“Apple’s got some $100 billion in such profits parked offshore and the shareholders, who do after all really own this money, would like some of it. The problem is that the US corporate income tax is 35%, those offshore profits have only paid perhaps 3 or 4% in tax so far, so 30 odd % will be demanded by the taxman if they’re taken back into the US to be sent out as a dividend,” Tim Worstall writes for The Adam Smith Institute. “So, instead, Apple borrows money in the US and pays that out as a dividend.”
“Hurrah!” Worstall shouts.
“Which brings us to the usual complaint but, well, companies should pay tax on their profits. So why am I cheering someone avoiding doing that? The answer there being tax incidence. It never is a company that bears the economic burden of a tax: it’s some combination of shareholders, customers and or the workers,” Worstall writes. “So given that we’re not actually taxing the companies why is it that we send the tax bill to the company? Simply because it is convenient to do so. There is no economic reason at all to tax company profits.”
“Which is why I applaud Apple’s plan,” Worstall writes. “Given that the only reason we do tax companies is convenience, if it’s no longer convenient then perhaps we should stop doing it? Simply abolish corporation tax altogether. Make income taxes on dividends and other returns from investment the same as they are from any other source of income. There, job done. And hundreds of thousands of accountants and lawyers will have to go do something productive for a living. Shame, eh?”
Read more in the full article here.
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Apple’s massive $100 billion capital return program is a perfect tax arbitrage – April 26, 2013
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Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
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Apple’s dividend move puts spotlight on foreign cash holdings, repatriation tax reform – March 20, 2012
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I’m not so sure this guys theory on taxing companies is sound. While I understand what he’s saying, I think many economists would disagree with him on many points.
Wouldn’t his idea of paying taxes hurt investing?
All Companies make provision for taxes. Taxes are an expense, pure and simple. In order to make 8% profit a company must earn 13% profit. It is the consumer that pays corporate taxes, as those taxes are embedded in the price of the goods that corporation produces. End of story.
You want lower prices, eliminate corporate taxes. As a small side benefit, the price of US produced goods go down, not just in the US, but worldwide. Lower cost US goods means more exporting, which means more US manufacturing JOBS. You can be sure of that.
A real tax revolution that would CLEAR ALL of this non sense away would be abolishing the IRS all together.
We should never be taxed at the source of income but instead be taxed when and ONLY when we spend it.
And that is an economic theory that I DO believe to be sound.
Obviously.
Steve Forbes had the right idea back in 1996:
http://www.pbs.org/newshour/bb/congress/forbes_flat_tax.html
However, the economy that depends on a complicated tax code has a powerful lobbying capability. Until the tax reform movement can rival it, there will be no meaningful change.
The flat tax is a horrible idea, and Forbes is an idiot.
What would make sense is a sales tax the excluded food, drugs, housing, and services. Put a 20% sales tax on everything else and eliminate all other taxes. No tax on income or savings. You’re only taxed when you spend it. For someone making $12K per year, spending all their income on housing, medicine, and food taxes would be almost nothing. Someone making $1M per year would pay almost 20%.
No one should ever pay taxes for anything. Who needs infrastructure? Not I, for one! I refuse to pay for anything whatsoever. Send me back to the stone age, please!
No one said a thing about not paying taxes for anything, Strawman.
Craig, don’t feed the witless trolls no matter how amusing their rants get.
Follow Jim Carry much?
Why do you assume that if something is paid for by taxation today, that there is no other way to do it?
People want roads and schools. I’m quite sure that if we all got to spend our earnings as we see fit, we’d have no shortage of roads or schools, but we wouldn’t be paying anyone to grope your granny at the airports.
-jcr
Liberals are like communists – they don’t mind spending, as long as it’s other people’s money.
Question: Santa Claus, the Easter Bunny, a Compassionate Conservative and a Mean Conservative are walking down the street. They see a $100 bill lying on the ground. Who gets it?
Answer: The Mean Conservative, naturally. The other three are fictional.
Trolls are like dandelions — they spout fluff into the interwebs seeding thought-weeds wherever they land…
As Margaret Thatcher said: “The problem with socialism is that eventually you run out of other people’s money [to spend].”
