As the world’s most popular company, Apple makes a great foil for any issue anyone wants to campaign. Want to draw attention to the plight of the Chinese worker? Use Apple (via Foxconn). Want to trash U.S. corporations for avoiding taxation? Go after Apple.
Which is what The New York Times did on April 28 in an article entitled “How Apple Sidesteps Billions in Taxes.” The article detailed some of the devices employed by Apple in order to minimize its tax burden, including siting business units in low-tax states in the U.S., and in lower-tax jurisdictions around the world.
“Sidesteps,” of course, implies that there is something improper going on. The Times acknowledges that there is nothing illegal about the devices Apple employs, but still insinuates that Apple is doing something wrong, as if companies have some obligation to pay more taxes than they actually owe, diverting profits from their shareholders and employees into the coffers of profligate governments like, say, the state of California.
But, as Christopher Bergin, publisher of Tax Notes, reminds us, “Taxpayers, corporate or individual, have the responsibility to pay the tax the law requires, and only the tax the law requires, and the right to give the rest of their money, or not, to whomever they want.” The point is well-enshrined in law that taxpayers have the right to employ any legal means to minimize their tax burden. So long as the taxpayer is complying with the letter of the tax law, the burden is upon the tax code.
What Apple (along with most U.S. companies) is actually doing is finding a way to survive and (in Apple’s case) thrive in the face of a tax code that seems designed to disadvantage them. We now have not only the highest corporate tax rate in the world, but also are just about the only nation on earth that demands the right to tax income earned anywhere in the world at that same stifling high rate.
It turns out that “innovate or die” also applies to the effort U.S. companies must put into dealing with our tax code.
Our tax code has become so complicated, convoluted and counterproductive that it has become an obstacle for U.S. companies as they try to innovate and compete in a global economy. It should NOT surprise us that innovative companies find ways to solve the problems created by our tax code.
What should surprise us is that companies aren’t wholesale pulling up stakes and moving to lower-tax nations like, say, Canada, the same way that they are leaving high-tax states like California. Because freedom includes the freedom to leave.