Apple: Corporate Tax Rates

We live in a global world. These are companies that operate globally, so they have a lot of leeway to park profits in different places around the world.

Tax rates operate in a marketplace. Countries have been competing with each other to draw the tax base, by making their rates as low as possible. The U.S. is not very competitive, so we ace ourselves out of tax revenue. We have the highest corporate tax rates in the world. So companies take their profits and park them in places where their tax bill will be less.

If we set our rates at 10 percent across the board, for example, and simplified the code, we'd see those companies that are currently paying zero to the U.S., pay something to the U.S. rather than to Ireland or Switzerland. It would make us competitive with countries that have lowered their rates to those levels to attract a tax base that can take itself anywhere.

None of that will happen, of course, because our tax code is a piece meal mess of individual favors handed out on a one-by-one basis, and administered by a corrupt pack of hyenas.

 

That "extortion" is already going on. There is a marketplace for tax rates. And the equilibrium price has already been set. The lowest rates (effective tax rate) in the world are between 10 and 13 percent. Cisco or Apple or GE already have done the "threaten to to take their profits elsewhere" game. And that 10 to 13 percent rate appears to be the bottom market pricing for tax rates. A pretty competitive marketplace set the rate there.

I'd suggest it is no more extortion, of course, than you are extorting a store when you comparison shop for the best price. There is a point, of course, at which no one can afford sell you that big screen TV for less money. There are costs, overhead, etc. and they need to have some margin for profit.

There is also a point at which lowering corporate tax rates to attract global companies brings about such diminishing returns that countries can't go lower. We can either find that number and attract the tax revenue by setting our rates there, or we SHOULD expect that companies with global reach are going to comparison shop and go elsewhere.

 

GE pays zero to the U.S. some years.

It does pay some taxes elsewhere, even if it does employ more resources to reducing its global tax load than any company.

GE has a network of subsidiaries in Ireland, for example, that it has gone to great expense to set up IN Ireland -- to keep the money away from the U.S. Ireland sees some tax revenue from GE that the U.S. doesn't.