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Free Minds & Free Markets

Apple's Tax Tactics Deserve Defending, Not Shaming

Is it moral to pay higher taxes, even if that hurts employees, consumers, and shareholders? David Brooks seems to thinks so.

Employees of Apple "should be humiliated and ashamed" because of the iPhone company's "clearly sleazy" decision to minimize its corporate taxes, New York Times columnist David Brooks claims.

"The Apple corporation exists because of American institutions," Brooks writes, complaining that "Apple parked its intellectual property in an Irish subsidiary so it could avoid paying taxes in America and support those institutions. It saved $9 billion in 2012 alone."

The Times columnist complains that Apple "stiffed its own country."

"We turned off the moral lens," Brooks complains, contending that "remoralizing...the market is the great project of the moment."

Brooks doesn't so much argue that Apple's behavior is immoral as he does assert it, hurling tendentious language—"clearly sleazy," "ashamed," "stiffed"—without spelling out the reasoning behind this "moral" system that requires a corporate management to pay higher taxes than legally required.

It's a peculiar kind of nationalism. Brooks didn't object to Apple making its products in Asian factories, or to the company's employing a Briton, Sir Jonathan Ive, Commander of the British Empire, as its chief design officer, or to the company making 63 percent of its sales outside of the U.S. Yet when it comes to paying taxes, Brooks wants Apple to be strictly "America First."

This is an old argument. Back in 1947, Judge Learned Hand of the United States Court of Appeals for the Second Circuit observed, "Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

It's not immediately obvious, at least to me, that it would have been more moral for Apple voluntarily to have paid $9 billion more in U.S. taxes in 2012. In that case, the $9 billion would have been available for politicians in Washington to spend. Some portion of it would probably have been wasted. Instead, Apple was able to use the money for other purposes—compensating employees, investing in the growth and development of its business, and creating value for shareholders and customers. Apple generates plenty of U.S. taxes anyhow, through the income taxes paid by employees, capital gains taxes paid by selling shareholders, and state and local sales taxes. When the Senate held a hearing about this issue in 2013, Apple CEO Tim Cook "noted that the company's $6 billion federal tax payment last year likely made it America's largest corporate tax payer," USA Today reported.

Apple chose to minimize its U.S. corporate income taxes at a time when those taxes, at a 35 percent rate, were so high and uncompetitive that even President Obama proposed reducing them. By avoiding paying at the 35 percent rate, Apple helped to build political pressure for rate reductions. The Tax Cuts and Jobs Act signed into law by President Trump reduced the U.S. corporate tax rate to 21 percent. Apple subsequently announced it would pay $37.3 billion in U.S. taxes on money that it will bring back to America under the newly lowered rates.

If Brooks wants to defend the 35 percent U.S. corporate tax rate that applied in 2012—a rate that, again, even Barack Obama said was too high—I'm open, but skeptical. It's long been a technical challenge and a political challenge for policymakers to agree on tax rates that maximize economic growth and generate the revenue necessary to pay for essential government functions. It's not at all clear that "shame" has been the missing ingredient needed for consensus.

For Apple to have paid a higher tax rate in 2012, the company might have had to charge its customers more for phones. It might have had to pay its contractors and their Chinese factory workers even less to make those phones. Or it might have generated lower returns for its shareholders, including a lot of U.S. pension funds. Doing those things so that politicians in Washington could have extra tax money to spend may be moral in Brooks' view of the world. But the tax choices Apple made instead are also morally defensible. That is something for Apple employees—and shareholders and customers, too—to keep in mind the next time David Brooks calls them "sleazy" or instructs them to be ashamed.

Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.

Photo Credit: THOMAS PETER/REUTERS/Newscom

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  • Uncle Adolf’s Gas and Grill||

    All I want for Christmas is a YouTube video of David Brooks getting kicked in the nuts.

  • ||

    Yes!

    "Ow my balls".

  • Don't look at me!||

    What's the over / under on how many deductions he takes on his 1040?