@ correctu – I can tell you about another real character – the Clueless Liberal, naturally, who thinks every good social idea needs to be funded regardless of fiscal consequence.
“The Ten Commandments – Republican-Style”
I. Thou shalt talk about Christian principles, but not live by them.
II. Thou shalt attack opponents personally when you can’t win on policies.
III. Thou shalt call yourself pro-life, but be in favor of the death penalty.
IV. Thou shalt call yourself pro-life, and put guns in the hands of school children.
V. Thou shalt give lip service to democracy while taking away civil liberties.
VI. Profit is the Lord Thy God, thou shalt not put the people’s interest above those of your corporate contributors.
VII. Thou shalt make sure fetuses have health coverage, but leave children and babies behind.
VIII. Thou shalt bear false witness against your opponents and liberals, and demonize them.
IX. Thou shalt run on a moderate platform, then enact right-wing policies as soon as possible.
X. Thou shalt call the media liberal, so that people forget that the media is owned by corporations with a conservative fiscal agenda
Wow. I’m Canadian and even I think 4, 5 and 6 are completely unfair. And a few others I don’t feel qualified to speak on.
You can’t accuse someone of demonizing you and then do the same to them.
Unfair? If the shoe fits, wear it.
XI. Pretend you’re a victim.
Absolutely spot-on ! I’m Australian and simply replaced “Republican” with “liberal/national coalition” and “democrat” whith “labour party” and again spot on !
I reckon this template would apply to any government in any country.
Well done Correctu !
You sure are one dumb fuck.
Ah, you are following the second commandment, then. Cheers!
http://memeblender.com/2012/01/22/first-world-problems-someone-on-the-internet-disagrees-with-me/
That was amazing! But, where are the hateful right wing replies?
cb, most of us conservatives are smart enough to realize that it’s pointless to have a battle of wits with the unarmed.
BLN – don’t insult the Communists. At least they make 5-year plans, rather than annual “continuing resolutions.”
If it is legal, which it is, why are we criticizing and complaining?? Where was the outrage when GE paid ZERO DOLLARS last year?? Where was the outrage when Obama only paid 18% tax rate??
I love how government double and probably even triple dips on business & consumer tax income. So corporations pay 35% tax and then stockholders get to pay another 15-30% of income derived from that in the form of dividends and stock? In my opinion once any amount of money has been been taxed it doesn’t get to be taxed again in other forms ad infinitum. That’s government “whittle down to near nothing” effect. And they wonder why we need entitlement programs…
The transaction is taxed, not the money itself. Society supports those transactions with education, courts and other government services, infrastructure. Because value is added at each transaction, it’s a win/win, unless the biggest players hide across the border (Apple included).
This is nothing new, peterblood71. For instance, every time that a car is sold in the U.S., the transaction is taxed. As I recently found out, a used car in Texas is now taxed at a blue book retail value (NADA, I believe) or the sale price, whichever is *higher*. That’s right…you can be taxed on money that never actually changed hands.
The taxation policies in the U.S. are obviously overly complex and broken. So are the fees for fishing, national parks, etc. They don’t necessarily go to the organizations that collect those taxes.
The solution is a simplified tax structure without deductions. I would prefer a consumption tax with exemptions for food and medical supplies and services, but a workable solution could be found using income taxes, etc.
The key is balance – whatever the taxation strategy, we need to balance revenue and spending over the long term. I would prefer a reduced level of federal spending, but we need to close the revenue/spending gap at the actual level of spending, whatever it is. The pain of actually paying for *all* of the services that the federal government provides just might make people think twice about demanding more services. The false promises of tax cuts putting more money in your pocket while, at the same time, generating more tax revenue, have to end. That only works when tax rates are high (well over the “optimum” rate for maximizing revenue), and it also takes time for economic growth to overcome the tax cut and begin delivering increased revenue.
Let’s establish a simplified tax structure that balances the budget and then cut taxes *only after* spending cuts have been enacted and realized (spending cuts come first, then tax policy is modified to rebalance the equation based upon actual spending).
