In the late 1990s, Apple Inc. (then Apple Computer) developed an advertising campaign entitled “Think Different.” The campaign, meant to highlight Steve Job’s philosophy for the company, opens with the lines “Here’s to the crazy ones. The misfits. The rebels. The troublemakers… They’re not fond of rules.” Some 15 years later, executives at Apple can pat themselves on the backs for living up to this vision.
While Apple may be a model corporation in Silicon Valley, it – and CEO Tim Cook – have come under intense scrutiny on Capitol Hill. On Tuesday, Cook was questioned by a Senate investigative committee on the matter of tax evasion.
For those unfamiliar with the story, a simplified version is this: Apple has incorporated subsidiaries throughout the world, some of which have no employees and are effectively run from Cupertino. By strategically locating these subsidiaries, Apple was able to take advantage of various loopholes to make them virtually exempt from paying taxes on corporate revenue. One such subsidiary, Apple Operations International, was incorporated in Ireland (thus not subject to U.S. tax law) but largely managed in Cupertino (thus not subject to Ireland’s differing tax code). So while it drew in roughly 30 billion U.S. dollars in net profit from 2009 to 2012, it paid zero dollars in taxes over this period.
Like many other citizens and corporations, executives at Apple took advantage of available loopholes in the tax code, although the size of Apple and the specific loophole exploited make this case stand out. Technically, Apple’s actions are legal. On the moral front, the issue is less clear. Is Apple obligated to pay more taxes than it is legally required to pay? While many on Capitol Hill are critical of Apple right now, as Rand Paul rightly pointed out, “Tell me a politician who is up here and doesn’t try to minimize his taxes.” Many think that Apple even has a duty to minimize its tax burden.
But if we believe in Kant’s categorical imperative – where you should “act only according to that maxim whereby you can, at the same time, will that it should become a universal law” – then Apple’s actions are morally wrong. If every corporation and individual were to pay significantly fewer taxes, our nation would disintegrate. At an extreme, if no one were to pay taxes, all that which Apple and other corporations utilize to maximize profits would be lost – no more legal system to secure contracts and property, no more police and military to make America safe to do business, no more highways and airports to transport capital and no more public education to supply labor. Perhaps our government is wasteful at times, but one cannot deny that Apple and other corporations benefit greatly from the services it provides. Even when Apple produces iPhones in China and sells them in Germany, the research and development that led to this profit was almost entirely conducted in Cupertino.
As it is, though, the popular narrative is that those with the least – those who rely on food stamps and Medicaid – profit the most from our government. This is utterly false. Rather, it is the wealthiest among us who are able to make millions, if not billions, in large part due to government services. I’ve mentioned infrastructure and law and order already, but even welfare allows corporations to get away with paying poverty-level wages to those at the bottom of the ladder.
Another popular narrative is that if we believe in the free market, we should support the efforts of these multinational corporations. But government interference works both ways: For every hindrance that government regulation may provide, our political system also provides significant spoils to the most well-established corporations. These firms can afford to, say, lobby for the creation of tax loopholes that few corporations can take advantage of. In short, firms like Apple subvert can free market economics, and we should hold them accountable.
Right now, Tim Cook and other corporate executives are demanding that Congress allow their firms to bring back the billions of dollars in profits stored offshore at a single-digit tax rate. Perhaps it’s their job as top executives to be greedy. And maybe some politicians will buy their arguments, especially if some Super PAC funding is attached. But it’s our job, as taxpayers and voters, to not let these corporations shirk paying taxes that help fund the nation from which they profit so greatly. And it’s our job to affirm the principles of a free-market, not a big-business, economy by demanding that politicians establish a tax code that is not ripe for exploitation by the wealthiest corporations.
What are your thoughts on America’s tax code? Email Adam at [email protected].