Thursday, May 30, 2013


I will admit that I have not been following the APPLE tax story – because I have no interest in corporate taxes.    

If APPLE did indeed avoid taxes on billions of dollars using totally legal strategies, techniques, deductions, or credits, written into the Tax Code by the idiots, past and present, in Congress, then they did nothing wrong and have nothing to answer for.

There is no legal, ethical, or even moral obligation to pay one penny more in taxes than is allowed under the Tax Code.  And it is not legally, ethically, or even morally wrong to use whatever legal means available to reduce one’s tax bill, even to 0.

Taxes are a cost of doing business.  Directors, officers, and executives of publicly-held corporations have a fiduciary responsibility to their shareholders to reduce costs, and increase profits, by any legal and ethical means available (within the context of long-term considerations).

And just a reminder - if by not paying federal income taxes APPLE, a publicly traded company, was able to increase the dividends paid to its shareholders, these dividends were taxed on the individual tax returns of the shareholders (unless they were in the 15% or 10% bracket).  So the income did not totally escape taxes.  Remember the double-taxation of corporate income.

There are countless court decisions upholding the correctness of business entities as well as individual taxpayers taking advantage of legal so-called “loopholes” to avoid taxes. 

Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.”  Judge Learned Hand in Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).

And (highlight is mine) -

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”  The learned Learned Hand again in Commissioner v. Newman, 159 F2d 848 (1947).

It is fair that APPLE did not pay taxes on its income.  No.  But the Tax Code is certainly not fair.  Is it fair that almost half of Americans either pay absolutely no federal income tax or actually make a profit by filing a tax return?  Of course not.  Should the Tax Code be fair?  I would say yes.

The fault lies not with APPLE or the members of the 47% or the “wealthy”.  The fault lies with the idiots in Congress who write the tax law. 

Are the various so-called “loopholes” used by APPLE, other corporations, and both the 47% and the “wealthy” to reduce or totally avoid taxes “fair”, “correct” or “appropriate”?  In most cases a definite no.  And in most of the cases where the “ends” may be considered correct and appropriate, the “means” – a tax deduction or credit – is not.

Loopholes, including probably some used by APPLE, are, more often than not, written into the Tax Code by the idiots in Congress as “payment” to special interest lobbyists who have filled either the pockets or re-election campaign coffers of Congresspersons.

So APPLE, the 47%, and the “wealthy” are doing nothing wrong.  They are acting correctly and properly.  Our ire should be directed at the idiots in Congress, who we (well not me) continue to re-elect year after year.


1 comment:

Anonymous said...

What was most remarkable about the senate hearing was how they were asking questions addressed to Tim Cook. On what he thought was fair and how to change the tax code. I'm sorry he missed his chance to tell them they should be asking congress these questions.
The tax issue for Apple surrounds repatriation of earning that were made overseas. Why does the senate think the US has dibs on earnings on sales overseas on products made overseas? And why bring that cash back to the US to be taxed at 35%?

The elephant in the room - Why doesn't congress change the code. Either a lower repatriation tax, or a zero-tax offer to bring money back to (a) distribute in dividends or (b) to use to build factories that will create jobs.