co-op, which is something we ought not to be taxing either. But if they don’t create and preserve jobs for lots of people, or choose to hire all H1Bs (it’s not really that Americans don’t have the skills; it’s just that being fed propaganda about Sam Adams makes for a lousy cultural fit at the kind of company that would fire a whole shift because somebody drew a smiley face inside a box) — then let them pay full freight, dammit!
Well–Ginni—you say to Trump..Listen..how about listening too..all the out sourcing (CLOUD-out sourcing)..people out of jobs..R&D cuts..and you CLOWNS still run WINDOZ…which s/b band in the Company..just for security reasons alone..BUt hey..I only have 45+yrs in the BIZ..and seen all this F*&^ups IBM has done through the years..because of not LISTENING …
But IBM and Lenovo were bought out about ten years ago by a division of the Chinese PLA (Military). This is why all major government bodies who were using IBM and Lenovo equipment began switching to Dell and HP’s. They are still owned by the Chinese PLA so Trump shouldnt be doing any business with IBM or Lenovo.
Wrong.
Lenovo is a (now) Hong Kong-based company that bought IBM’s PC business about a decade ago and its Intel-based server business a couple of years ago.
Neither Lenovo nor “a division of the PLA” owns IBM. The largest single shareholder of IBM is Warren Buffet’s Berkshire Hathaway, at 8.5%. No other shareholder makes it even to 6%.
You could look it up.
As long as US company computers are mostly made in China, they can be compromised in the manufacture process before being shipped off.
In a recently posted Greenwald Twitter link to one of Noam Chomsky’s interviews, Chomsky recommended Dean Baker’s just released book “Rigged” which is a detailed analysis of five core economic processes which siphon money out of the middle class to enrich the 1%. The ebook is available free at: http://deanbaker.net/images/stories/documents/Rigged.pdf
How is this even a surprise? OK, thanks Intercept for reporting on it, but there’s never any prescription for what we normal people can do to change things.
I hate this cronyistic, savage capitalism.
It’s to everyone’s benefit for our President-elect to consider opinions of great leaders in business in determining how to create jobs and how to secure our nation, more so than listening to his friends in politics. IBM has been busy hiring this past year, so if anyone gets a tax break, they should be one of the companies to do so. It would be nice if the tax breaks could be tied to job growth. Individuals who have parked their money on islands where income is not reported do not deserve the same tax breaks. And it would be nice if the government had better technology to minimize hacking by foreign entities. IBM has many new products that can be implemented in many industries if companies are confident that government is going to avoid another recession and if this Republican government can focus on doing the most good for our nation without spending our resources attacking their political enemies.
Many years ago, someone who knew I was involved in computers sales, and IBM was doing very badly, asked me if he should dump his IBM stock. I just told him that I couldn’t give him advice on that, but that IBM had a very deep patent portfolio and still did a lot of research, which gave me confidence that they would survive. And they did, even though a lot smaller.
Remember, “the business of America, is business”. Nothing has changed that way, in fact, it is more so.
DO NOT mention the fact that Hillary Clinton stated that she
supported the same kind of scheme or that Chuck Schumer
is ready to help it happen when he is minority leader.
Trump’s corruption is similar to that of the leading democrats
and, as has become glaringly obvious over the past 30-plus
years, the democrats will be there to help their corporate
predators gradually implement more corruption.
More garbage from Jon Schwarz, pining for more money to be stolen from corporations by the USG. That way we’ll have even more $$ to bomb third world countries, I suppose. Left unsaid is that the 35% corp tax rate is among the highest in the world. And they are offering IT to the “most erratic, dangerous presidency in American history”. While that may turn out to be true, it’s a bit early to be so sure, no? This is all just business-as-usual stuff. Shrink the government by 30% and most of it will go away, but Jon Schwarz would never advocate that.
Were the same people that wrote this article personally butthurt when Google, Facebook and Twitter does the same thing for Hillary and the DNC….????
