A front-page article in Sunday's New York Times entitled "How Apple Sidesteps Billions in Taxes" is getting quite the buzz.
A couple of things about the article.
While the Times piece recognizes that there is nothing illegal about the techniques that Apple uses to minimize its taxes, it insinuates, I thought, that Apple is still doing something wrong and unfair. That would be wrong. There is nothing wrong with Apple taking advantage of the tax rules as written. As far as unfair, it's the tax code, given to us by our elected officials, that is unfair -- let's put the blame where it belongs. (And the answer that most of our elected officials have for fixing an unfair and broken tax system: create new and different winners and losers.)
The piece reports that Apple also legally minimizes the taxes it pays to California, where its corporate headquarters are located. But it insinuates that Apple should do more anyway because California is in a bad way and has to cut back on a community college right in Apple's back yard (this point is made quite emotionally). No it doesn't. California is in bad shape because it has made stupid, and sometimes irrational, fiscal policy decisions over decades (I know; I used to live there). How is that Apple's problem? A tax code exists to collect revenue, not as the charitable arm of the state. Taxpayers, corporate or individual, have the responsibility to pay the taxes the law requires, and only the taxes the law requires, and the right to give the rest of their money, or not, to whomever they want.
Or is this no longer correct?
We are currently having a debate in this country about fairness and our tax systems. That's a good debate to have because our tax systems at the state and federal levels are all almost consistently unfair. But I worry about that debate as well. Insinuating that someone who pays a lower effective tax rate than you - say Mitt Romney or President Obama - is somehow doing something unfair to you does not help the debate. (By the way, you will note that neither gave a "contribution" to the federal government to make sure they paid the maximum rate.)
What's often insinuated into the debate is that for those who have less, especially a lot less (for several different reasons, including being just-plain stupid like California) they should expect the government to take from those who are successful -- because "successful" means they got their money because they were lucky or, worse, cheated -- and give it to them.
I don't think that makes for a fair debate. And it's no way to run a railroad (or a tax system) unless you want to eventually run it without trains.
See Tax Notes on Feb. 13, 2012, p. 777 and Aug. 1, 2011, p.459. for Martin Sullivan's original articles on Apple.
Apple's tax rate: 9.8 percent? - The Washington Post
Report: Apple legally sidesteps billions in taxes – USATODAY.com
Apple's Tax Avoidance: Evil Scheming, Good Business, or Both ...
A company like Apple has so much legal horsepower, and our institutions like the IRS are so overworked and underfunded, Apple can and does bully the government. This is not an accident. Even though studies demonstrate that every dollar spent on enforcement by the IRS returns several dollars in additional revenue, the Republicans in Congress have succeeded in cutting the IRS and SEC budgets. (2)
This is not a victimless crime. Teachers, firefighters, policemen, children's school lunches, nursing homes, etc. have all be the victim of this corporate "new math". Apple is not alone. Google (who has the same corporate board members as Apple), Microsoft, General Electric, Exxon, and many other hugely profitable companies are all similarly guilty.
1. http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html
2. http://www.businessweek.com/news/2012-01-24/taxpayer-advocate-calls-irs-budget-cut-most-serious-issue.html
But on the subject of fairness, I disagree, every single corporation and person who benefits from unfair taxation is being unfair to all the others who do not benefit from unfair taxation.
And on the segue from the NYT article, which documents how Apple pretends to live in Reno, Nevada, when it really lives in California, to an argument that California deserves what it gets because it is stupid, I think, the exact quote: "What's often insinuated into the debate is that for those who have less, especially a lot less (for several different reasons, including being just-plain stupid like California)"
What would be fair would be a California tax system that prevented California corporate taxpayers from pretending that they live in Reno, at least, in as much, that the only way Apple could convince the tax collector that it lived in Reno was if it actually got up the gumption and moved there from California.
Further, complaining about this equation means you're a communist, hate success and are jealous.
The incredible thing is this story gets any attention at all. Several of Obama's cabinet picks illegally evaded taxes by filing erroneous returns and nobody gives a hoot. A corporation follows the rules and people are screaming for their heads. Partisan politics is alive and well at the grass roots level.
I'm with you in tax cheats and frauds in Washington, I just don't know where you get the idea that it's a partisan phenomenon.
apple is rogue.
http://www.bloomberg.com/news/2011-09-29/google-joins-apple-mobilizing-lobbyists-to-push-for-tax-holiday-on-profits.html
Sometimes they are justified but if there is one company on the planet that does not need any corporate welfare it's Apple.
Tax AVOIDANCE is legal, accepted, and appropriate.
Tax EVASION is illegal, unacceptable, and inappropriate.
Too often pundits and commentators conflate the two legally, morally, and ethically distinct concepts of tax avoidance and tax evasion, and improperly attribute the treatment afforded tax evasion to instances of tax avoidance.
It does if the tax "breaks" being taken advantage of by Apple are not available to every individual. Can I live in New Jersey, work in New Jersey, be registered to vote in New Jersey, and yet claim a lower tax liability from another state? Heck, by this article's logic, I should be able to file from one of the states with no income tax but live in one that has one, because hey, it's not hurting anyone! See, I don't have an army of corporate tax lawyers, funded by the billions in profits that I want them to protect from the law. If corporations want to enjoy the rights of citizenship such as donating to elections and exercising free speech, there are obligations and responsibilities that Apple must meet in order to earn that citizenship. Dodging taxes isn't something human citizens get away with, last I checked.