  • a ab abc abcd abcde abcdef ahf||

    I hope David Brooks is intentionally and voluntarily overpaying his taxes. It sure would be a shame if he had any dodgy tax exemptions. I wonder how many of his business lunches were fraudulent.

  • Sevo||

    "I hope David Brooks is intentionally and voluntarily overpaying his taxes."

    he and Warren Buffett should make a good pair.

  • tlapp||

    Yes, he can just not take the deductions that are allowed by law and pay more so it won't violate his morals and instead only violate his stupidity.

  • ||

    A commentary on Apple's moral standing that doesn't mention right to repair seems grossly one-sided.

  • Overt||

    There is no moral right to repair. And there is absolutely nothing preventing you from "repairing" your phone/mac book as long as you are willing to live with the consequences of voiding your warranty with Apple. Boo hoo. Apple won't agree to pay for your machine after you had some teenager in a strip mall shove in unauthorized parts.

  • Agammamon||

    You are amazingly uninformed over 'right to repair'.

    1. There absolutely is a right to repair.

    2. Apple is one of several companies that are going to extreme lengths - including mobilizing the violence of the state - to prevent people from getting their own stuff repaired by any Apple doesn't agree to. Warranty or no.

    3. Apple has been flat-out telling people that even basic repairs are not doable at Apple repair centers - repairs that anyone who has a half-way equipped shop can and do do. All so they can drive up sales of new devices.

  • Overt||

    1) There is a right to private property. And you are free to do with your property what you want. And Apple is free to refuse to offer further support for the product.

    2) I may very well be misinformed on this, so you are free to link to some evidence. However, the "Evil Apple" screeds I have seen so far include, a) going after companies that advertise repairs in ways that indicate they are authorized, b) decline to sell replacement parts, c) prosecute reverse engineering or unauthorized copy of their gear.

    The latter is the only one I find morally objectionable, and only in so much as I object to overly broad patent law in the first place.

    3) If the device is repairable within the terms of a warranty, then take them to small claims court. If it is not within warranty, there is no morally compelling reason that Apple offer support for it just because they sold it to you 6 years ago.

    Yeah, Apple's business model is predicated on selling you a closed system that will be unsupportable in 5 years. I have found it a distasteful business model for the 30+ years they have been practicing it. Yet people with very small rimmed glasses and black sweaters have been happy to buy in for all that time. There is no moral dilemma there- just a bunch of people who want Apple to sell more than Apple is willing to offer.

  • Overt||

    You are amazingly uninformed over 'right to repair'.

    And by the way, the whole term "Right to Repair" is generally used to describe extremely statist intervention in free markets. Generally "Right to Repair" bills require companies to offer parts for long periods after the device is past its lifetime, as well as open up their systems to 3rd party actors. *If* Apple is engaging in state violence to enforce some sort of forced obsolescence, then I'll be happy to object. But when people start throwing around those specific three words (Right to Repair), it is a dog whistle for "Moar stupid legislation".

  • ||

    And by the way, the whole term "Right to Repair" is generally used to describe extremely statist intervention in free markets.

    Sure, and at one point, net neutrality meant the opposite.

  • ||

    *If* Apple is engaging in state violence to enforce some sort of forced obsolescence, then I'll be happy to object.

    How about fraud? It's pretty readily established that the Genius Bar exists not to support and repair existing products but to upsell future products. This is in combination with licensing and then undercutting resellers *and* as indicated below, suing legitimate parts acquirers for copyright infringement.

  • Sevo||

    mad.casual|1.14.19 @ 4:11PM|#
    "A commentary on Apple's moral standing that doesn't mention right to repair seems grossly one-sided."

    Any claim of "right to repair" is bullshit on the face of it.
    You have a 'right' to what you bought, period.

  • ||

    You have a 'right' to what you bought, period.

    Right. So when I go to the strip mall and ask the kid to fix my phone and he says "I'm not a licensed Apple service technician and I don't have access to Apple guaranteed parts, but I can order used and aftermarket parts off eBay and fix your phone for you." Apple has no grounds to sue him for copyright infringement.

