Anyway, I was really struck by this quote from the NYT:
Is California somehow entitled to that money? Because that's the only way I can see that would justify the statement that Apple is "sidestepping" state income taxes.Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year.
Almost every major corporation tries to minimize its taxes, of course. For Apple, the savings are especially alluring because the company’s profits are so high. Wall Street analysts predict Apple could earn up to $45.6 billion in its current fiscal year — which would be a record for any American business.Well no kidding! Making money for its owners is the primary, some would say only, purpose of a corporation. While it may be good practice to be a "good corporate citizen" or whatever other description people use to get companies to pay for something, that's not their purpose.
People who don't realize that don't have the slightest grasp of economics.
24 comments:
Darren this is impossible. We all know tax rates have no effect on productivity and people don't move because of them, they just just pay their fair share like good little serfs.
Sarcasm intended (you know me but this might make other readers fly off the handle.) The morons in Sacramento (and the clueless writers at this paper but we are talking the NY Puke) don't contemplate some simple math. Ten percent of a buck is a lot more than ninety percent of nothing.
As insulated from the real world i see a future for these two kiddies in a future Democratic Treasury Department.
I tuned in to a local liberal radio station once. The host was moaning how horrible it was that corporations (and people, but the focus was on business) didn't structure things to maximize (yes, maximize) the taxes they paid. The stupidity was mind-blowing.
No, you're wrong. And, this is bullshit.
Companies reap all the benefits of one state - quality of life and perks to draw workers - but avoid paying for the infrastructure and benefits they enjoy.
I am absolutely opposed to a US company operating fully in the US, benefiting from its infrastructure, employees, its legal protections, etc., and then setting up "an office" in the Cayman Islands to avoid paying the taxes that afford them a safe productive work environment.
This is tax evasion, and it's BS. If Apple wants to avoid the taxes, then they should move operations to that state, and operate there.
Despite much of your beliefs, I am actually shocked that you think this is OK.
I'm not wrong. You're arguing emotionally, not logically or rationally.
The companies I own stock in, I want them to maximize profits (legally). I don't care if one region charges confiscatory tax rates and another one doesn't, as long as the people running my investment arrange things so tax payment is smallest.
Do you try to maximze the amount of taxes you pay, mazenko? Do you take a homeowners or some other exemption?
It's not emotional at all. It's practical. California is "entitled" to the money because Apple uses their roads, infrastructure, schools, neighborhoods, etc., but avoids paying for them. How can you justify that? Apple can draw people to live and work in Cuppertino because of its quality of life. The same wouldn't be true of drawing people on a wide scale to Reno or Henderson.
Do I maximize my taxes? No. But do I avoid paying for the very roads and services I use? No. I don't deduct a lunch at Chipotle with a colleague because we talked about literature either. Because I could. But that would be absolutely bush-league.
And plenty of corporations don't do this because despite being "legal," it's wrong. My lawyer can get me off on a lot of technicalities, but it's not right. I know you don't agree when criminals get cases thrown out on technicalities.
Technically legal doesn't make it right. It's called character and integrity. And your view of economics is not what people like Adam Smith explained. He urgently and in detailed fashion talked about the moral responsibilities of the producers. George Will explained this quite well in Statecraft as Soulcraft.
Worth reading.
By the way, I am amused that you took the time to read a NYT article. There's still hope. :-)
If you think companies shouldn't try to maximize profits for their shareholders, then I wonder how you invest your money. I see no reason why Apple--or any other company, for that matter--should pay for something if they don't have to, or should offer to pay more because they can. That's just silly. John Kerry didn't pay a higher rate of income taxes in Massachusetts--and that's an *option* on their tax return paperwork.
It is not you, this is the liberal mindset. I remember in college sitting through a rant by a liberal professor wherein he said he felt "honored" to pay more taxes. Funny, I don't feel honored when my choices are denigrated and despised by the sitting government. Of course, it's interesting that the Left would attack Apple since every Leftist I know proudly sports their Mac as some sort of badge of belonging. That's not to say all Apple owners are Leftists, but I would bet that many who claim allegiance to leftist causes do so on a Mac. The excuse is that it is somehow more inherently creative, or that's the blather I get. In the meantime, Amazon, an organization located in Leftist Oregon, is involved in a lawsuit with the State of Texas over paying sales taxes. Funny how those folks that claim that taxes are an honor to pay revoke that idea when they have to pay them. This completely explains Tim Geithner.