Agree with you and JW. We should view Rometty’s actions under a business lens, not a political one.
The corporate tax is one of the worst taxes on the books. If it didn’t exist, goods and services would cost less; more jobs would stay in the US, and there would be no talk of tax holidays. International companies would have to consider headquartering their operations in the US, which would mean even more job creation in the US. However, the US taxes the shit out of corporations – largely for the sake of appearances (“thank” progressives) – and guess who pays for it? Hint: it’s not the corporations. The higher the corporate tax on profits, the greater the incentive for a corporation to raise prices and to move jobs to another country.
Since The Intercept seems to enjoy reporting on Apple, I’d love to read a piece from The Intercept which discusses the price of the iPhone7 under a tax system with no corporate tax. My guess is that instead of being priced at $649, Apple could take home the same profit if it were priced at $447 with no corporate tax. What’s not to like about prices going down on almost everything we buy? Surely, the Left, Right, Blue, and Red would all enjoy cheaper stuff.
Agree with you and JW. We should be viewing Rometty’s actions under a business lens, not a political one.
The corporate tax is one of the worst taxes on the books. If it didn’t exist, goods and services would cost less; more jobs would stay in the US, and there would be no talk of tax holidays. International companies would have to consider headquartering their operations in the US, which would mean even more job creation in the US. However, the US taxes the shit out of corporations – largely for the sake of appearances (“thank” progressives) – and guess who pays for it? Hint: it’s not the corporations. The higher the corporate tax on profits, the greater the incentive for a corporation to raise prices and to move jobs to another country.
Since The Intercept seems to enjoy reporting on Apple, I’d love to read a piece from The Intercept which discusses the price of the iPhone7 under a tax system with no corporate tax. My guess is that instead of being priced at $649, Apple could take home the same profit if it were priced at $447 with no corporate tax. What’s not to like about prices going down on almost everything we buy? Surely, the Left, Right, Blue, and Red would all enjoy cheaper stuff.
Typo: Roomette instead of Rometty
“genuinely destructive agenda”
Really? Seriously? This kind of garbage, non-factual, hyperbolic rhetoric is beneath the Intercept. It’s really sad when the Intercept becomes just another apparatus in the group think echo chamber that makes up the majority of corporate media.
Timely article. And during Palmisano’s time, IBM led the practice of requiring employees to train their H1B visa replacements. This is now common practice in most large companies today. These types of visas are definitely a subject worthy of discussion.
The irrational tax code which only benefits large corporations is a complex subject on its own. But our government policies should b e in competition with the world to repatriate those accumulated foreign profits of corporations. Once the “cash” is on the balace sheets here, you would like to see it used primarily for capital investment, R&D and other direct business expansion of the companies. Such activities will unquestionably increase and enhance employment. How much of this increase go to H1Bs is a question perhaps of a secondary level.
Use of this cash for stock buy back or dividend distribution enhances the balance sheets of the stockholders, including 1%s, various investment funds, retirement accounts, union funds, etc. Some of this will flow to direct business investments in other business entities in the U.S. That has a second level effect on employment, better than no effect of course.
The challenge for the Trump administration is to shape policies which will encourage repatriation profits to be channeled to primary business expansion activities instead of secondary and tertiary level usage. Well designed policies and maybe bully pulpit encouragement can certainly generate good jobs in a self sustaining way. For example, how many non H1B US jobs can Rometty generate at IBM?
The difficulty with using traditional logic and arguments is that they assume things that are no longer considered true in the business world. For instance, if you a company that relies on technology and are concerned about being competitive ten to twenty years from now, you should be investing a healthy portion of your profits on research and development. However, if your focus is on this quarter’s results, any R&D investment must be viewed as an unnecessary expense, and so you throttle your investment in R&D. For decades now US companies have been cutting back on their R&D, and the results are starting to become apparent.
