Excerpts of Apple Executives' Senate Committee Testimony on Tax Policy

[Chupa Chupa]

There's nothing insane with well balanced socialism. A country striving towards a more equal society where everybody get a fair chance in their life, is the best society.

But I guess you prefer a class based society, no wellfare, no universal healthcare, where money controls everything, and where everyone only thinks about themselves.

You are deluding yourself if you think there exists a socialist country that a) doesn't have a class system and b) money doesn't control everything, or c) people in those countries are somehow more altruistic than in more capitalist oriented countries.

Every human organization to ever exist had an "elites" level and then lower hierarchies. Even in the "modern" horizontal hierarchy there is still a charasmatic "de facto" leader or group of leaders. These "leaders" or "elites" typically have access to better goods and services than others not among the top level.

Fraud and deceit exists everywhere there are humans. Black market rentals thrive in Sweden. Finland has experienced a fair share of political corruption. Just a couple examples. There are no Utopias in this world.

And money is still the token that gets people their basic needs and luxuries everywhere. No significant country I know of exists on a pure barter or community system. Hard currency still runs nations everywhere, regardless of economic ideology.

Nepotism exists everywhere too, and probably more so outside for-profit enterprises because a certain level of competence is required to run businesses lest they cease to exist, unlike governments which can print money or tax if their planners make poor assumptions.

If you've ever taken a human sociology class then you know, historically, humans generally are altruistic up until their own basic needs are not being met, then it's everyone for themselves. If no one in a hierarchical level's needs are being met then you get revolt. This is true in capitalist countries, socialist countries, oligarchies, monarchies, you name it. All the great world revolutions occurred when needs were not allowed to be met by whatever government they were under.

 

[BaldiMac]

How is this so different from the Starbucks case? Starbucks say in UK: we would love to pay for your healthcare system and crap, but you know, it's just that it's a lot of money—oh and by the way, we are not doing anything illegal.

The Starbucks tax issue in the UK was about how Starbucks allocated expenses within the UK. They claim to be operating at a loss in the UK and thus not paying taxes on UK earnings. The government disagreed.

The Apple issue is about the repatriation of foreign earnings. Apple's payment of taxes on US earnings was not in question during the hearing.

 

[whooleytoo]

One of the most interesting things to come out of this - is Cook seems to have confirmed that Apple have a special tax arrangement in Ireland (2%?) whereas the Taoiseach and Tánaiste here have denied any such deal exists.

Awkward...

 

[Mr. Gates]

So basically, Apple has admitted that they don't like the rules and have decided to not play by them

 

[iVoid]

This focusing on Apple for political gains is sad, real sad.

Instead of fixing the tax code themselves, they try to divert attention by accusing Apple of being tax cheats for daring to follow the tax laws that the senate itself created in the first place.

It's the same as the Chinese government accusing Apple of bad practices just to look like they are trying to protect their citizens.


Apple has it's faults, but it's pathetic that people try to use them to further their own gains simply because anything involving Apple get's more attention.

 

[BaldiMac]

So basically, Apple has admitted that they don't like the rules and have decided to not play by them

Nope.

 

[rdowns]

So basically, Apple has admitted that they don't like the rules and have decided to not play by them

Not even remotely near what's happening here.

 

[Chupa Chupa]

So basically, Apple has admitted that they don't like the rules and have decided to not play by them

Where has Apple admitted such? Even Apple's detractors on the Hill are not going that far. It's quite the opposite. Apple (and quite a few Senators -- the ones that have a momentary flash of honesty) insist Apple is operating within the letter of the tax code. As with all legislation, especially when it's a mutt of bolted on changes 26 years long, mostly proffered by lobbyists to benefit their client, there is a bevy of unintended consequences that flow forth. That's really a central point not being picked up. Apple is being used as a distraction to cover Congresses unwillingness to overhaul the tax code 1982 style.

Apple is playing by the rules, some in Congress just resent the fact its own legislation is so imperfect and ineffective, but who's fault is that? Apple's for actually reading and understanding the code, or Congress, who wrote the code and has the power to rewrite it, for not understanding what it wrote. It's the tax code that is rotten, not Apple.

 

[GoldenJoe]

There's nothing insane with well balanced socialism. A country striving towards a more equal society where everybody get a fair chance in their life, is the best society.

But I guess you prefer a class based society, no wellfare, no universal healthcare, where money controls everything, and where everyone only thinks about themselves.

You're right. Socialism is great...until you run out of other people's money. I'm sure it's just coincidence that modern civilization was built on the virtues of capitalism, while socialism has failed to do much of anything aside from ruin economies and end lives.

