NY Times Apple Tax Article Flawed

bonch writes "Forbes contributer Tim Worstall points out that the NY Times article claiming Apple pays less than 10 percent of its profit in taxes was based on a flawed assumption of the corporate tax system. The 9.8% figure came from Greenlining Institute, who compared Apple's 2011 profits to taxes calculated according to 2010 profits. In the corporate tax system, estimated quarterly tax payments are made based on the previous year's profits until actual profits are calculated at the end of the trading year, when the balance is then paid to the IRS."

Comments

So what?

[MrEricSir]

Saying NYT made an incorrect calculation and explaining why is fine. But what was Apple's tax rate, then?

If you can't answer that, then you can't say the figure itself is incorrect, only the means used to arrive at it.

Re:So what?

[MoonBuggy]

It's fair to say that the figure is pretty damn likely to be incorrect. But I quite agree, the Forbes article should've gone one step further and done the correct calculation for the 2010 data (since, by their assertions, it seems that 2011 data is not yet fully available).

Re:So what?

[SirGarlon]

Indeed. I tried to RTFA but there's no help there -- it is basically just a flame against NYT by a rival journalist. Based on TFA's headline we can't really trust said journalist to analyze the alleged error with calm and rational professionalism.

Re:So what?

[medcalf]

From memory, so could be wrong, Apple reports it's effective tax rate last year at about 24%.

Re:So what?

[mehtajr]

According to their 10K filing with the SEC: "The Company’s effective tax rates were approximately 24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively."

Re:So what?

[Tharsman]

In its own tax filings, Apple reported these tax rate figures paid in the last three years: “approximately 24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively.”

Re:So what?

[alexander_686]

No, but you can say it is really low. What Worstall is saying is that the NY times was using 2010 tax payments (calculated on 14b of profits) on 2011 profits (of 26b).

While the odd U.S. tax rules on territorial income (We should really join how the rest of the world does it) plus special circumstances (None that I know of, but..) will make it hard to make direct comparisons.

However, NY is assuming that a 85% increase in profits would not result in a higher tax bill. I would make the assumption (which is safer) that Apple’s taxes would be higher the next year.

Of course I am getting this info from Apple’s financial statements. And, as I know too well, financial statements to the SEC and the IRS are prepared with very different assumptions.

Re:So what?

[Overly Critical Guy]

Saying NYT made an incorrect calculation and explaining why is fine. But what was Apple's tax rate, then?

We won't know until the actual profits are calculated at the end of the trading year, when Apple pays the remaining balance.

If you can't answer that, then you can't say the figure itself is incorrect, only the means used to arrive at it.

What?! Yes, you can. Because it was derived from 2010's, it doesn't reflect what Apple's actual tax rate will be for its 2011 profits, which were much higher than 2010's. Therefore, the figure is totally useless.

Re:So what?

[ZeroSumHappiness]

What he's saying is that if I claim Apple's tax rate was 208% because I'm assuming they paid $2.08 in taxes but only had $1 in profits you don't know that the final figure I came up with (208%) is wrong because through some obscene coincidence it could come to pass that Apple pays 208% in taxes. What you do know is that my calculation used really stupid inputs so my methodology is almost undoubtedly incorrect.

Re:So what?

[alexander_686]

Apple's 2011 fiscal year end is September 2012. And I am sure they file extensions. So, no, we would not have the data yet.

Re:So what?

[gl4ss]

yeah but does that take into cash moved to holding to wherever? which should be the main point anyhow?

it wouldn't be a story at all to report sec filings..

Re:So what?

[roman_mir]

If Apple is forced to pay any income taxes and their effective rate is over 0%, then it is too much, and it's not only true for Apple either, it's for everybody.

Re:So what?

[Surt]

Almost none of our taxes go to that as it is. The rate is something like 0.7%, and generally that money is targeted at the kids who are relatively innocent victims of those mothers, in the hope that they might turn things around in the next generation.

Re:So what?

[BasilBrush]

Saying NYT made an incorrect calculation and explaining why is fine. But what was Apple's tax rate, then?
If you can't answer that, then you can't say the figure itself is incorrect, only the means used to arrive at it.

Anyone can answer that very easily. It's in the 10K.

24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively.

Even without looking that the 10K you could have said NYT was wrong. Apple is in huge growth. Their revenue for each year is far more than the year before. So unless you match revenue year and tax year correctly you're bound to get a massively wrong number.

Re:So what?

[roman_mir]

Shilling for government much? It is of-course NONSENSE that a nation without INCOME TAXES is a nation without public streets, without other infrastructure, without even laws.

How in the world was USA surviving and thriving before income taxes were introduced I wonder? How in the world was the productivity going up, production and consumption going up and all those cities were being built, roads, etc., and no income taxes?

Must have been 'naked power'.

Re:So what?

[alexander_686]

Yes. Apple earned 33.8b and paid 8.3b in taxes. Not neccessarly to the US goverment however.