Just curious...what stocks do you own?
Mike's arguing that his views are morally superior and should thus apply.
By inference he's also arguing that the law, as written, should be subordinated to his sense of what's wrong and what's right. That's why the Constitution has to be a "living", i.e. discarded, document. It stands in direct opposition to the sort of unlimited government Mike wants by placing explicit limitations on the power of government, power that Mike, and all lefties, arrogate to themselves by virtue of their various sorts of superiority.
That assumption of unassailable moral superiority is a theme that runs through much lefty thinking and in its worst excesses leads to the sort of horrifying brutality with which the left side of the political spectrum is firmly associated. In its lesser form, like in nations with fairly strong constitutional limitations on government power they lead to a natural and sustained attack on those limitations. Lefties pay lib-service to representative forms of government but in fact representative forms place restrictions and impediments on lefties that they naturally oppose.
We all, at some time in our lives, go through an "if I were king" phase. Lefties never grow out of it.
I think most liberals don't think corporations should pay more in taxes then they are legally obligated to, they just believe corporations should be legally obligated to pay more. Anyway in an ideal world corporations shouldn't be taxed at all and it should all be covered by the employee's income tax, the investor's income tax, and then the estate tax to take care of the loopholes in the previous two taxes.
Actually, I think what should be happening is in-between what Darren & Mazenko are arguing.
First, I think it is the company I invest in responsibility to legally maximize my profit in the investment. That is a companies main reason for existence, making money. What Apple is doing is just smart business. Many companies do this, Apple is just people's ire because it is so good at it primary objective.
Second, State's need to close loopholes like this in their tax law, not blame companies for using the loopholes. Their a cities/states that base their taxes are where the income is earned. My Dad worked in Cleveland but lived in the suburbs. The city of Cleveland taxed his income because it was earned in Cleveland. Dad had to use the Cleveland-paid-for road system to get to work each day. The Cleveland police & fire protected him during the workday. The Cleveland sanitation system took care of the waste he produced. Etc. Etc.
Mazenko's point is spot on, Apple is using the California infrastructure and workforce to create the profits. They should pay for using it. However, if California tax law will let them off without paying, I fully expect them not to pay. Money that could go to investors should go to the investors.
From the New York Times piece (page two):
"However, Apple’s accountants have found legal ways to allocate about 70 percent of its profits overseas, where tax rates are often much lower, according to corporate filings."
And from Apple's recently released Fiscal Year Q2 2012 finances revenue from the Americas (which includes Canada, Mexico and South America) was about 38% ($17.7B/$46.3B). It is easy to imagine that US profits are about 30% of Apple profits.
So Apple is allocating about 30% of its profits to where about 30% of its sales are. And I'm supposed to be outraged over this?
How much US taxes should Apple pay for selling a Chinese manufactured product in Belgium? Keep in mind that Belgium is going to be charging taxes, too (VAT and such). How much US taxes should Apple pay for selling a music download in Taiwan?
Apple *does* pay US taxes ... roughly proportional to US sales. And that part of the Apple workforce in the US pays US income taxes.
The NYT article seems to be complaining that:
(a) Apple pays US taxes on US profits only, not US taxes on worldwide profits, and
(b) Apple moves some business outside of California to avoid paying California taxes.
Complaining about (a) seems absurd.
Complaining about (b) seems less absurd, but still fairly silly. If, as an example, Apple "moves" its investments to a no-income-tax state, what claim does California have on that income? It isn't like the money accruing interest uses any California state supplied resources.
And it isn't like Apple doesn't pay California taxes at all. If I had to guess, my guess would be that Apple pays more in California taxes than Apple consumes in California state supplied benefits. But I don't know, and neither does the New York Times.
-Mark Roulo
Second take.
For Apple's fiscal year ending in September 2011, Apple's audited income statement claimed $34B in pre-tax income and $8B in taxes. Apple is paying taxes at a bit less than 25%.
If this seems low, what would be a "good" number?