 

[avanpelt]

So basically, Apple has admitted that they don't like the rules and have decided to not play by them

Wrong. Apple plays by the rules. Believe me, if they didn't play by the rules, the IRS would be all over them in a nanosecond. Now, if you don't think United States business tax laws are fair, that's something you should bring up with your member of Congress.

 

[JHankwitz]

If you are manipulating where your money goes to avoid paying taxes you are by definition, being Dodgy or at the very least Dodging the laws. Do we all do our best to keep our money we do, but I don't make billions or have the ability or resources to move and manipulate my money in the way a corporation like Apple can.

Then likewise, everyone is being dodgy when they work for a company that provides the best pay and benefits, purchase products on the internet without paying the sales tax to their perspective state, or purchase less expensive products made in Asia as the result of those manufacturers not having to fork over 35% to their governments. It looks like we're all dodgy.

 

[PracticalMac]

Way to go Rand Paul! Liberals and Democrats live in la la land and have no understanding how business and job creation work.

Apple is a success story!

That's odd, as I see a number of Conservatives also grilling Apple over this.


Its not about Lib/Dem vs Cons/Rep, its about the average US citizen vs those who work in a fantasy world inside the "the beltway" (few exceptions).

Chris Christy is a good example, one who really puts his people above politics in a major emergency, and he gets labeled a traitor by his "fellow" Republicans.

I have no love for (well, actually hate) Liberals/Democrats, but most Conservatives/Republicans make me violently sick.

 

[cmwade77]

I think Cook was pretty reasonable when he suggested a corporate tax rate in the 20's.

I'm in favor of an international minimum tax as Obama has suggested. If the nation of sale taxes below this mutually agreed upon rate, the home nation taxes the rest to that percentage (say 15%). No tax on repatriating money. That way you tax the profits only once. Makes sense to not tax the moving of money provided it was taxed fairly when it was first earned. And it's not a true transfer of wealth since it remains under the control of the same entity.

I think an international minimum tax would be a stupid move. Our Federal tax code should read:
A tax shall be added to the final sale of all goods and services in the amount of 7.5% until the national debt is paid off, after that, the rate shall drop to 5%, all other federal taxes are hereby abolished. The national debt must be paid off within the next 5 physical years, otherwise no federal elected official shall receive any pay until it is. Congress shall pass no budget that exceeds the revenue brought in the previous physical year, if they do, no federal elected official shall be paid for the year that the budget was passed in, if they have already been paid, they must repay the pay or go to jail for a minimum of 10 years or double the length of time that they have been an elected official for.

Our State tax code should read:
A tax shall be added to the final sale of all good and services of 4.5%, Cities and counties may add up to 0.25% each, all other taxes are hereby abolished. No budget that exceeds the revenue brought in the previous physical year, if one is, then no state or local elected official will receive any pay for the physical year in which it was passed in, if they have already been paid, they must repay it or go to jail for a minimum of 10 years or double the length of time that they have been an elected official for.

Simple, straight forward, takes very little paper, eliminates the need for the IRS, encourages reduction in the size of the government and ensures financial responsibility. Add to that the fact that it is fair to everyone, as everyone pays an equal percentage of their income, none of this sliding scale garbage.

 

[PracticalMac]

You are deluding yourself if you think there exists a socialist country that a) doesn't have a class system and b) money doesn't control everything, or c) people in those countries are somehow more altruistic than in more capitalist oriented countries.

Every human organization to ever exist had an "elites" level and then lower hierarchies. Even in the "modern" horizontal hierarchy there is still a charasmatic "de facto" leader or group of leaders. These "leaders" or "elites" typically have access to better goods and services than others not among the top level.

Agree.

Regardless of the political or economic structure, the end results are roughly the same.

I would go further that any system is not necessarily better then the other, its just how they go about the end result.

like Trains, Planes, and Automobiles, all 3 will get you where U want to go, just how long and how much you can take with you.

 

[JAT]

Yes, we all try to minimize our taxes. But when the rich can minimize them much more than the poor, that's not just an issue with the tax code, because the rich will always be able to find more loopholes with million-dollar lawyers.

Care to back that up? I love hearing all these stupid comments about the poor paying so much tax....When I was low-income, I paid zero income tax, first 5 years of my "tax-paying" life. My first serious job put me in the lower-middle somewhere, and that was the first time I paid tax. And believe me, I wasn't some tax expert at 18 years old finding loopholes, it just calculates to zero when you don't make much. For 2012, if a couple makes $19k or less (gross wages), they pay zero Federal tax. Now, that's pretty low, but what does "poor" mean? Add one kid, it goes to $33k, two kids makes it $42k. That's without taking ANY itemized deductions or income reductions, just straight standard exemptions. Single parent with one kid, $26k. Etc.

