A Stalinist show trial was held on May 21 by the Permanent Subcommittee on Investigations of the U.S. Senate Homeland Security and Government Affairs Committee. Their aim was to investigate “how individual and corporate taxpayers are shifting billions of dollars offshore to avoid U.S. taxes.” In the dock that day, Apple CEO Tim Cook found himself answering to the likes of Senators Carl Levin (D-UAW) and John McCain (R-Border-Free Utopia) for his company’s alleged crimes against the regime. Like every other taxpaying entity, Apple has a legal obligation to obey American tax laws. And while tax evasion will land you in jail, tax avoidance remains legal.
Yet our feckless congressional leaders have suddenly decided to challenge the long-standing practice of tax avoidance. The nation’s precarious federal finances have now put every taxpayer’s ability to minimize his tax bill at risk. In its report, the subcommittee complained that “U.S. citizens and multinational corporations have exploited and, at times, abused or violated U.S. tax statutes,” including the use of “various complex structures and transactions to exploit taxloopholes [sic].” The bipartisan panel has become concerned that the $16 trillion U.S. national debt—a product of the federal government’s last three decades of fiscal imprudence—will force “individual taxpayers and future generations” to make up the difference. Those who can’t afford Apple’s crackerjack tax experts have yet another reason to brace themselves for higher tax rates and fewer deductions in coming years.
Cook testified that Apple paid more than $16 million daily to the U.S. Treasury in 2012, or roughly $6 billion total. Unfortunately, for the few American corporations doing well despite the weak economy, the federal government’s appetite for others’ hard-earned cash has no limit. Apple’s bulging income statement reminds Senator Levin of an All You Can Eat buffet. The Michigan demagogue decried Apple’s perfectly legal tax strategy of recording European revenues in an Irish affiliate, “Where [profits] are not available to the American tax man.” Levin conveniently overlooked the 39.1-percent combined state and federal statutory tax rate applicable to Apple’s net income, the highest such rate in the developed world. Apple’s 14-percent effective tax rate for 2012 equaled that of its primary competitor, Samsung, but only after wielding its legal Irish shield against the U.S. government’s avaricious grasp.
Only an American legislator could puzzle at Apple’s desire to keep roughly $102 billion of its $150 billion cash hoard overseas. The tax penalty on repatriated earnings rules out investment options for Apple that would also jibe with America’s economic national interest. The construction of an Apple manufacturing plant in Detroit or Flint, as opposed to Taiyuan or Shenzhen, will only occur after Apple stuffs sufficient payola into Senator Levin’s reelection-campaign chest.
Rand Paul, the lone dissenter at the hearing, took Levin and the other senatorial shakedown artists to task. Paul first asked the assembled committee members who among them didn’t seek to minimize his own taxes legally. The junior senator from Kentucky then had the temerity to demand as a follow-up, “Tell me what Apple has done illegally,” before he reminded the inquisitors of Congress’s responsibility in the creation of a “bizarre and byzantine tax code . . . that simply doesn’t compete with the rest of the world.” Republican John McCain, whose fealty to Democrat Carl Levin apparently outweighs his duty to the millions of American taxpayers who have paid his salary for over four decades, leapt to Levin’s defense. The Arizona gerontocrat upbraided Paul, not just for injecting reality into the Kafkaesque farce, but even more so for exposing Congress’s culpability in damaging the American economic national interest through tax-code chicanery.
Corporate executives like Apple’s Tim Cook have a fiduciary duty to increase their shareholders’ investment. Megalomaniacs like Senators McCain and Levin will forever strive to increase their power at corporate America’s expense. And now a massive arms race of complexity, with the tax code as the battleground, threatens to drive U.S. corporations even further offshore. Such unpatriotic opportunism will not surprise those who scoffed at the Supreme Court’s recent opinion equating corporations with people. But Wendell Berry’s definition of a corporation as “a big pile of money . . . whose sole reason for existence is to get bigger” best explains the cat and mouse games being played between these amoral business entities and their immoral statist persecutors.