Tuesday, December 20, 2016

How Apple Gets a Subsidy Avoiding Taxes

Stumbled across this:
Report: Government Paying Apple Millions to Shelter Overseas Profits Permanent Article Link- Report: Government Paying Apple Millions to Shelter Overseas Profits  
Many of the biggest U.S. multinationals have seized on the same exemption, which lets them avoid or delay repatriation taxes by buying Treasuries with their overseas cash. (The top 10 alone hold over $100 billion of the bonds.) That, in effect, enables the companies to turn billions of dollars in potential tax liabilities into millions of dollars in taxpayer subsidies--all while they publicly bemoan the sky-high taxes that make it impossible for them to bring the money home. 
  Yes.  That is not an accident.  It may costs $100,000 a year in lawyer/accountant fees, but it is what you get when you borrow enough ex nihilo credit to get huge, and then have lobbyists write legislation to benefit you.  I can do this thing as well, but it costs $100,000 a year in lawyer/accountant fees.  Not worth it unless I am huge.
Since 1962, the U.S. tax code requires overseas profits to be taxed at the corporate tax rates. So, companies can either keep the profits over seas, pay the tax on the already taxed profits, or, as this article details, invest in government securities. Proceeds from such investments are subject to the same tax rules as the overseas profits.
It interesting outlining how Apple's tax scheme works, including its own in-house investment firm to manage its cash investments. Where things go weird on me though is suggesting Apple is getting a tax subsidy buying government debt. The article goes so far to claim Apple has been paid $6 per tax payer over the past 5 years. The fact though is the government sells debt and anyone who buys those securities receives interest on their investments. If Apple, and other companies weren't purchasing the government securities, someone else would.
Not true.  If Apple and other companies were not purchasing them, the interest would be higher, for the demand would be lawyer.  G'ma on fixed income would be doing better.  At higher rates, Uncle Sam could not finance as much whimsy as he can now.

At the same time Uncle Sam taxing those profits in real time would not do anyone any good, for when Uncle Sam has more money, he just starts another war.

This is simply another example of the misallocation and malinvestment that comes with an ex nihilo credit regime.

The solution is to go back to import duties being the sole revenue source for the general (federal) government.  All else is free trade, and all product liability is on the importer.

It was the original design of the USA, a free market, until the bankers, led by Hamilton, overthrew the revolution.

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