This Just in: Successful Company Chooses to Legally Maximize Profit Rather Than Reward High-Tax Jurisdictions


The New York Times over the weekend had a big blowout story titled "How Apple Sidesteps Billions in Taxes." Since the newspaper-journalism tradition is to lead with your strongest stuff, I'll excerpt the first four paragraphs:

RENO, Nev. — Apple, the world's most profitable technology company, doesn't design iPhones here. It doesn't run AppleCare customer service from this city. And it doesn't manufacture MacBooks or iPads anywhere nearby.

Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.

Apple's headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company's profits, Apple sidesteps state income taxes on some of those gains.

California's corporate tax rate is 8.84 percent. Nevada's? Zero.

Why, the next thing you know, The Times will be ripping the lid off the fact that many businesses incorporate in Delaware….

Incorporating in Nevada is a time-honored way for heavily taxed Californians to avoid the long arm of Sacramento. I remember hearing earfuls about the process a decade ago at a D.I.Y. convention for indie musicians in Hollywood, but you won't see Silver Lake rocker trash (who, unlike Apple, will never hire an employee in Nevada) on the front page of The New York Times any time soon, on account of not sitting on a $74 billion offshore warchest.

I recommend reading the full article, whether it's because you enjoy tracing the complexities of international softwware tax and trade, or simply because you're a fan of unintentionally hilarious to-be-sure sentences. Such as:

* Almost every major corporation tries to minimize its taxes, of course.

* Apple, of course, is not responsible for the state's financial shortfall, which has numerous causes.

There is some scandalous Apple behavior in the story, although it's barely presented as such. Namely, the company has begged, wheedled, and strongarmed politicians for various tax credits, holidays, and the usual corporate welfare BS. Which is presented not as bad policy (which it is), but rather yet another reason why not volunteering to pay more taxes in California is disloyal and totally unfair to community colleges:

But some in California are unhappy that Apple and other California-based companies have moved financial operations to tax-free states — particularly since lawmakers have offered them tax breaks to keep them in the state.

In 1996, 1999 and 2000, for instance, the California Legislature increased the state's research and development tax credit, permitting hundreds of companies, including Apple, to avoid billions in state taxes, according to legislative analysts.

Your bonus moment of zen:

And while the company has remade industries, ignited economic growth and delighted customers, it has also devised corporate strategies that take advantage of gaps in the tax code, according to former executives who helped create those strategies.

Will paradoxes never cease!

Here's an idea: Stop giving tax breaks to special pleaders, stop spending money you don't have, use the money saved to drastically simplify the tax code and lower rates, then see where that leaves you. Nah, screw it–let's just blame the world's most successful companies for the country's biggest basketcase of a state:

"When it comes time for all these companies — Google and Apple and Facebook and the rest — to pay their fair share, there's a knee-jerk resistance," [said Brian Murphy, president of nearby De Anza College]. "They're philosophically antitax, and it's decimating the state."