When IBM decided to become a services company, and started cutting back on R&D and manufacturing, the first thing they discovered was that their service staff – consultants if you will – were too expensive. This was partly due to the stifling bureaucracy of the IBM structure, but was blamed on employee salaries. As a result, IBM has been going through one “Resource Action” (their euphemism for RIFs) after another, replacing senior level, knowledgeable engineers with H1B holders, mostly young, and mostly poorly trained. They then wonder why their customers abandon them in droves. Thus their desperation to become close to the Government, for whom they can still make money without doing much.
The strategy of cozying up to Donald Trump is a wise one, because he is apparently someone who rewards loyalty and obedience to almost the same degree as he punishes opposition and independence. It will be interesting to see whether, Cheney-like, Trump makes companies like IBM his Haliburtons, doling out sole source contracts worth billions. For Rometty’s sake I hope so – she has to keep the money flowing to complete the chalet she’s building for herself in Switzerland.
rometty? switzerland? so the CEO of IBM is an H1B?
Whenever I see someone doing those silly hand movements they are all taught to do by these ludicrously useless insight type of companies that label all your employees with colored bricks and color wheel numbers and all that junk I immediately think this person hasn’t got a clue what they are speaking about. All show and no substance. Don’t have anything to do with her Donald.
What a hit piece, is this what goes for journalism today?
A president who holds an unprecedented disregard for basically everything,
to counter his genuinely destructive agenda
I am getting so sick of the media pushing politics. It is time to boycott all media that functions as a political pundit of one party or another. It is time to boycott The Intercept.
Please do.
You poor tools. What kind of America do you think it would be if illegal aliens could enter at will ad infinitum? If any Muslim was allowed entry regardless of creed or agenda?
You liken the protection of a nation to National Socialism when the goal is to keep blood from being shed. You can’t differentiate between walls built to keep the citizens in or the barbarians out.
The “genuinely destructive agenda” which Trump has is not what you’ve twisted it to seem, but it’s rather to destroy the movement which undermines the USA.
Actually that is what has been happening to Palestine, i mean America, at the rate of 1M per year since 1975. America is the sewer of the planet now.
weird creepy predatory
she looks like she’s about to strangle someone – is she asking for volunteers?
Look, when a society is SADDLED with the proposition of having to compete for life support, a threat to survival, a persistent threat, what happens is the POWER PLAY mentality sets in and takes over the operating environment of the mind, and social relationships, and you end up with the fear game being played by the powerful as a weapon against everything human. This does not affect 100% of the population, just the majority.
IBM offered its services to Hitler, too.
Oh, much more than “offered.”
A bit of research about Deutsche Hollerith Maschinen Gesellschaft will not improve your sleep tonight.
<a href = "https://en.wikipedia.org/wiki/IBM_and_the_Holocaust"IBM and the Holocaust
Oops.
IBM and the Holocaust
IBM and “Death’s Calculator”
They also offered their services to Obama. Guilt by association. ..
Progressive propaganda tactics. ..
Obama had massive calculations to do. Computing the number of civilians killed by his wars and drone attacks, by subtracting the number killed from the number killed. It requires huge computing ability, exa-flops per femto-second, that only IBM can deliver. And computing odds and strategy on Murder Tuesdays, using terrorism game theory and optimization to assure and justify the result: someone gonna get kilt
When I read the headline, it brought a smile to my face. IBM is up to its old tricks. First the shell game exporting jobs abroad, then claiming they are in the US. Lobbying Congress to increase the number of tech visas so they could bring low paid workers into the country temporarily to bust wages. If you ask them, most of their work force is in the US but in fact it’s not.
IBM has been on a roll since the ’80s. They have misjudged each and every trend in the industry, gutted their own capabilities for research and manufacturing, then tried to make up for it with a series of acquisitions, each designed to bring in new blood according to their press releases but really for the purpose of sucking the blood out of potential competitors. Each time they acquire a promising new company, all the real innovators flee, leaving IBM with an empty shell. Their balance sheet is made to look good by selloffs of their remaining facilities. In short, they are perfectly suited to the kind of capitalism that is so favored in Washington.