-Mark Roulo
No, Apple shouldn't pay for using it because what the state of California wants has no relationship to the benefit that accrues from doing business in California. If it were a quid pro quo, and voluntary exchange, then there'd be such a responsibility but there isn't.
The state of California's using the coercive power of government to extract tax revenues from everyone regardless of the value those individuals see in return. There's no moral imperative to submit to coercion even if that coercion has lots of cheerleaders, even if that coercion's been duly enacted into law. Apple has the option to avoid that coercion and since the primary responsibility of Apple is to its shareholders the moral high ground is held by Apple. Mazenko covets the wealth produced by Apple and so has constructed elaborate rationalizations for the seizure of that wealth most of which boil down to "because I can".
Mazenko, in keeping with all members of his tribe, uncritically arrogates the moral high ground to himself rejecting without consideration all opinions to the contrary. That sort of moral certainty is most commonly found in children who, having no recourse, fall back on the all-purpose defense against the indefensible, "that's not fair". Well, it is fair. There are limits on the power of states just as there are limits on the power of the federal government and chafing against those limits lefties assert the unquestionable moral superiority of their personal opinions.
That's the real beef here, that the state of California can't exert its coercive power without limit and may have to do the unthinkable - bow to circumstances beyond its control. Adults learn to understand and work within the realities of the situation in which they find themselves. Children never do.
Darren
All I add to this discussion is remember my comment about readers flying off the handle?
Wow, Mike.
Talk about black kettles ...
Mike
You teach debating as I recall. Is use of profanity a sign of a well supported argument?
Profanity? What?
In your first comment you used an epithet for "el toro poo poo".
Oh, yes, that.
Well, in a logically fallacious way that tends to match many of these threads, I'll say this:
If Vice-President Cheney can be excused for using the F-word on the floor of the Senate, I'm certain my use of the term BS can be overlooked on a blog.
You teach debate? Gawd.
Teach 'em that sulky silence or sniffing condescension's the appropriate response when your poorly thought-through propositions are shredded?
Probably not. Your head might explode with the irony.
Most likely you just imply that sulking silence and sniffing condescension's an inappropriate response to having the poorly thought-out arguments you make reduced to rags and tatters. That way you can maintain the illusion to yourself that you're not a hypocrite.
Debate instructor. That is rich.
Well, in a logically fallacious way that tends to match many of these threads, I'll say this:
If Vice-President Cheney can be excused for using the F-word on the floor of the Senate, I'm certain my use of the term BS can be overlooked on a blog.
Mike, you may want to look up the definition of a Red Herring. Cheney on the Senate floor told one of his “colleagues” (let’s be honest both men despise each other) to do something that is physically impossible. But it wasn’t intended for public discussion but was inadvertently broadcast. Similar to when Bush called Adam Clymer a major league “ass$%^&” Cheney agreed, “Big time.” Or more recently when Joe Bite-Me, during the signing of Obamacare told the man-child “this is a big f$%^ing deal!” What do all of these have in common? They have nothing to do with this thread.
Sometime in the last year you called a poster on this blog a “fool” and I responded that was beneath you. I also reminded you this wasn’t a class, you were dealing with adults in this blog. If we disagree with you we will let you know. But I don’t recall (tell me if I’m wrong) someone calling you a fool.
Again, bring your adult game here. Please show the fellow bloggers (and our host Darren) that respect.
Not a debate instructor, Allen.
But an AP English Language instructor who has a 93% pass rate on the exam with 75% 4s and 5s. A teacher whose students average over a 30 on the English ACT - even the low level ones who score below a 20 on math and science. A Recognized Teacher of a US Presidential Scholar by the Dept of Ed. A Distinguished Educator Award winner from the University of Chicago. And a teacher whose classes - and letters of recommendation - are so in demand students will wait for hours in line for schedule changes and parents will place calls to the registrar requesting spots in class. And of course a guest columnist for the Denver Post.
You may not like my answers, but you've got nothing on me as an educator. And your attempts to demean my reputation in the classroom is laughable at best, but more likely just a tad pathetic.
But whatever makes you happy, bud. If you have kids, you could only wish they have a teacher as skilled as I.
Nice try.
And, Mike, don't get above yourself.
And Mike, remember what's I said about education and intelligence.
Also, you were the one who lowered this discussion, so please keep that ego in check. Again, these are adults here.
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