Higher Taxes: Less Revenue

 

In the latest example of the Laffer Curve we see that 0% of $60 billion is less than [some number > 0]% of $60 billion.

See, Apple doesn’t think that having to pay the world’s highest corporate income tax is in the best interests of the company.  Or the shareholders.  So it’s not going to pay the tax.

See, Apple rightfully thinks that an American tax on foreign earned and taxed money is crazy:

Apple made an aggressive pitch for a corporate tax holiday Monday, stressing that it plans to keep more than $60 billion parked offshore until Congress makes it easier for companies to bring those profits home.

“Repatriating the cash from offshore would result in significant tax consequences under current U.S. law,” Apple Chief Financial Officer Peter Oppenheimer said on a conference call.

Now, many good and right thinking liberals would say that Apple is not paying “its fair share.”  After all, that money is profit and Apple has a responsibility to pay taxes on profits.  Perhaps  BUT, Apple has already paid taxes on those profits in the country where they earned them.

True, the United States is offering multi-nationals a tax break in the form of a deduction.  In other words, Apple could deduct from its profits the amount of foreign taxes it paid.  In other words, this:

If Apple earned $100 in Elbonia and Elbonia charged a modest 15% corporate tax rate, Apple would take that $100, pay $15 and be left with $85.  Now, if Apple wants to bring back that money it earned in Elbonia, it would have to pay an American tax of 35% minus the deduction:  [$100-$15=$85*35% = $29.75].

If you’re keeping up with the math that leaves Apple with $55.25 of the original $100.00.  Pure nonsense.

Reduce taxes.  Increase revenues.

Rocket surgery.

 

2 responses to “Higher Taxes: Less Revenue

  1. 1) You seem to be taking it for granted that Apple is going to be willing to bring any profits back to the US when the tax rate is lowered. Why would they? They can just leave it all outside US jurisdiction and ignore the laws that they’re subject to (which they agreed to be subject to when they formed a domestic presence here). They’ll go ahead and say it’s a protest of domestic tax rates because they want those lowered anyway (it affects their domestic profits, after all), but they have no intention of bringing foreign profits anywhere near the US unless they can do it without paying any tax at all (which is pretty clear from that article, in which they ask for a tax holiday).

    2) The article you’re citing makes it clear that the foreign tax is a credit, not a deduction. That means it goes against tax paid, not profits, so they’d only be subject to a total of $35 in tax according to your hypo.

    • You seem to be taking it for granted that Apple is going to be willing to bring any profits back to the US when the tax rate is lowered.

      Hey Nickgb,

      Well, they seem to say they would be interested in bringing those profits home if the rate was lower:

      Apple and other backers of a repatriation holiday — including Oracle, Cisco, Microsoft and Google — threw their support last year behind the WIN America Campaign, a lobbying coalition that urged Congress to temporarily reduce the tax rate that U.S. multinationals have to pay on offshore profits.

      It isn’t the 35% that we currently have, and I don’t know what the number “O”ught to be, but it seems that Apple and some of these other guys are able to keep it off shore indefinitely.

      I’m sure there is a lot of thought behind foreign profits and US taxatio.n. But it seems to me that much of the infrastructure that corporate taxes support, in this case, isn’t being assumed by the US. Apple stores in France pay French taxes to support French roads and stuff. I don’t know if the rates for foreign profits should be different from domestic or not.

      But it seems Apple does.

      The article you’re citing makes it clear that the foreign tax is a credit, not a deduction.

      Fair point. Thanks.

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