Don’t blame Apple for profit

Legislators embarrass themselves when they criticize corporations for maximizing profit.
Some members of the U.S. Senate Permanent Subcommittee on Investigations last week excoriated Tim Cook, an Auburn University graduate and chief executive officer of Apple Inc., for his multinational company’s “gimmicks” in avoiding taxes.
No question, the numbers were remarkable. According to a committee report, Apple avoided paying U.S. taxes on $44 billion in offshore income between 2009 and 2012.
“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” Sen. Carl Levin, D-Michigan said. “It has created offshore entities holding tens of billions of dollars while claiming to be a tax resident nowhere.”
Cook’s job is not to maximize tax revenue for the nation, but to maximize profit for shareholders. He does so by producing products people want and selling them at a price that generates the greatest revenue. He does so by keeping costs to a minimum, a task that requires him to hire as few employees as possible, to pay his suppliers as little as possible and to pay as little as possible in taxes.
Criticizing Apple for failing to pay more taxes than legally required is just as silly as deifying it as a “job creator.” Cook’s role — the reason he gets paid millions — is to make money for shareholders. That requires him to minimize costs. If he allows Apple to pay more in taxes than the tax code requires, he is failing his shareholders. If he spends more on workers than is necessary to maximize shareholder return, he is breaching his obligation to shareholders. It may well be that Apple does not pay enough in taxes. The company benefits from the laws, institutions and infrastructure of the United States. There is nothing wrong with demanding that it pay its share in maintaining them.
The problem with senators criticizing Apple for not paying as much in taxes as they think it should is that it improperly shifts the blame. On paper, the United States has one of the highest corporate income tax rates in the world. Thousands of congressionally sanctioned loopholes and a failure to deal with multinational operations, however, make its effective tax rate among the lowest.
If Apple is paying all the taxes it is legally required to pay but not paying its fair share in the upkeep of the nation, the fault lies with Congress. The job of balancing the budget requires revenue. Congress is tasked with writing the laws that dictate how much in taxes corporations must pay. If Congress needs more revenue to meet the federal government’s necessary expenses, then it needs to make changes to the tax code.
America’s economy does not simply allow corporations to maximize shareholder profit; it depends on it. If corporate executives are doing their job, their corporations will pay only those taxes they are legally required to pay. If Congress is doing its job, it will pass laws that require every corporation to pay a fair and adequate amount.
Cook deserves neither adulation nor censure from other American taxpayers. He’s just doing his job. Rather than criticize him, members of Congress should do theirs.

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Filed under Capitalism, Tax reform

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