Steve Wozniak Says Apple Should Pay 50% Tax Rate

[mytdave]

Education. Healthcare. Environmental standards and protection. Assistance for seniors, single parents, the mentally ill. Law enforcement. Tax incentives for businesses. Student loan forgiveness. Roads, infrastructure, and clean energy. Mass transit. Scientific research and development. Culture and the arts. Museums. National parks. Etc.

The idea behind tax is that Apple (and any other company or individual) already benefits from those things. Without roads, police, schools, government funded research, etc., Apple wouldn't exist in the United States. Everyone should be paying their fair share, rather than companies like Apple using their enormous wealth to pay for expensive tax avoidance schemes.

And right there is the problem with taxation, it's takes away an individual/entity's hard EARNED increase and redistributes it to someone else - whether person or program, that some bureaucrat thinks is important. Who are they to decide? What about the rights of the one who earned it?

Let me dissect your examples, with an eye toward historical solutions (some from a long time ago):

Education: No. Was handled privately and by small towns/organizations. Ed in US was good, now in shambles.
Healthcare: No. One word: Obamacare - biggest pile of stinkin' **** in the history of the country.
Enviro. protection: Yes. Unfortunately however, the power has been grossly abused. Scale it back.
Assist seniors/ill: No. It's the responsibility of individual families, community, charity. Shame on us.
Law enforcement: Yes. But with less govt. overreach, & more prosperity there would be less law breaking.
Tax incentives: No. No subsidies/breaks for anyone/anything. You succeed or fail based on merit. Low tax for all.
Student loans: No. Government has destroyed student loans, created the mess. End it all.
Roads/infrastructure: Yes. And current govt. is grossly neglecting this responsibility.
Clean energy: No. Would naturally evolve in a truly free competitive private market. See enviro. above.
Mass transit: Yes/No. Other than in large cities, it is a dismal failure. Failing in some cities too. (DC)
Science R&D: No. Private matter/investment. Govt. taxation/redistribution did not invent the light bulb.
Culture/Arts: No. Private matter/business. If you're good, you'll make money, if you suck you wont.
Museums: Maybe. Private/public partnerships would probably be best.
National Parks: Yes. Unfortunately the power has again been abused and used to confiscate private lands.
Let me add one you missed: Defense: Yes. One of the only govt. responsibilities actually in the Constitution.

We could go on and on and on with examples. The nuts and bolts of the thing is that all these things you cite (roads, schools, research, etc.) were originally created by private interests/individuals, not governments. And these individuals almost always did a better job of it. When it comes to tax, Apple pays what it is legally obligated to pay. The "fairness" argument is a fallacy. What is "fair?" The real solution is to get government out of as many things as humanly possible, so we can have a low equitable tax rate that's exactly the same for absolutely everyone.

Ending govt. meddling, and a flat rate of 10-15% would increase economic activity, create immense prosperity for everyone, and generate more tax revenue than governments would know what to do with - which excesses of course should be placed in emergency funds and returned to the tax payer in the form of even lower tax rates.

 

[bonehead]

With due respect to Woz, Apple has a fiduciary responsibility to minimize ANY unnecessary expenses, including taxes. All their tax practices are legal. If some people don't like it, then they need to petition their elected (or otherwise) officials to change the tax laws in their respective countries. It's that simple. Stop vilifying companies for doing what they are supposed to do.

And, 50% is insane. Not sure how Woz is paying a rate that high, unless he lives in CA or NY... In reference to the US only, if we had sane politicians who would lower the marginal corp. tax rate from the insane 39% (3rd highest in the world) to a job-creating, incentive-inducing 15% (or less), then all US companies (not just Apple) would keep and invest their profits here in the country instead of looking for (legal) ways to squirrel the money away overseas.

That 39% corporate tax rate is the nominal rate. The effective rate, after deductions, rebates, etc., is closer to 25% which puts the US in line with a lot of other countries. A combination of closing loopholes and lowering the nominal rate somewhat would help clean things up but I wouldn't make claims about job creation. A NY Times piece yesterday pointed out that corporate profits over the last thirty years have risen from about 6% of GDP to 12% of GDP while wages during the same period have fallen at about the same rate. A lot of the time, when companies make more money, they keep it to pay bonuses or dividends or, heaven forbid, raises to their employees.
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I think paying 50% of your income to the government is insane. I feel bad for him to think that the government is confiscating over half of what the guy makes. It's appalling.