Companies like low taxes, sure. But taxes are simply factored into the cost of doing business, as noted by others. And companies spend lots of effort and money attempting to minimize taxes. It is very inefficient. What businesses really need is stability. A stable environment makes is much easier to forecast and plan. The elimination of annual tweaks to the tax code is worth more than a small change in tax rates. In the end, the citizens end up paying for the costs of government, regardless of the structure set up to collect the taxes. If revisions to our tax policies can make our exports more competitive and, thus, create more good jobs within this country, then we will spend less on unemployment and collect more from whatever tax structure (income or consumption) that exists.
Such a change will involve a great deal of pain and there will be detractors. Many thousands of people work in the tax industry or support the tax industry (training, software, etc.). Those people will need to be retrained as their jobs are eliminated.
Tax simplification is unlikely to happen anytime soon because of the power and money in play to “influence” our Congressional representatives. These politicians have to be convinced to represent the best interests of the country and rather than paving the way for a post-retirement quid pro quo cushy executive position.
Melvin, please, please just shut up. Every time I read your drivel I whisper to myself, “O Angel of Death, Take Me Now!”…please stop your inane, verbose, pompous horseshit so that I may live another day. Thanks in advance.
Apple is a world wide company with customers in every country. Only those whose America-centric views deny the existence and rights of other nations would argue that Apple should pay everything to the American government.
Just to play devil’s advocate here, Tflint, one could argue that Apple is an American company even though it does business in every country, and therefore it “owes” something to the USA. This is, of course, a specious argument; the taxes it pays here in the USA (and the taxes generated by the jobs created by Apple) fulfill that obligation, and Apple pays taxes to the countries in which it does business. Now, if the USA were to say “we’ll charge you the DIFFERENCE between the foreign tax rate and the USA tax rate, since you’ve already paid taxes on that money to them,” that might be a place to start discussion. But until that discussion starts, Apple – and every other multinational – has a fiduciary responsibility to its shareholders, not to governments, and should pay only the taxes that it is REQUIRED to pay, and not a penny or eurocent more.
America has the highest corperate tax in the world, so it is smart of Apple to avoid paying these insanly high taxes. Government is a leech on the back of the People.
“The problem is not that people are taxed too little, the problem is that government spends too much.”
Ronald Reagan
“Government always finds a need for whatever money it gets.”
Ronald Reagan
“The trouble with our Liberal friends is not that they’re ignorant; it’s just that they know so much that isn’t so.”
Ronald Reagan
Yes indeed. Good old Raygun quotes. He tripled the California budget as governor. He raised federal taxes 5 times. He ushered in the beginning of huge deficits at both places. However he did talk a good game. But of course he was an actor. You must be very young or very gullible my friend.
April ’13: 165,000 new jobs under Obama: http://fxn.ws/12vXCzc
September ’83: Over 1 million new jobs under Reagan: http://cnnmon.ie/Azu4Vg
CJ, you must be the gullible youngster.
http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
Thanks for the link. Everyone should study it. Very interesting. Turns out US isn’t so far different than most countries. I note that Ireland is at only 12.5%. No wonder both Apple and Google pay more than 2/3 of thier oversea taxes there. Must be huge iPhone business there, huh? Wish I could pick where I claim my income. Wish I owned a few politicians.
“And hundreds of thousands of accountants and lawyers will have to go do something productive for a living.”
And you’ve just named 2 of 4 groups who will prevent any attempt to eliminate the income tax. The other 2 are politicians and bureaucrats. All 4 know job security when they see it.
How much cash in off shore accounts do Google & Microsoft have hiding away from IRS?
Worstall and his other fellow analysts keep making the same error — they keep stating that Apple’s shareholders “own” Apple’s cash. Wrong.
Apple owns Apple’s cash. While the shareholders each own a tiny piece of Apple, they do not own Apple’s assets. Apple controls its money, and the Board of Directors decides what to do with it. The shareholders not only have no say in how Apple’s money is spent, but in a windup of the company, they’re the last to get paid.
Just getting a little tired of analysts being wrong (again).
It always amuses me when companies get blamed for avoiding taxes. Libs get all cranked up over these “evil corporations” but they’ll never get angry over the politicians who continue to make such obtuse and ambiguous tax laws.