Apple and Corporate Taxes ⇥ bits.blogs.nytimes.com

From the New York Times’ live blog of the hearings:

Senator Rand Paul, the Kentucky Republican, has taken the floor with a very different tone. He says he is “offended” by the hearings. Who, he said, doesn’t try to minimize their own taxes?

“Tell me what Apple has done that’s illegal,” he said.

Reasonable people here aren’t arguing that what Apple has done is illegal or criminal, just devious. Carl Levin (D-Michigan) issued a press release, in which John McCain (R-Arizona) states as such:

“Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” said Sen. McCain. “A company that found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue. It is important to understand Apple’s byzantine tax structure so that we can effectively close the loopholes utilized by many U.S. multinational companies, particularly in this era of sequestration.”

The question here is not one of legality. Rather, like Arne Svenson’s “Neighbors”, it is a question of morals. Here, it’s an implicit requirement of compliance with a 35% taxation rate. Apple doesn’t comply with this, but no large corporation in the United States complies with this either. That doesn’t make it okay, but nor does it mean that it’s criminal. The tax structures created by most US companies are complex by design and by necessity.

Most tax scholars — whether they be from the libertarian CATO Institute, or the conservative American Enterprise Institute, or the centrist Brookings Institution, or liberal Center for American Progress — argue for a reform and dramatic simplification of the byzantine US tax code. But owing to the complexity of such a task, and the differing opinions of any given think tank or politician, a complete rewrite is unlikely in the near future.

Apple has published their prepared testimony (PDF).