I guess it's good he's happy about it but it's un-American for the government to take half of everything you have. I guess it isn't anymore.

You need to look at personal income tax rates of the past. Then you might not feel so bad about 50%.

 

[enzo thecat]

What I dont understand is why a company should have to pay taxes at all.

Any profit, aka capital will either eventually be used to make purchases towards materials, machinery, etc......or pay employees (or officers) and THEY WILL PAY THE TAXES ON THE INCOME.

So why should a company have to pay taxes at all?

Serious question. I think a lot of people know absolutely nothing about our tax code.
__________________

 

[bonehead]

Maybe. The top income tax rate is 39.6% but that's only on income over $415,050 (filing as single, which Woz isn't - filing jointly is $466,950 [off topic but that's the marriage penalty in action - 1 person hits the top bracket at 415K but 2 people hit it at 467K]).

What this means is only income over 415K is taxed at the top rate (using single as example). Your first 9K is taxed at 10%, your next 27K at 15%, your next 40K (I'm rounding) is at 25%, etc. Not all your income is taxed at the top rate. This means that the only way to have your tax as % of income reach 39.6% is to make somewhere in the range of $500 million per year. Woz isn't earning that much (even if he was, much of it would probably come from investments, which are taxed at lower rates).

However, because he lives in CA, if you add in state income tax, property taxes, etc., he could certainly be around 50% total tax burden (assuming his federal effective tax rate is at least 30-35%) but that's the only way he gets to 50%. If that's the case, Apple's tax rate is higher too because we have to factor in all the other taxes they pay (sales, local, utility, import, property, and so forth). This means that just throwing 50% out there is misleading at best.

I'm not sure income tax works that way but I'll check with my accountant. As someone who lives in CA and has makes decent money, both my accountants and I can assure that you can make much less than $500 million per year and hit 50%.

 

[Undecided]

We are all amazingly overtaxed. Property taxes (which you are really paying even if you rent), federal income taxes (including social security, medicare, Obamacare, etc.), state income taxes (including SDI, UI, etc.), sales taxes, etc., not to mention the stealth tax of inflation.

We need to switch to a flat tax on all income (regardless of whether earned, portfolio, or passive) of around 17%, a standard deduction (which results in the tax rate being graduated), and no corporate tax.

 

[bonehead]

What I dont understand is why a company should have to pay taxes at all.

Any profit, aka capital will either eventually be used to make purchases towards materials, machinery, etc......or pay employees (or officers) and THEY WILL PAY THE TAXES ON THE INCOME.

So why should a company have to pay taxes at all?

Serious question. I think a lot of people know absolutely nothing about our tax code.
__________________

Companies use public infrastructure and place burdens on them. They benefit from our relationships with other countries and from the protection of our police and military. They use our natural resources. Taxes pay for these things so they should pay just like individuals do.

 

[kdarling]

Companies have an obligation to their shareholders to pay as little tax as possible.

That's not true at all. Not to pick on you, sir, but I really wish that people would stop claiming this nonsense.

Companies are legally like people. Each one has a board that is supposed to be that citizen's brain, and they can decide whether to concentrate on profits, good citizenship, privacy rights, green production, or whatever they wish.

To quote Tim Cook himself when asked about Apple, "If you want me to do things only for ROI reasons, you should get out of this stock."

However TC is talking rubbish when he says that Apple is following both the letter and the spirit of the law. Mind you, you can't very well say that you're legally exploiting tax loopholes.

Exactly. Most of us regular tax payers don't spend years creating off-shore shell companies to hide our revenue.

What a way to miss the point. Do not pass Go or collect £200!
What they are doing is not in keeping with the image of whiter than white that Tim likes to portray. Guess what, Tims employees and Apple themselves get to take full advantage of the public services that Apple does not contribute properly to. Which means I pay more and/or get less. Just like you.

