Are Apple’s Tax Games Bad for America?
30th April 2012
Never mind the insane and arcane details. The big picture is that the world’s countries have built a great tax maze by competing to offer the most attractive rates to multinational companies, and the most sophisticated firms know how to navigate the labyrinth. It’s not unlike a shopping pro using coupons, sales, and return policies to pay bottom price at competing electronic stores — except at a much more complex and international level.
The reaction to the Times story has been fraught with indignation. But readers on every side of the federal tax debate ought to get used to this sort of thing. Yes, it’s frustrating, and yes, it’s morally debatable. But no matter what, U.S. multinationals are going to make most of their money overseas. No matter what, they’re going to use (legal) overseas loopholes to hide their money from our relatively high corporate tax rate. And, no matter what, we’re not going to see the vast majority of this money. And maybe we shouldn’t. Apple is an American company, but it makes two-thirds of its money overseas and its Asian market is growing almost three times faster than the American market.
Who wins in this system? Not the U.S. government, which is poorer for our efforts to have a high marginal tax rate that drives money out of the country. Not Apple and other multinationals, whose business plans are shaped by tax arcana rather than endogenous business strategies. And not Americans, who benefit neither from the tax money we don’t see nor the domestic investments we don’t get.