In Praise Of Apple’s Low Taxes

[Ed Hudgins]

In Praise of Apple's Low Taxes

By Edward Hudgins

May 24, 2013 -- Apple Inc. is under attack by politicians for “avoiding” paying $44 billion in American corporate taxes.

Sen. Carl Levin (D-Mich) complained about tax “gimmicks” and Apple’s “unfair behavior,” saying “loopholes in our tax laws and regulations allow many companies … to shift enormous amounts of income from this country to other countries.” Making the whining bipartisan, Sen. John McCain (R-Ariz) complained that Apple “is one of the largest corporate tax avoiders.”

But in fact it's the politicians who deserve condemnation, not Apple.

First, as Apple CEO Tim Cook pointed out in Congressional testimony, his company paid all the corporate taxes it legally owed—estimated to be around $6 billion. It broke no law.

Second, anyone with a proper sense of self-worth seeks to pay no more taxes than they legally owe. If that’s “tax avoidance,” everyone does it and should do it. What kind idiot would Cook be if he said to his shareholders “Gee guys, let’s fork over tens of billions more to the feds above and beyond what we’re required to do”?

Third, if Apple had shoveled more of its cash into the federal government’s insatiable maw, this would have meant some combination of higher prices for Apple consumers, less Apple investment in developing cool new products, lower prices for Apple stock (check your portfolio!), and less profits for the individuals who earned it. Note: none of those “earning it” are members of Congress.

Fourth, the huge, arcane, incomprehensible tax code is a political document. Every deduction is there because Congress put it into law, whether it’s for oil companies purchasing drilling equipment or Green consumers purchasing Chevy Volts. Yes, it’s a mess. But…

Fifth, the reason the tax code is a mess is that political power is the coin of the realm. Few companies can stay “above politics” and survive. They always must watch for competitors who try to use the tax code or regulations to screw them. So every interest group—every business—tries to influence Congress to get benefits or at least protections worked into the law—and the politicians oblige. The result is a tangled, corrupt, crony-capitalist mess.

Conclusion: Apple was not trying to screw anyone, just trying to use every legal means to keep from being looted.

Neither Apple nor any enterprise or individual needs to justify why they should keep their own money. The government must justify why it should take it away since the only legitimate purpose of government is to protect our lives, liberty and—yes!—property. Most government activities nowadays are by no rational standard authorized by the Constitution. Most tax money is spent by political elites who arrogantly presume to run our lives.

So let’s praise Apple both for being one of the world’s most productive companies and for keeping its tax bill low. And let’s condemn politicians who try to cripple the productive while demanding that the productive turn over more of the fruits of their productive efforts to politicians to be wasted.
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Hudgins is director of advocacy and a senior scholar at The Atlas Society.

For further information:

*Video: “The IRS Scandal and Tea Party Protests.” May 23, 2013.

*Video: “IRS Denied Non-profit Status To Free State Project.” May 20, 2013.

*Edward Hudgins, “The IRS and the Cult of Arbitrary Power." May 14, 2013.

*Aaron Day, “Voting With Your Wallet Against the IRS.” May 14, 2013.

*Edward Hudgins, “Steve Jobs vs. the Anti-Capitalists.” October 5, 2011.

[Brant Gaede]

You got it right, Ed, but money paid to shareholders in dividends and stock buy backs is more economically efficient than letting it stay in corporate coffers to be misspent by management in improper and over-priced acquisitions. Not Apple's problem so far, but this is generally true. Some corporations have all but destroyed themselves that way. Management has too much power while the real owners, the shareholders, have too little. Modern corporations are philosophically unjustified legal entities tending to and supporting fascist state power and crony capitalism, but the country has grown up with them and we are stuck with them.

--Brant

Edited May 25, 2013 by Brant Gaede

[syrakusos]

Ed - as I said on RoR, nice post. Now they need to say all of that for themselves.

Brant - yeah, corporations are a problem. The specific consequences you cited were almost resolved in the 80s with the 'junk bond" leveraged buy-outs. Stockholders took the companies back from managers. Disney, in particular was rescued from The Apple Dumpling Gang and "splashed" success with Roy Disney's take-back. But, of course, the powers that be used the state (Rudolph Giuliani) to put an end to that. So, your point is easy to support.

However, the specifics of organization of the firm do not change the facts that Ed cited.

[Brant Gaede]

No argument from me about your last.

--Brant