Yes. It's sad that Apple (and many other companies) use shell companies in Nevada to hide their revenues from California, while using California services.

Then there's the US court system, which Apple loves so much to use to sue other companies to get even more profits and awards, and to defend themselves from similar lawsuits.

Interestingly, keeping deals off-shore sometimes has negative legal consequences. For example, Apple claimed patent exhaustion in their ITC dispute with Samsung. Unfortunately, that USA rule only works for items sold in the USA. Apple had bought and sold all the broadband chips overseas, and thus those chips did not have the same US legal protection they would've, had the deals been done (and taxes paid on) in the US.

 

[mytdave]

Very astute post. I just have one quibble with it. Business very rarely make investment decisions based upon the tax rate. That is something that Republicans and other anti-tax groups make up. Basically you make an investment based on the opportunity for profit. Generally speaking if that profit is taxed at 20%, 30%, or 40%, it is going to be immaterially in comparison to all the other factors involved in the investment decision. The investment decision is based largely on expected costs and expected sales, which produces profits. Taxes are basically only paid on those profits so upon success. Now this might turn a home run investment into a "triple", but taxes aren't going to turn a successful investment into an unsuccessful investment. And largely speaking almost all investors and capital allocation is going to go into an investment which will be taxed if successful. So in deciding between one investment or another taxes don't make a difference. Maybe a few investors are at a point of deciding if they are making further investments or just hanging it up and retiring to spend their wealth. But that is very much at the margin.

Warren Buffet has pointed this out over the years and years of his investments. He pointed out that when asking an investor if they want to do an investment the investor doesn't ask what the tax rate it is, they ask what the chances of success are. If the chances of success are good, then you do the investment. If they aren't, you look for another investment. But you don't just not invest at all unless you have decided you are retired and are just going into spend mode. Even if you don't invest, what you do is store cash in bank or bonds, and that is basically still an investment of some sort and you pay taxes on the interest. But you don't make that decision because you want to avoid taxes, you make that decision because you haven't found an investment you like.

Not exactly - one point you missed is that if the potential ROI is taxed less, then the company/individual may likely be inclined to invest more in said opportunity, based on it's chance for success. Even if they don't invest more, when determined investment eventually generates a profit, there are more dollars available in that profit to the investor to spend on whatever they want, which increases economic prosperity down the line for everyone.

 

[AlexH]

Woz, you're a great man, and you're entitled to an opinion, but you're also a little nuts if you think Apple should pay 50% taxes. That's just bonkers. What right do they have to half of everything Apple makes? Such a wisdom-free government wouldn't spend it properly anyway.

 

[Gutwrench]

The years of working around epoxy is really revealing itself in Woz.

 

[Renzatic]

That's not true at all. Not to pick on you, sir, but I really wish that people would stop claiming this nonsense.

Right. The most you can say is that they have a reasonable expectation to maximize profits. There is no legal obligation to do so.

To repeat something I said oh so many years ago, if it were a legal requirement, no one would make any risky business ventures. For instance, if the iPhone failed to make it in the market, Steve Jobs could've been sued or jailed for not doing everything in his power to assure his shareholders an ever increasing profit. The end result of a business world run as such would be a world without any iphones, because they'd be too much of a risk to produce, and introduce to the market.

 

[keysofanxiety]

That's not true at all. Not to pick on you, sir, but I really wish that people would stop claiming this nonsense.

Nonsense, and not true at all? That's quite a naive thing to say I'm afraid.

Companies make money. As soon as you get board members and shareholders involved, your rose-eyed ideal that profit comes secondary to anything else is preposterous.

There isn't a board member alive in any company who would willingly pay more tax than they have to.

 

[mytdave]

Apple would still pay little taxes if there was a flat rate tax for everyone. You don't understand because everyone describes what Apple does with one word, loophole.

What Apple does is have American workers invent patents in USA. Apple then sells that patent for a penny to an Irish shell company.Total profit made by Apple is a penny and 15% of a penny is still less than a penny.

Apple wants to use those patents in the iPhone so has to pay licensing fees to that she'll company. Profit made by that shell company is billions and Apple gets to use that expense in USA as a tax deduction to further pay less taxes.