So, are "the poor" you all talk about those that are actually at median income levels ($69k in my county), but waste their take-home amount on crap like cigs, beer, and crappy cable TV, and thus feel poor? Don't feel so sorry for them.

Here's another calc: If you take a couple with two kids, but now they make $200k, their tax without any "loopholes" (as people like to call deductions) would be $43,779. Should they just pony that up, or use their house payment interest and other business to legally lower their burden? Hey, if they could get it to zero, they could employ the poor couple for the same cost.

I just wish we were paying for fewer bombs, and more road repair.

 

[jnpy!$4g3cwk]

So basically, Apple has admitted that they don't like the rules and have decided to not play by them

Obviously not what happened. Cook asserted that Apple is paying all the taxes it owes.

What is missing is an international agreement on taxes to accompany the WTO trade agreements. The U.S. chooses to pretend that corporations are people. Few other countries have made that mistake-- but, everyone is subject to international corporations looking for the best deal.

In retrospect, WTO agreements on trade should have included taxes from the beginning.

 

[wiz329]

I think an international minimum tax would be a stupid move. Our Federal tax code should read:
A tax shall be added to the final sale of all goods and services in the amount of 7.5% until the national debt is paid off, after that, the rate shall drop to 5%, all other federal taxes are hereby abolished. The national debt must be paid off within the next 5 physical years, otherwise no federal elected official shall receive any pay until it is. Congress shall pass no budget that exceeds the revenue brought in the previous physical year, if they do, no federal elected official shall be paid for the year that the budget was passed in, if they have already been paid, they must repay the pay or go to jail for a minimum of 10 years or double the length of time that they have been an elected official for.

Our State tax code should read:
A tax shall be added to the final sale of all good and services of 4.5%, Cities and counties may add up to 0.25% each, all other taxes are hereby abolished. No budget that exceeds the revenue brought in the previous physical year, if one is, then no state or local elected official will receive any pay for the physical year in which it was passed in, if they have already been paid, they must repay it or go to jail for a minimum of 10 years or double the length of time that they have been an elected official for.

Simple, straight forward, takes very little paper, eliminates the need for the IRS, encourages reduction in the size of the government and ensures financial responsibility. Add to that the fact that it is fair to everyone, as everyone pays an equal percentage of their income, none of this sliding scale garbage.

Your suggestion is nonsense, quite frankly.

First, a 7.5% sales tax wouldn't even bring in the revenue currently needed to sustain the operations of the Federal government, nor would a 4.5% state sales tax. If you want to sustain programs like Medicare and Medicaid, you're going to have to have a much higher tax rate.

...let alone begin to start paying down the national debt. you cant just mandate it be gone in 5 years. it is over 100% of our GDP currently, so you would have to impose ridiculously high tax rates to pay it down in 5 years, which would throw our economy into deep recession.

Finally, there is a reason why there are taxes in so many places in the economy -- to keep people from cheating the system. If you tax multiple places throughout the circular flow diagram, it keep things balanced.

Income is taxed for a reason -- it is just easier to collect and keep track of, and often causes less distortionary effects than simple sales taxes. It is also more vertically equitable -- If you look at consumption as a percentage of income, it is much higher for poor folks, because they have to spend a larger chunk of their income on basic necessities.

So, by introducing a flat sales tax, you are essentially introducing a regressive tax structure.

Simplicity sounds great in theory, but oftentimes doesn't really work all that great. Although the current structure may be needlessly complex, it didn't become so merely for the sake of being more complex. Sometimes there are good reasons for all the rules.

 

[BaldiMac]

I think an international minimum tax would be a stupid move. Our Federal tax code should read:
A tax shall be added to the final sale of all goods and services in the amount of 7.5% until the national debt is paid off, after that, the rate shall drop to 5%, all other federal taxes are hereby abolished. The national debt must be paid off within the next 5 physical years, otherwise no federal elected official shall receive any pay until it is. Congress shall pass no budget that exceeds the revenue brought in the previous physical year, if they do, no federal elected official shall be paid for the year that the budget was passed in, if they have already been paid, they must repay the pay or go to jail for a minimum of 10 years or double the length of time that they have been an elected official for.

