RESEARCH TRIANGLE PARK – The corporate tax rate may change under the Biden administration, notes Cisco Chairman and CEO Chuck Robbins in an interview this week with Yahoo Finance Live. And that could affected the tech giant in multiple ways.
“Well, clearly a higher tax rate ends up with us having lower profitability and so it certainly impacts all of our spending,” said Robbins in the interview with Yahoo Finance Live. “And so I think you have to balance that, you have to balance it with R&D investment, you have to balance it with job creation, and we have to balance it with being competitive on a global basis because other companies that we compete with globally don’t face that kind of tax rate.”
Cisco’s share price has increased nearly 34 percent year-over-year but dipped in the last few days. Robbins said that he, and Cisco, remain hopeful for a tax policy where there is “common ground.”
“I understand the challenges they are trying to deal with from a budgetary perspective,” said Robbins. “But you know capitalism and the businesses in this country are what creates these jobs, the wealth and the opportunity. We have to do a better job of ensuring that the opportunity is available to everyone in this country.”
Robbins also discussed how Cisco might both play a role and been impacted by an approximately $3 trillion infrastructure package expected to be presented later this week by the Biden administration.
“Infrastructure, these days, is pretty much technology across the board,” said Robbins. “Even industrial infrastructure, roads, bridges, etc., have an element of technology because they’re generally going to be considered smart infrastructure.”
In 2020, as a presidential candidate, Biden put forward a proposal to change the corporate tax rate from the Tax Cuts and Jobs Act (TCJA) that was signed into law by President Donald Trump in December 2017, proposing a corporate tax rate of 28 percent and an additional provision that would place a 15 percent minimum tax on the book income of larger companies.
Portions of presidential candidate Biden’s plan also included how capital gains taxes would be levied on people earning more than $1 million and increasing the income tax rate on families making more than $400,000 in annual income. The Tax Policy Center estimated that Biden’s plan, as a presidential candidate prior to the November 2020 election, would raise $2.1 trillion over a decade.
Cisco employs about 5,000 in their facility in Research Triangle Park, which according to the company is the second-largest campus in the United States after the company’s headquarters location in San Jose. As recently as January, data shared with WRAL TechWire showed that job openings at Cisco’s Triangle campus were among the highest of any organization across the region and the state of North Carolina as demand for high-tech talent is increasing.
Cisco recently completed the acquisition of Acacia Communications in a $4.5 billion deal that cleared a major hurdle in January 2021 when Chinese antitrust regulators approved the move.
Robbins told CNBC’s “Squawk Box Asia” this week that though the Acacia deal has closed, he hopes future deals “will be a little smoother” from a regulatory approval perspective.
“It is in the best interest of both China and the United States, for these two countries to actually figure out how we co-exist and how we work effectively together around the world,” said Robbins in the conversation with CNBC. “I think this administration realizes that.
”Though the acquisition has been completed, the company’s infrastructure platform business, including the sales of data center routers and switches, has seen a rocky few months as the global computer chip shortage continues to impact companies across industries. According to reporting from CNBC in February, while the company’s earnings results beat analyst estimates, this line of business was struggling.
Robbins addressed the issue in his interviews with Yahoo Finance Live and CNBC’s “Squawk Box Asia” this week, noting that the shortage of computer chips will create “short term pain, for sure, over the next couple of quarters,” but expressed the belief that the market will stabilize and become manageable once it is more predictable.
“I think that it will take a couple years [to address] simply because the demand is continuing to increase,” Robbins told Yahoo Finance Live. “I think we see a few quarters of real stress in the supply chain, and we think that it will be more predictable. It may not be where we want it to be, but it will be more predictable.”
Biden signed an executive order in late February that was aimed at addressing the global semiconductor chip shortage, beginning a 100-day review of supply chains for four products deemed critical, including semiconductor chips. According to reporting by Reuters, Biden also committed to pushing Congress to approve $37 billion to boost the manufacturing capacity to produce the semiconductor chips necessary to relieve the supply shortages.