The only way to fix this is make it so if companies want to sell their patents cheaply to a shell company, a competitor (like Samsung) should have the opertunity to buy that patent instead. Then we wouldn't get companies like Apple using loopholes to shuffle their assets to Ireland.

Edit: if I regulaly bought brand new cars an sold them for a penny to my brother, I would be under investigation for money laundering. Apple sells their patents for a penny to their shell company and that is regular business.

Again, the problem is government (and the tax code). If a simple, single low flat rate was established, then the tax code can be changed (eliminated) so there are no more deductions for expenses. No more deductions for anything. No more subsidies. No more write offs. No more of any type of crap. Everyone pays a low 10% on profits, we don't care how you make your profits.

 

[keysofanxiety]

Right. The most you can say is that they have a reasonable expectation to maximize profits. There is no legal obligation to do so.

Nobody in this thread has claimed that there's a legal obligation to maximise profits. That would be ridiculous.

 

[Renzatic]

There isn't a board member alive in any company who would willingly pay more tax than they have to.

Right, but they can't sue the company if they decide to pay those taxes off of profits made from their investment. The most they could do is request for a new CEO, which they probably won't do if things are otherwise going well.

 

[AlexH]

Companies use public infrastructure and place burdens on them. They benefit from our relationships with other countries and from the protection of our police and military. They use our natural resources. Taxes pay for these things so they should pay just like individuals do.

I've heard this argument before. I'm curious, what burden does Apple place on the country, or its infrastructure that isn't far surpassed by what it already gives back in the form of taxes, employing talented tax paying employees, and inventing world changing technology? I'd love hard evidence.

 

[enzo thecat]

Companies use public infrastructure and place burdens on them. They benefit from our relationships with other countries and from the protection of our police and military. They use our natural resources. Taxes pay for these things so they should pay just like individuals do.

I dont think you understand how the tax code works. Taxes are collected on profits. If a company has $100,000 revenue in a year, but spends half of that on paying wages and the other 50% on equipment and supplies, the company has ZERO profit for that year. It would owe ZERO in taxes. The taxes would be paid by the wage earners. If the company needs to hoard capital for future expansion, development, wages, etc then that is considered profit. So they company must pay taxes on those cash reserves. The government calls those cash reserves (aka capital) "profit" to dupe voters, like yourself. But eventually that money will either be used to keep the company running or paid out as wages and then it will be taxed. Many companies, C-Corp, and LLCs always end the year with Zero $$ on the books to avoid this crap. At the tax-year-end they buy supplies, equipment, or pay bonuses to avoid a double tax (Cooperate tax than payroll tax)

 

[TallManNY]

Not exactly - one point you missed is that if the potential ROI is taxed less, then the company/individual may likely be inclined to invest more in said opportunity, based on it's chance for success. Even if they don't invest more, when determined investment eventually generates a profit, there are more dollars available in that profit to the investor to spend on whatever they want, which increases economic prosperity down the line for everyone.

I'm just not convinced that the effect of increased ROI after taxes has that much impact. The investment decision and size is much more driven by facts on the ground (like how many potential customers are in the area, stuff like that). Taxes being higher or lower doesn't change the facts on the ground. And I'm talking about the fundamental investment in a new business. I'm not talking about buying more or less stock from the market or buying a bond. The lower tax argument is that there is this pool of capital eyeing potentially successful investments and sitting out because instead of receiving 80 cents for every dollar of profit, they would receive 70 cents. I just don't see that. I don't think the potential small business owner doesn't open their restaurant because of thinking like that. And I don't think the large corporation refuses to open new stores to satisfy identified customers because of a bit more taxes due upon success.

The second argument is basically just an argument that all government taxes take money out of the economy and get wasted by the government. But the government spends every dollar it has. That money is back in the hands of people and businesses in very short order. Maybe some of the stuff that government builds is a "waste" but a business gets money to build that stuff. And I suppose you can say that the profit generator should be left with more money to make apparently further future prudent investments. But we are living in an era where the richer are accumulating more money. So rich investor are getting to make increasingly more (and more powerful) decisions as they accumulate and control more wealth. I do not think we need lower taxes to further empower the folks or the class which is currently accumulating wealth at a very brisk pace.

