BY JEFF MACKLER
Armed to the teeth with a scalding report prepared by researchers of the U.S. Senate Permanent Committee on Investigations revealing that Apple Computer had avoided paying billions of dollars in taxes on its nearly unprecedented foreign profits, members of the Senate were momentarily outraged. The senators took to the corporate media to pillory Apple’s top executive, Tomothy D. Cook, for a few days until they got the word from on high to back off.
“The Corrosive Effect of Tax Avoidance by Apple and other Multinationals,” headlined the May 24 New York Times. Yet it was a scandal that most Americans understand is the rule, not the exception. The rich get richer and pay little, or no, taxes while the rest of us become poorer and are taxed to the hilt to pay the government’s bills. These bills include “obligations” to bail out failing and/or profitable corporations, banks, hedge funds, agribusiness, and insurance conglomerates and bills for the endless wars that bring trillions to the military industrial complex and its secretive super-spy spinoffs like Homeland Security and the CIA.
For several days Apple was accused of stealing from seniors’ Social Security benefits, and from all other social programs that have been brutally slashed in Washington’s austerity game of “sequestering” working people to pay for the annual trillion-dollar deficit and largess to the failed banks and corporations. This time, the Senate committee led by Republican John McCain and Democrat Carl Levin set out to publicly expose the big guys, who everyone knew got away with the same tax evasion practices that almost all U.S. corporations employ daily. A few days into the farce, however, in late April, the word came down that Apple’s “tax transgressions” were really above suspicion, and indeed, practiced by virtually every corporation in the country.
Apple’s Timothy Cook confidently appeared before the Senate committee, texts and “experts” in tow, to present proof positive that his corporation—which has “off-shored,” or better, sheltered from taxes a record $108 billion in overseas profits—had simply followed the adopted regulations in the U.S. tax code.
Floyd Norris’ May 24 “High and Low Finance” New York Times column made this point quite clearly. Said Norris, “The shameful thing about Apple Inc.’s ability to structure its business to avoid United States taxes was not that it did it. In fact, as Apple executives tried to point out at the Senate hearings at which their tax strategies were detailed, they could have chosen to pay much less in American taxes than they did.”
Norris continued, “The shameful thing is that we have a tax system that seems to allow multi-national corporations to choose what they want to pay.”
Cook said that Apple was not to be blamed for shifting its multi-billion-dollar foreign profits to low-tax jurisdictions, or sneaking them into Cayman Islands or Cyprus-type tax havens. This is commonplace in the world of high finance, where ruling-class “lobbyists” actually write the tax codes and/or related regulations into the “law,” as was revealed in the case of Citibank in late April. Who else would write the tax laws but the corporate hired guns who work for the same ruling class that runs the government?
In Apple’s case, its much praised “legal team,” according to Norris, “found a way to move a large part of its foreign income to Apple subsidiaries that claimed to not exist anywhere, at least when it came to paying taxes.”
Apple simply transferred its foreign profits to an Apple-owned entity incorporated in Ireland that is not subject to U.S. tax law. Indeed, Apple even transferred its huge Irish subsidiary profits to Manhattan banks and used them for whatever investments it deemed necessary while legally “deferring” paying U.S. taxes on the profits until such a time that Apple decided to officially “repatriate” the profits.
In short, Apple used a “legal” tax scheme to defer taxes until such time as it could “negotiate” a deal with the government to reduce the tax rate to a level below the current 35 percent—a rate that virtually no corporation or business pays. Cook boldly told the Senate that a rate sufficient to entice Apple to pay any taxes would have to be “in the single digit” range.
Such “tax holidays” or “amnesties” simply require the insertion of a few words, usually written by the top corporate lobbyists, into some obscure section of the tax code to satisfy the various congressional committees assigned to “oversee” or perhaps overlook such standard “legal” transactions. Our readers should remember that—as with President Obama’s kill list or his now-requested rules as to who may be spied on or murdered with drones, or tortured or held indefinitely in prison without recourse to due process—everything is “legal” in America, provided only that it is approved by Congress—that is, made the “law of the land.”
Even so, invoking U.S. “national security” interests by the president virtually always negates whatever formal rules or regulations might exist to protect basic democratic rights. Today this includes theft disguised as tax law or murder legalized as necessary to protect the “national security interests” of the capitalist state. Corporate stealing is daily legalized in the volumes of unreadable and largely unscrutinized tax codes that collectively legalize corporate tax corruption.
The often-heard hue and cry emanating from the Republicans (the Democrats’ partners in crime) to the effect that U.S. corporations have the highest corporate tax rates in the world is a myth. Graham Bowley, writing in the May 24 New York Times, says it well: “Some of the biggest and most powerful companies in the United States are fighting for a cut in the official tax rate arguing that it is necessary to allow them to compete effectively in the global market.”