    Moreover, if Apple says I have to jump through X, Y, and Z hoops in order to become a certified Apple reseller, it's pretty blatantly disingenuous and quite reasonably fraudulent of them to then poach my client list, undercut me, and deny me access to parts and services.

    Moreover moreover, if I buy a product from Apple and a warranty on those products, I haven't bought in to the abstract notion of me being supported in having the product, I've bought in to the manufacturer supporting the product they sold me. Marking up the cost of repairs until it's more affordable to sell me a new product and then selling me a new product isn't support.

  • Just Say'n||

    "The Apple corporation exists because of American institutions," Brooks writes, complaining that "Apple parked its intellectual property in an Irish subsidiary so it could avoid paying taxes in America and support those institutions. It saved $9 billion in 2012 alone."

    This sums up elite conservatism right there. Brooks is upset because Apple isn't paying as much taxes by offshoring its intellectual property, but Brooks would shit himself with rage if Occassional Cortex chastised Apple for producing the i-phone in China rather than domestically. Brooks sees a distinction where there is none.

  • ||

    Brooks is upset because Apple isn't paying as much taxes by offshoring its intellectual property, but Brooks would shit himself with rage if Occassional Cortex chastised Apple for producing the i-phone in China rather than domestically. Brooks sees a distinction where there is none.

    Not to defend David Brooks, but if you think physical property and/or assets and intellectual property have no distinctions, you're a moron.

  • Just Say'n||

    "but if you think physical property and/or assets and intellectual property have no distinctions, you're a moron."

    That's strange. Seems to me the moronic position is to consider that reducing costs by outsourcing labor or intellectual property is somehow different. You probably think free trade agreements should include strong and perpetual intellectual property protections too.

  • ||

    Seems to me the moronic position is to consider that reducing costs by outsourcing labor or intellectual property is somehow different.

    Labor, property, and intellectual property are completely interchangeable when it comes to cost savings? That's your position?

    You probably think free trade agreements should include strong and perpetual intellectual property protections too.

    The opposite actually. Or, maybe better stated, for free and/or fair trade to happen grossly disparate intellectual property regimes cannot exist.

  • Just Say'n||

    If you reduce costs by outsourcing manufacturing plants or you do it by outsourcing your intellectual property holding, thereby reducing your tax burden, it is still done with the exact same purpose. Which is what Brooks doesn't seem to grasp. There is no difference between moving your headquarters overseas or your intellectual property holdings overseas or moving your workforce overseas with the intent of reducing cost.

    All I was saying is that Brooks is trying to make a distinction where there is none.

    Also, intellectual property protections in free trade agreements is virtually no different from wage mandates in said agreements.

  • Sevo||

    "Labor, property, and intellectual property are completely interchangeable when it comes to cost savings? That's your position?"
    Yes.

    "Or, maybe better stated, for free and/or fair trade to happen grossly disparate intellectual property regimes cannot exist."
    Assertions =/= arguments. You are welcome to your opinion; it is other than shown.

  • ||

    Yes.

    Weird, because Apple protects IP in Ireland and manufactures in China. Almost like there's a distinction to be made.

    I wonder, if it suddenly became preferable to protect IP and China and manufacture in Ireland if moving the manufacturing to Ireland and the IP to China would happen at anything near the same rate and/or overhead?

  • Mickey Rat||

    David Brooks is conservative for someone with a column on the NY Times editorial page That is about it.

  • marshaul||

    And you're conservative for someone who thinks authoritarianism and general shitheelery and American traditions. That's about it.

  • ReadMyLips88||

    The only reason that policymakers have had any challenge to agreeing on rates is the internal pressure to raise more revenue brought on by the reckless and cronyist spending that dominates the Federal budget.

    As to David Brooks, I would expect his nuts already hurts from sitting on that fence for so long. Hard to be both conservative and progressive.

