Taking a Bite Out of Apple

Peeved that a company had the audacity to minimize its tax burden, some politicians want to take a bite out of Apple. After investigating the company for months, Carl Levin’s (D, MI) Senate Permanent Subcommittee on Investigations found nothing wrong. Zip. Zero, Nunca. Nada. As explained to the subcommittee by Tim Cook, Apple’s CEO, Apple paid every penny of taxes it legally owed.

A bipartisan Congressional panel yesterday released its findings regarding Apple’s international tax regime and, specifically, how it was able to pay a relatively low tax rate when the U.S. corporate statutory tax rate is 35% (the highest in the developed world). The investigation turned up no wrongdoing, and that Apple follows the letter of the law and pays every dime of its legally-required taxes. –From townhall.com

That did not keep Carl Levin from hauling Cook in front of the committee in order to…well, we’re not sure. Embarrass him, perhaps? If so, it backfired. Cook explained the obvious and informed the Senator that he had no intention of repatriating billions of dollars kept overseas. Doing so would subject Apple to a boatload of taxes that it currently does not owe. How rude, legally retaining what one has earned.

Hedgehog bites apple

In a fit of Congressional sanity, Senator Rand Paul (R, KY) went nuclear on Levin’s tactics, suggesting that every member of Congress minimizes his/her taxes and that the committee was simply bullying one of the most successful companies in history. Thank you, Senator Paul.

As the world devolves into a seething rage against the successful, let us pause to ask where Congress would be without companies like Apple. First, they would be without their iPhones. Sad enough, but they would also be without the billions that Apple does pay in taxes ($6 billion in 2012). To say that Levin is biting the hand that feeds him is an embarrassing understatement.

A government that grows continually has to eat continually. When Congress noses around for something to devour, it faces a problem of perception. Citizens are not happy when you start gnawing on their legs, but they can live with your gnawing on someone else’s leg as long as you throw them a scrap or two. Thus, Congress’s dilemma–how to eat from the hand of businesses like Apple while making it look like they are bravely beating them up for being greedy. Fortunately for them, Joe and Jane Citizen make that easy.

First Joe and Jane hate the rich. They don’t know why, they just hate them. Most citizens have never met the Jobs, Gates, and Bransons of this world, but they are deeply suspicious that anyone with that much money had to do something wrong. I suspect that each of us who has fallen short of billionaire status has at least once or twice lamented his lot in life, thinking that somehow the game must be rigged, else we too would own a yacht. Those of us who take the time to understand these things soon shrug those feelings of inadequacy off and go on about our business. We know that only a few people make billions just as only a few people get to play in the Majors. We also celebrate the victories of the successful, knowing that we too might join them one day by contributing our own unique value to the world.

Second, Joe and Jane never take the time to figure out just how little difference taxing the rich makes to the fiscal outlook of an entire country, especially one as big as the United States. Were they to take a look downward, they would see that while pack leaders like Levin distract them, the other cur are munching their way up from ankle height to heaven-knows-where. They are already being eaten, but their envy of the rich keeps them from noticing.

Good thing, too, if you happen to be a progressive. No amount of clawing at the rich will ever fund the kind of government that progressives are absolutely sure is desirable. Even if we were to focus exclusively on peeling the Apples of this world, we would soon find ourselves being cored. So, government has to mute, buffer, distort, and outright lie about how and how much taxation is directed at the middle class. Joe and Jane will feel like Dumb and Dumber when the dogs turn on them in the not-too-distant future.

As Levin’s brand of spectacle makes headlines, you who call yourselves progressives should give pause. When one encourages the government to go after the rich, he is in reality encouraging the government to go after everyone. Everyone includes you and those you think will benefit from the benevolence of a large and all-encompassing government. When that happens, will you still have a taste for Apples?

________________

*The research of Kahneman and Tversky is a bit more complex than that, but the lesson is basically the same.

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About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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