Our State tax code should read:
A tax shall be added to the final sale of all good and services of 4.5%, Cities and counties may add up to 0.25% each, all other taxes are hereby abolished. No budget that exceeds the revenue brought in the previous physical year, if one is, then no state or local elected official will receive any pay for the physical year in which it was passed in, if they have already been paid, they must repay it or go to jail for a minimum of 10 years or double the length of time that they have been an elected official for.

Simple, straight forward, takes very little paper, eliminates the need for the IRS, encourages reduction in the size of the government and ensures financial responsibility. Add to that the fact that it is fair to everyone, as everyone pays an equal percentage of their income, none of this sliding scale garbage.

1) "Fiscal" year
2) Do you really think poor people should pay a higher percentage of their income in taxes than rich people?

 

[GermanyChris]

Care to back that up? I love hearing all these stupid comments about the poor paying so much tax....When I was low-income, I paid zero income tax, first 5 years of my "tax-paying" life. My first serious job put me in the lower-middle somewhere, and that was the first time I paid tax. And believe me, I wasn't some tax expert at 18 years old finding loopholes, it just calculates to zero when you don't make much. For 2012, if a couple makes $19k or less (gross wages), they pay zero Federal tax. Now, that's pretty low, but what does "poor" mean? Add one kid, it goes to $33k, two kids makes it $42k. That's without taking ANY itemized deductions or income reductions, just straight standard exemptions. Single parent with one kid, $26k. Etc.

So, are "the poor" you all talk about those that are actually at median income levels ($69k in my county), but waste their take-home amount on crap like cigs, beer, and crappy cable TV, and thus feel poor? Don't feel so sorry for them.

Here's another calc: If you take a couple with two kids, but now they make $200k, their tax without any "loopholes" (as people like to call dedu) would be $43,779. Should they just pony that up, or use their house payment interest and other business to legally lower their burden? Hey, if they could get it to zero, they could employ the poor couple for the same cost.

I just wish we were paying for fewer bombs, and more road repair.

You're assuming that Federal income tax is the only tax.

 

[DisplacedMic]

Good thing at least the first four replies in this thread show people who literally have zero understanding of the issues being discussed and should have thought five times before pressing submit.

seriously. god almighty the lack of knowledge is sometimes staggering....

How can you claim that Apple is not "paying their fair share" when they are the highest taxed manufacturing company in the country and the third highest over all? And that's just here in the US. they pay taxes in other countries as well.

 

[JAT]

You're assuming that Federal income tax is the only tax.

That's all we're talking about, the US Senate can't do much about anything else. I'm not talking about gas prices or movie tickets, either. My post was not meant to be a complete economic plan for a couple.

Some states have no income tax, and all the others have various rates, discussing all of them would be too time-consuming to be beneficial. Many times the calc will come to zero for state, too, if you are at a very low wage.

 

[PaulChowHK]

Wall Street Gecko say Greed. Is it good business yes. Is it good for USA? According to Gecko yes.

 

[Cartaphilus]

...What people don't realize is that after WWII, the US was the "last man standing." We were decades ahead of the world. There was no better place to do business than the US, so it didn't really matter if taxes were too high. Businesses just had no place to go.

The best time to raise tax rates is during boom times, as during the years following the Second World War when, as you say, the U.S. was enjoying a rapidly expanding economy. It was the right time to cut government spending and to increase revenues, making it possible to pay down the debt that was accumulated during the Great Depression and the war.

In the current moribund economy, though, deficit spending by the government is necessary to increase aggregate demand since the private sector is largely sitting on cash, paying down debt, redeeming equity, and refusing to invest as long as it perceives inadequate demand. At the same time, tax revenue should be relatively lower, as should interest rates, all to encourage spending. In each case, though, tax rates are properly a governmental effect of economic conditions rather than a cause.

The current political climate, however, seems to foolishly focus on the size of the national debt and on annual deficits, despite the urgings of the overwhelming number of economists based on empirical data. Persistent high unemployment and it's long-term effect on national productivity is, aside from occasional tut-tutting, largely ignored.

As you point out, high marginal tax rates didn't create the boom of the 50's and 60's, but neither did it end it. At the same time, higher government spending during the 30's and the war years did not bankrupt the country nor did it lead to runaway inflation.