  • BigT||

    Is he congressive or progservative?

    OK, let's settle for a-hole.

  • MasterThief||

    He's a progressive who occasionally says commonsense things or something that appeals to tradition. Though really he rarely says anything remotely conservative

  • $park¥ The Misanthrope||

    the company might have had to charge its customers more for phones

    Yeah, that would have been tragic alright.

    *eyeroll*

  • Incomprehensible Bitching||

    "Apple parked its intellectual property in an Irish subsidiary so it could avoid paying taxes in America and support those institutions. It saved $9 billion in 2012 alone."

    There's your wall, right there! Go go morality!

  • Sometimes a Great Notion||

    "The Apple corporation exists because of American institutions," Brooks writes, complaining that "Apple parked its intellectual property in an Irish subsidiary so it could avoid paying taxes in America and support those institutions. It saved $9 billion in 2012 alone."

    Well let the Irish then fight the Intellectual Property Right fight with China for Apple. This is my problem with Apple and others, you want the protection of the US government then you need to fly the flag of the US govt or enter a protection agreement/treaty with the USA. Meanwhile I have tariff levied against my business on the rational that the Chinese are stealing tech secrets. But good for them for avoiding taxes. I really mean that, but they should then live with the cost of that benefit.

  • Sevo||

    "...you want the protection of the US government then you need to fly the flag of the US govt or enter a protection agreement/treaty with the USA...."

    My rights and freedoms are unalienable and not negotiable.
    I do not need to volunteer for some war to enjoy life, liberty and the pursuit of happiness, nor does Apple.

  • Mickey Rat||

    The ruling class and their cheerleaders would rather pontificate about the moral value about paying some theoretical "fair share" and forgo revenue in their sanctimony then actually have a competitive tax structure that does not chase assets into shelters.

  • BigT||

    Apple should offer to build the wall with that $9 B.

    Gorilla glass with lots of cameras and sensors. And 'stylish.'

  • Uncle Adolf’s Gas and Grill||

    So who's logo goes on it? Apple's or Trump's?

  • Harvard||

    Logo of Trump. With a bite out of his head.

  • Incomprehensible Bitching||

    Beautiful.

  • ||

    Not with the moralist virtue signalling creep Tim Cook at the helm they will.

  • ||

    And 'stylish.'

    Translation: All four edges encased in anodized aluminum.

  • buybuydandavis||

    Corporate tax dodging is a clear problem for the US.

    This is not a free market in operation. Corporations are government entities. Fill in the right paperwork, and you get limited liability. You get to dodge taxes.

    Naturally, "Free Market" Reason is all for it.

    Corporate Profits Uber Alles!

    "Libertarian Moment"

  • Overt||

    The idea of limiting liability of a corporate industry is longstanding. It solves all sorts of problems, most significantly the transfer of ownership, but there are others.

    I'll make you a deal. Let's make shareholders liable for an entire company as soon as we do the same with every other organization out there. You start a philanthropic organization, or other NGO and its executives are personally liable for every debt of that organization. As are donors. Start an after school club in your local town, and you are responsible for the next kid who breaks his arm on one of your sponsored hikes. And that responsibility continues in perpetuity until you can get someone else to take the liability from your shoulders.

  • buybuydandavis||

    "It solves all sorts of problems,"

    Reason deviates from free market principles when it "solves problems" for corporate profits. And then prances about on their Free Market high horse for deviations that solve other problems but harm corporate profits.

    It's almost like by Free Markets they simply mean Corporate Profits.

  • Sevo||

    "Reason deviates from free market principles when it "solves problems" for corporate profits. And then prances about on their Free Market high horse for deviations that solve other problems but harm corporate profits."
    No, it simply admits that the only organizational arrangement (like, you know, 'contractual agreement') which allows large organizations is one which limits the investor to his/her investments.

    "It's almost like by Free Markets they simply mean Corporate Profits."
    Pathetic, populist idiocy. Go promote 'cheap money'. And get lost.