Bowley notes that “the vast majority of American businesses, including some large and prominent Wall Street firms, actually do not pay corporate taxes at all.”
This is the result of the tax code invention of “pass through” companies in the 1980s wherein corporations, initially small businesses and partnerships, were excused from paying corporate taxes and instead distributed their profits to their shareholders, who were then supposed to pay on the basis of their personal income taxes.
Today, the “brilliant” corporate tax specialists representing giant ruling-class firms have largely converted their mammoth operations to “pass through” entities, thus evading federal corporate taxes entirely and even more so when the 1986 “tax overhaul” slashed personal tax rates below corporate levels. Bowley properly concludes with a stunning tax fact:
“Of the 34 million business tax returns filed in 2009, the most recent tax data available [demonstrates that] 32 million were pass throughs [paying zero in federal corporate taxes].” This figure “represents 70 percent of all net business income…” That is, 70 percent of all corporate income was excluded from taxation, as opposed to 25 percent in 1980.
Further, with recourse to new laws lowering personal tax rates on capital gains, the ruling-class few are further able to lower their tax rates to 20 percent, not counting the myriad of additional deductions pressed into law by the corporate elite that further reduce this figure, in many cases to zero or less—less meaning that the government gifts them tax refunds!
Meanwhile, working people—through a steady stream of tax and related mechanisms daily introduced at the national, state, and municipal levels—are compelled to make up for the trillions that corporations are gifted, including the across-the-board austerity measures implemented in every aspect of daily life. This includes massive college tuition increases, cuts, or outright elimination of pensions, cuts in virtually all social programs, doubling and tripling of health-care costs, and near hidden hikes in the cost of food, home heating, and fuel.
Despite all these trillions allocated by the always bought-and-paid-for bipartisan capitalist politicians, there is no end in sight in the U.S. or anywhere else in the world. Austerity measures of every type are imposed everywhere—proof positive that the capitalist system is incapable of anything other than pursuing the ever-widening division of wealth between the ruling rich and all others (the 99 percent). Capitalism’s inherent contradictions are today fully operative, evidenced by the wars against working people at home and the ever-increasing wars around the world—wars to impose neocolonial regimes subordinate to the biggest imperial players.
World capitalism’s last major economic catastrophe, the 1929 Depression, gave rise to a world war that took the lives of 80 million people. The horrific destruction of the economic infrastructure of much of the world was required to resolve the system’s inherent contradictions. On the ashes of this world horror and with the U.S. emerging as the only virtually unscathed participant—free from the economic competition of its wartime allies and enemies alike—the system of plunder and exploitation gained a new lease on life.
Today, the competition between the major industrial and military players has again reached fever pitch. A rebuilt and re-arming world system, based on the endless and deadly struggle once again stemming from ever-declining profit rates due to fierce world-wide competition, has no choice but to resolve its crises at the expense of the world’s exploited and oppressed.
Apple Computer amassed its super-profits at the expense of Asian workers who are paid near slave wages—while American workers saw theirs ever approaching near poverty levels, with vast numbers of unemployed, partially employed and casual workers, not to mention immigrant and prison workers today comprising a near majority of the work force. Apple’s rules of conduct with regard to taxes and all other aspects of capitalist production are the norm for all corporations. Were this not the case, they would have folded long ago and, indeed, many of the weaker competitors have been destroyed, absorbed or merged into today’s giant entities that, like their equivalents abroad, rule over the world economy, increasing at the expense of each other and all humanity.
The McCain tiger’s public attacks on Apple quickly gave way to great praise with the right-wing senator ending his examination by asking CEO Cook why his antiquated cell phone was ever in need of changed apps. The Senate committee ended up praising Apple for its “incredible legacy,” and according to The New York Times, “gushed over its products” calling Apple a “great company” that managed to “change the world.” Arch-libertarian free-marketer Rand Paul insisted that corporate attorneys who failed to take advantage of existing tax loopholes might be guilty of criminal negligence.
What we have said about Apple applies equally to the concomitant destruction of the environment, with all rational solutions to the rapidly advancing and life-threatening fossil fuel-induced climate change set aside as in conflict with the deadly struggle for profits.
Capitalism’s boom days, won at the expense of 80 million dead in World War II, and hundreds of millions more killed in the wars since that global conflagration, are over. Either working people organize to challenge the system itself, including the construction of mass working-class and revolutionary socialist parties deeply implanted in all the inevitable struggles ahead, or humanity’s future is bleak indeed.
History demonstrates again and again that the vast majority has the power to build the world on new foundations and bring into being the socialist future that thrives on the collective satisfaction of the needs of the overwhelming majority as opposed to those of the rapacious few.