“That Steve Wozniak is a truly gifted engineer is one of those things which I think he has proven over the years, something we can take from granted now,” Tim Worstall writes for Forbes. “That he’s fully au fait with the economics of taxation seems to be less certain.”
“For he’s just told BBC radio in the UK that he thinks that Apple should be paying a 50% tax rate, just as he does. Without, apparently, realising that the economic entity Apple does indeed pay a roughly 50% tax rate right now,” Worstall writes. “The confusion coming from the fact that the economic entity, Apple, and the limited liability corporation, Apple Inc, are not the same thing, not the same thing at all. The economic entity is Apple plus the people who own it, the stockholders and that’s what we need to consider as the taxable unit when we think about comparing the tax rate to that which Wozniak himself, as an individual pays, that 50% that he claims.”
“For it’s the combination of the corporate income tax rate and the dividend tax rate which needs to be considered,” Worstall writes. “Those two are, together, the taxes being applied to this economic activity and the taxes, added together, that most closely resemble the personal income tax rate which Wozniak is stating as his own tax rate… We’ve got to decide what we should do about all of this. And my solution is a long standing one. Just abolish the corporate income tax altogether and tax dividends and capital gains (perhaps with an inflation adjustment) at those normal income tax rates.”
Read more in the full article here.
MacDailyNews Take: Obviously, U.S. corporate taxes are too high.
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013