In our age of sclerotic growth and sprawling, dysfunctional government, Apple, Inc., represents an astonishing success story.
Since its nadir in 1997, the company has increased in value by 6,413 percent. Today Apple, which is estimated to have created around 600,000 jobs, is worth more than the entire American aircraft-carrier fleet. They’re good for the government, too: “To our knowledge Apple is the largest corporate taxpayer in America,” CEO Tim Cook noted yesterday morning. “We paid $6 billion in cash to the U.S. Treasury [in 2012] — that’s $16 million each day. And we expect to pay even more this year.”
Yes, you read that right. The world’s greatest deliberative body is asking a for-profit company why it isn’t volunteering to pay taxes that it doesn’t owe. You might have imagined that tax collectors targeting innocent parties would make for poor optics right now. But you’d imagine wrong.
“Apple is exploiting an absurdity,” Michigan’s Democratic senator Carl Levin spluttered professorially at the start of the Senate’s probe yesterday — an absurdity “that is right at the epitome of creative tax gimmickry.” He quickly made sure to note that he wasn’t being personal. “Apple’s a great company. But no company should be able to determine how much it’s going to pay in taxes . . . by using gimmicks!”
Along with “loophole,” “gimmick” is the voracious Left’s newest way of describing “compliance with our rules.” Since 2009, the company’s annual reports show, Apple has paid a tax rate of around 2 percent on the $74 billion it has earned in overseas income. Which is precisely what it owed. American law holds that companies incorporated overseas, as Apple is in Ireland, aren’t required to pay U.S. taxes; Irish law holds that, as Apple is controlled in the U.S., it should be taxed there. Senator Levin can fulminate all he wants, but Apple is “determining how much it’s going to pay in taxes” by following the rules of the two countries in which it operates. That’s how it works, Carl.
After explaining how much he, too, liked Apple, John McCain joined Levin in objecting to their obedience. “For years,” McCain griped, “Apple has opted to forego fully contributing to the U.S. Treasury and to American society by shifting profits and circumventing U.S. taxes.” A reminder to the maverick: You are discussing taxes. One cannot “opt” out of taxes. If Apple has done something wrong, then prosecute them. If not, stay quiet. When you imply that a beloved company isn’t fully “contributing to American society” if it declines to hand over some of its hard-earned cash to the federal treasury, you sound like a fool.
“Apple pays all its required taxes, both in this country and abroad,” the firm observed bluntly in a written statement. Indeed so, and, both legally and morally, that is all that is required of it. My colleague Kevin Williamson is bang on: Avoiding taxes is not just legal, but it is a patriotic and virtuous act. At today’s spending rates, the federal government blows through Apple’s $16 million per diem contribution by 12:03 a.m. For avoiding destructive corporate taxation as much as is legally possible, Tim Cook and his team are to be admired.
Quite why Apple was singled out is unclear. In fact, quite why anybody was called in is unclear. If Congress wishes to change America’s tax code, removing the “absurdities” and “gimmicks” of which Senator Levin so disparagingly spoke, it can do so on its own time. Are we to expect it to become customary for the victims of convoluted legislation to account for their submission? When debating the Volstead Act, did Congress wheel in the patrons of America’s saloons and request sniffily of them an explanation as to why they were drinking beer?
Apple is a publicly traded company whose finances are available to anyone who cares to take a look. Why single it out?
“If anyone should be on trial here, it should be Congress . . . for creating a bizarre and byzantine tax code,” said Rand Paul, objecting to the spectacle. “If you want to assign blame, this committee needs to look in the mirror and see who created that mess.” Tim Cook agreed: “The tax code has not kept up with the digital age.”
The digital age? It’s barely escaped parachute pants and shoulder pads.
— Charles C. W. Cooke is a staff writer at National Review.