 

[cmwade77]

50% tax on anything is absolutely absurd. Bottom line is taxes should just be a flat sales tax and should never exceed 10% and this should be combined for federal, state and local governments (or the equivalent in other countries). That's right, the government would never get more than 10% of the GDP this way and they would need to learn to live within their means.

 

[T-Will]

How does anyone think a 50% tax rate is acceptable. That amount is completely ridiculous. Working 6 months a year just to pay the government.

 

[Renzatic]

How does anyone think a 50% tax rate is acceptable. That amount is completely ridiculous. Working 6 months a year just to pay the government.

Back in the 50's, it was as high as 90% in some cases.

Corporate taxes have been getting lower and lower over the years, and are now sitting at the lowest they've been since the 30's, and not even half our large corporations pay the full amount on that, thanks to tax breaks, incentives, and subsidies.

...yet somehow the idea that the federal government is choking the lifeblood out of our economy with overly high taxes has become a deeply argued point as of late.

 

[Urban Joe]

They'd fund schools properly. They'd support and fix a hospital system in crisis. There would be great outcomes for everyone if companies paid proper tax.

The more money these organizations get the more corrupt they get and the unions just get greedier. Everything on your list was much better before federal money was flooded into it.

 

[Renzatic]

The more money these organizations get the more corrupt they get and the unions just get greedier. Everything on your list was much better before federal money was flooded into it.

What? You mean like in the 20's?

 

[Iconoclysm]

Corporations are false individuals. Regardless of whether they are taxed or not, the individual rights of natural persons are a totally separate issue. Also, the IRS and the Federal Reserve are private corporations, as is the federal government called "The United States of America". This is not conspiracy theory. It is conspiracy actuality.

The IRS is not a private corporation. https://www.irs.gov/uac/The-Agency,-its-Mission-and-Statutory-Authority

 

[mytdave]

Flat tax for all. A higher rate for businesses than individuals. Period.

A flat tax might seem like a good idea on paper, but it could end up screwing over a good chunk of our small businesses and middle class. Sometimes you do need some exceptions in place to help grow the economy.

The problem with a flat tax for individuals is that it places more burden on those who make the least.
Using your example. the family that makes $10,000 per year now has to live on $8,500. At that level of income, $1,500 makes a big difference. For the family making $10,000,000,000 per year, I'm pretty sure they'll get by just fine taking home $9,850,000,000.

1. There's no reason a company needs a higher rate than an individual. Make it all the same. Quick example: If the business has to pay a higher rate, then there is less money that could have been used to hire another employee.

2. Flat tax won't screw small biz or middle class, it will help, and is equitable. The key is that small biz and big biz alike currently pay 39%. A low rate generates economic activity, which means revenues increases. More revenue at a lower rate still means the same or more money in taxes. A flat rate for everyone somewhere between 10-15% should be more than adequate.

3. A flat tax doesn't put *more* burden on lower income folks, but it does place an *equal* burden. Let's use your same example at a 10% rate. If someone makes $10k, their tax is $1k. Could $1k help pay a lot of bills? Sure, but just because I make a small income, why should I be exempt from contributing? Why do I have so many bills? Am I living beyond my means?

If someone makes $10B, their tax is $1B. That's $1B dollars!! How may employees could be hired with that money? Or maybe they own an airplane - I bet maintenance and hanger fees on that is pretty damn expensive. That $1B 'loss' then kind of hurts. Or what if that person, and others like them, spent (some of) that $1B on gizmos from the local electronics store where the $10k employee works? Well, economics for that store improve, and they then can (and frequently do) afford to give a raise to the $10k employee and make her a $12k employee.

Obviously taxes can't be zero, and it's not about getting by. A flat rate for all is "fair" (dirty word) or more appropriately, equitable for everyone. If we as a society want to be overly compassionate, then the tax code could be adjusted to be more "progressive," without adding complexity, to simply have anyone below the official poverty line only pay 1/2 of whatever the flat rate is. Nobody should be paying zero. Everyone has "skin in the game" regardless of how much they make. Everyone benefits from "roads & bridges" regardless of income.