Apple CEO Tim Cook was facing a Congressional panel today with tough questions about the way the company has organized itself in an effort to lower its tax burden. But at the end of the questioning, John McCain had something else on his mind. That, friends, is what we call a softball.
The quintessential question of our time.
Edward Kleinbard, a law professor at USC speaking to NYT about Apple’s overseas tax situation — or lack thereof.
One potentially good thing out of all this, Tim Cook will address it directly tomorrow in front of the Senate:
Mr. Cook is expected to emphasize that Apple is most likely “the largest corporate income tax payer in the U.S., having paid nearly $6 billion in taxes to the U.S. Treasury” in the last fiscal year. “Apple does not use tax gimmicks,” Mr. Cook is expected to testify.
He is expected to seek to rebut the Congressional findings by arguing that some of Apple’s largest subsidiaries do not reduce Apple’s tax liability, and to argue in support of a sweeping overhaul of the United States corporate tax code – in particular, lowering rates on companies moving foreign overseas earnings back to the United States. Apple currently assigns more than $100 billion to offshore subsidiaries.
I figured this would lead to a change in tax policy. Now I’m sure of it.
The statutory corporate income tax rate is quite high—35 percent—so it turns out to be cheaper to borrow the money and pay interest than to repatriate cash and pay taxes.
Yeah, that’s insane. Luckily, this Apple situation will put a whole new light on the matter.
Jeff Sommer of The New York Times on the U.S. tech companies hoarding money abroad :
Whatever the reason, United States corporations have parked staggering sums abroad. Last year, analysts at JPMorgan Chase estimated that accumulated offshore profits for American companies amounted to $1.7 trillion. This month, Bloomberg News estimated that the mountain of cash had grown to more than $1.9 trillion.
An astonishing amount of money that you’d think the U.S. government would love a piece of, even if they have to give a mild break on the usual corporate tax rate. If Apple repatriated their horde, they would have something like $67 billion to work with after taxes.
“So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.”