The company that invented the PC and then fucked up in almost every way it is possible to fuck up a dominant market position. It takes a special kind of arrogant stupidity — the kind they swim in in Armonk.
The reason that innovators flee is that Big Blue specializes in crushing innovation, especially if it comes from outside its own hallowed halls. Not Invented Here has killed more good ideas than their biggest and fastest big iron can count.
As Jeff says, they’ve blown it at every opportunity for nearly 40 years. If they hadn’t owned the world when they started blowing it, they’d be long gone now. I see them as dinosaur-dead. That is, the brain is already flatlined, but it’s a long way to the massive muscles in the limbs and those are still twitching.
10% is better than 0%. The money was made overseas and stays there because the US corporate tax rate is higher than almost anywhere else. Pretty simple.
Funny to see liberals talk out of both sides of their mouths only to have their propaganda collide. Globalism or your a dirty nationalist, then when your ridiculous tax rate can’t compete in the global economy it’s, uh uh dirty corporations! Aren’t they racist too don’t forget that!
BLM. Almost forgot that, sorry.
Let me understand…A person hired to run a company hired by the shareholders (owners) had their company money overseas paying NO taxes, but would be willing to give 10% to government and bring it back to the US if Trump has his way? That CEO is also making it known that her company is willing to grow that business by selling the government a productivity growth tool to save the tax payers money and help government agencies deliver a better quality service to the taxpayer? Holy crap, Armageddon. Pigs are flying! The gall of this lady, she should instead dump every Republican client or client that works with the US Govt, paint Love Trumps Hate across the corp headquarters in Albany, fire 150,000 employees, cancel all benefits, then auction off the intellectual property and real estate and give the money to Greenpeace to make amends. What is the world coming to? We cannot accept standard rational thinking at a time like this. We must bankrupt the govt and screw the taxpayer and benefit recipients to teach Trump a lesson!
“IBM CEO Personally Offers Company’s Services to Donald Trump”
In this case, Trump is not so eager to grab them.
The letter is not signed, was it ever sent?
Interesting question. My guess is that whoever got the letter to CNBC either wasn’t able to scan the original and thus just printed another version of the file, or had to scan it before it was signed to avoid detection.
I’m sure he’ll welcome their expertise.
Perfectly normal BAU. Corporate managers are legally required to act in ways that maximize profit potential for shareholders, to the exclusion of almost all other considerations.
Given, Drumpf’s cheerleading for another tax holiday, Rometty would be derelict in her duties if she didn’t jump at the chance to hustle services to the new administration and encourage the tax breaks.
If we don’t want this crap to continue endlessly, we need to change the rules relating to corporate charters, create enforceable legal obligations for business to enhance the commonweal, and stop permitting capitalism to function as our de facto state religion.
Anything less is hopeless and pointless.
Cloud Computing is for Airheads… and Communists.
That’s what I tell Trump.
Hey, this could be interesting and test of Trump if he is really all about bringing back American jobs. As far was I can tell from searches, there are more IBM employees in India than in America.
http://www.computerworld.com/article/2493565/it-careers/in-a-symbolic-shift–ibm-s-india-workforce-likely-exceeds-u-s-.html
Donnie!!! I know you love The Intercept and read it regularly. How about this. You tell IBM’s CEO no contracts, etc until IBM at least brings back half of the jobs it created in India.
Unfortunately, I am beginning to get the same feeling as in 2008 when the Hope and Change president appointed Clinton and Wall Street insiders for his economic team. Same shit, new day.
[quote]Unfortunately, I am beginning to get the same feeling as in 2008… [/quote]
only now you’re beginning?
Obama and Hillary asked me to give him a chance.
As in
“…all we are saying, is give Trump a chance…”
That article has been made obsolete not due to IBM keeping jobs here, but due to IBM selling off some service subsidiaries, such as insurance services. (For the most part, those jobs are still wherever they need to be. Certain insurance jobs cannot be outsourced outside the USA due to regulations.)