The most important issue in this discussion arises from the requirement that tax policy is perceived as fair and reasonable to taxpayers, making general compliance more likely. Italy and Greece have provided us with excellent examples of what can happen when tax laws are commonly evaded by a substantial portion of the citizenry. In today's complex global economy it requires quite an effort on the part of government to convince a largely economically illiterate populace that a highly complex tax regime is fair. It doesn't help that there are politicians who understand very well why a U.S. company needn't pay U.S. taxes on foreign non-repatriated income, but who nonetheless are delighted to be on television castigating the CEO of America's largest non-oil company taxpayer for simply following the rules. These politicians can rile up well-meaning but hopelessly naive citizens who reach the conclusion that corruption is rampant in large corporations and in government.

Unfortunately, it takes just ten minutes of news highlights to create the false impression, and hours of tedious study to appreciate that global macroeconomics can't be mastered by slogans or blanket statements of morality. It's a shame, because there are elegant strategies employed by countries throughout the world to balance their domestic tax revenue needs against their need to provide incentives to economic activity. Far too little effort is being expended by either the ordinary citizen or by governments to foster a fuller appreciation of the real issues and the constraints they impose.

 

[GermanyChris]

That's all we're talking about, the US Senate can't do much about anything else. I'm not talking about gas prices or movie tickets, either. My post was not meant to be a complete economic plan for a couple.

Some states have no income tax, and all the others have various rates, discussing all of them would be too time-consuming to be beneficial. Many times the calc will come to zero for state, too, if you are at a very low wage.

The discussion is taxes as a whole not federal income tax specifically. Federal income tax is not the only tax the federal government collects from an individual or in a individuals name. State taxes are another discssion all on there own that no one brought up.

 

[wiz329]

The best time to raise tax rates is during boom times, as during the years following the Second World War when, as you say, the U.S. was enjoying a rapidly expanding economy. It was the right time to cut government spending and to increase revenues, making it possible to pay down the debt that was accumulated during the Great Depression and the war.

In the current moribund economy, though, deficit spending by the government is necessary to increase aggregate demand since the private sector is largely sitting on cash, paying down debt, redeeming equity, and refusing to invest as long as it perceives inadequate demand. At the same time, tax revenue should be relatively lower, as should interest rates, all to encourage spending. In each case, though, tax rates are properly a governmental effect of economic conditions rather than a cause.

The current political climate, however, seems to foolishly focus on the size of the national debt and on annual deficits, despite the urgings of the overwhelming number of economists based on empirical data. Persistent high unemployment and it's long-term effect on national productivity is, aside from occasional tut-tutting, largely ignored.

As you point out, high marginal tax rates didn't create the boom of the 50's and 60's, but neither did it end it. At the same time, higher government spending during the 30's and the war years did not bankrupt the country nor did it lead to runaway inflation.

The most important issue in this discussion arises from the requirement that tax policy is perceived as fair and reasonable to taxpayers, making general compliance more likely. Italy and Greece have provided us with excellent examples of what can happen when tax laws are commonly evaded by a substantial portion of the citizenry. In today's complex global economy it requires quite an effort on the part of government to convince a largely economically illiterate populace that a highly complex tax regime is fair. It doesn't help that there are politicians who understand very well why a U.S. company needn't pay U.S. taxes on foreign non-repatriated income, but who nonetheless are delighted to be on television castigating the CEO of America's largest non-oil company taxpayer for simply following the rules. These politicians can rile up well-meaning but hopelessly naive citizens who reach the conclusion that corruption is rampant in large corporations and in government.

Unfortunately, it takes just ten minutes of news highlights to create the false impression, and hours of tedious study to appreciate that global macroeconomics can't be mastered by slogans or blanket statements of morality. It's a shame, because there are elegant strategies employed by countries throughout the world to balance their domestic tax revenue needs against their need to provide incentives to economic activity. Far too little effort is being expended by either the ordinary citizen or by governments to foster a fuller appreciation of the real issues and the constraints they impose.

Well put indeed.

One small point I would take issue with, however, is the importance of the size of the national debt. Obviously aggregate demand is an extremely important part of the equation, as is returning the economy to full employment. However, there are economic consequences of having such large deficits (and such a large national debt), particularly at the astronomical size they are currently at. Investment crowd out. Loss of confidence in ability to repay (which leads to higher interest rates, or the inability to borrow for truly important situation). Not to mention the contractionary effects whenever the borrow money is actually repaid.

Therefore, I'm not arguing that deficits are always bad, or making any sort of statement on the current deficit. I merely point out that it is a tradeoff -- anything you borrow today must be paid tomorrow, and that you must understand the costs and benefits. So, the real question must be, do the economic gains made by deficit spending outweight the costs of economic contraction whenever we have to start paying down the debt? Maybe they do. Maybe they don't. I (and probably most Americans) don't have the information to make that judgment call.