  • buybuydandavis||

    "No, it simply admits that the only organizational arrangement (like, you know, 'contractual agreement') which allows large organizations is one which limits the investor to his/her investments."

    Deviations from free market principles are great if they benefit large corporations. Got it.

    "Pathetic, populist idiocy."

    Well reasoned retort!

  • Sevo||

    buybuydandavis|1.14.19 @ 11:51PM|#
    "Deviations from free market principles are great if they benefit large corporations. Got it."
    Strawman bullshit. Got it.

    "Well reasoned retort!"
    Called on bullshit, and you don't like it.

  • ||

    It solves all sorts of problems, most significantly the transfer of ownership, but there are others.

    The word you are searching for is hyperletigiousness. Limited liability shields corporations and other public entities from the governments' facilitation of the powerless to have power over everyone on a relative whim.

    Not saying you're wrong exactly, just that the government isn't free of sin in necessitating liability protections. It's why the extracurricular club *still* has to both chip in for everyone's healthcare *and* keep liability coverage should little Overt break his arm and 12 angry people decide they haven't paid in *enough*.

  • marshaul||

    I'll make you a deal. Let's make shareholders liable for an entire company as soon as we do the same with every other organization out there. You start a philanthropic organization, or other NGO and its executives are personally liable for every debt of that organization. As are donors.

    Sounds perfect, except that only those with a property interest should be held liable.

    That said, limited liability is irrelevant to this discussion.

  • Sevo||

    "Corporations are government entities."
    Bullshit.

  • buybuydandavis||

    Well reasoned retort!

  • Sevo||

    Called on bullshit, bullshitter.
    Idiotic assertions =/= fact or argument and you have yet to offer either one.
    Put up or shut up, bullshitter.

  • Sevo||

    buybuydandavis|1.14.19 @ 8:06PM|#
    "Corporate tax dodging is a clear problem for the US."
    Fuck off, slaver.

  • buybuydandavis||

    Fuck off, corporate slaver.

  • marshaul||

    I thought you had retreated to your illibertarian hole. I wish I had been right.

  • buybuydandavis||

    "Corporate Profits Uber Alles!"

  • marshaul||

  • buybuydandavis||

    Note how triggered the corporate slavers get when you point out their "free market" hypocrisies.

    Cognitive dissonance in action.

  • Colossal Douchebag||

    Corporate Profits Bad! Laws I Don't Like Should Go Away! Stomp Whine Stomp!

    "Collectivist Moment"

  • Jerry B.||

    So Mr. Brooks should have no problem with releasing his tax returns for analysis to see if follows his own moral compass.

  • Azathoth!!||

    Apple as a company takes an extremely leftist stance.

    They firmly believe in the idea of 'soaking the rich' when it comes to taxation

    They've gone so far in this belief that supporters of low taxes have been censored from their platforms, albeit for 'issues' in addition to tax issues.

    But Apple IS 'the rich'

    Therefore they should stand firm at take all the taxing the government wants to impose upon them--because that's what they want for everyone.

    The fact that they do all they can to avoid taxation tells you that they understand the ideas they propound are unworkable from the get go.

    Every single leftist company does this.

  • marshaul||

    You really are retarded.

  • Earth Skeptic||

    So by Brooks' logic any reasonably bright college student who majors in gender studies and then can't find a high paying job is a tax dodger. They SHOULD have buckled down, majored in chemical engineering, and paid at least a 5 figure tax bill.

  • mjs_28s||

    Is Brooks forgetting that the taxes that companies paid are built into their prices, thus the customers that are buying the products and services are the ones paying the income taxes with dollars that were taxed before they even had the chance to spend them in the first place.

  • Carter Mitchell||

    David Brooks and all of his spiritual ken are like a cancer on humanity. We've been working hard to wipe out other forms of cancer, but this is the most malignant and destructive form; THAT should be the next Great American Project.

  • Colossal Douchebag||

    David Brooks can go fuck himself, hard.

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