And I wish people would stop talking about “offshore” holdings without talking about territorial tax rates.

In most countries corporate taxes are charged on income earned in that country. Income earned from offshore subsidiaries are not – because their offshore subsidiaries were charged the local corporate tax rate.

The US is one of the few places where US companies have to pay income earned overseas when it brought back onshore. Which means the same income is taxed twice. Back in the 70s ,when the US tax rate was over 50%, if the foreign countries’ tax rate was over 50%, could mean a tax rate of over 100%.

So, in order to keep our odd tax system, Congress carved out a whole host of expectations. It’s just a big mess.

Re:So what?

[alexander_686]

Sigh, no Congress - not Nerds,

So, prior to a company being hit with over a 100% tax rate, companies lobbied for loopholes, expections, bilateral tax treaties, etc. so the resulting system is a patchwork of loopholes. The only good thing about I can see from it is that I get a job out of it.

One of the expectations is that profits generated overseas would not be taxed if it were reinvested in the overseas operations. Which is lovely. Discourages US companies from bring back profits to reinvest in the US. Sigh.

And tax holidays are not a fix. The last one they tried returned a lot of money but little reinvestment.

Re:So what?

[flyingsquid]

I'd agree to that after we get the unproductive members of society off of the government teat. Get those welfare bitches in the ghettos and trailer parks to work or let their dead beat asses starve. Then we can talk about fair taxation.

If we want to talk about who's leeching off the federal government, let's start by looking at it on a state-by-state level. The states that are most heavily subsidized by the government- the states that receive more federal dollars than they pay in income taxes- are almost entirely Republican-leaning states. So we have Democratic-leaning states like California, New York, and Massachussetts subsidizing Republican-leaning states like Alabama, Alaska, and West Virginia.

In effect, the Republicans seem to have been able to engineer things so that there's a redistribution of wealth from high-earning Democratic states to low-earning Republican states. Sounds a lot like socialism to me. It seems like the Republicans are, when you get down to it, perfectly fine with receiving government handouts, they just don't like to see other people get any help.

Re:So what?

[chrb]

To be fair to both Greenlining and the New York Times article, both did point out that the tax year figure might include portions assigned to previous or future years:

Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.) NYT

The third method, which this report uses, is what a company reports on its 10-K as “cash taxes paid.” This is how much a company actually paid in taxes in a given year. But that figure includes the company’s taxes paid everywhere, including taxes paid to states, the U.S. federal government, and to other countries. Some of that money could be paid for back taxes and some could eventually be refunded. While imperfect, this is the best estimate of how much a company actually pays in taxes in a given year. Until the government or the Financial Accounting Standards Board requires companies to report more, this is the best figure available. Greenlining

Re:So what?

[roman_mir]

People other than you understand that we need civilization.

- people other than me also should understand that you are a government shill, equating CIVILIZATION to INCOME TAXES.

Re:So what?

[Penguinisto]

Almost none of our taxes go to that as it is.

Not to be too picky, but yeah, it does.

This is just a quickie list of what the impoverished get by dint of being impoverished:
--
Medicare/Medicaid/CHIP (which eats 21% of the total budget)
Non-Medicare "Safety Net" programs (which eat an additional 13% of the total budget)
--
That's over 34% of the total US tax revenue going towards the poor. By contrast, the defense budget is around 20% of the pie in spite of two simultaneous wars in progress.

Source.

Re:So what?

[chrb]

24.2% is the reported global effective tax rate, but Apple has allegedly "bulked up" that figure by including "potential future U.S. tax" on foreign earnings invested outside the United States - earnings that, in reality, will never be taxed in the U.S. It is speculated that Apple may have done this so that it can defer those profits and hence still report bumper profits during future leaner years, or that it is just better PR to appear to be paying more tax than they really are. See this report which estimates Apple's effective global tax rate at 12.8% - not as low as the 9.8% estimate, but not far off:

Apple reports a worldwide effective tax rate of 24.2 percent. A lower effective tax rate increases a company’s reported book profits. Apple would have a lower reported effective tax rate and higher profits if it recorded its tax expense the way most other companies do. Under generally accepted accounting principles, U.S. companies do not have to book tax expense on foreign profits if the company deems them to be permanently invested overseas. To lower their reported effective tax rates and boost their reported after-tax profits, most companies assume all of their unrepatriated foreign profits are permanently reinvested offshore. If Apple asserted that all of its foreign earnings were permanently invested outside the United States, it would have booked an estimated $3.6 billion less in tax expense, and its effective tax rate would be 12.8 percent. (See the table.) When assessing Apple’s tax situation relative to that of most other companies, this adjusted rate is probably more relevant than the reported 24.2 percent rate.

Why doesn’t Apple maximize reported profit like most other companies? We can only speculate. Perhaps because it is breaking all records for profitability now, it is saving some profits for less fortunate times in the future. As the Joint Committee on Taxation recently wrote: ‘‘If the company accrues the tax expense in the year the profits are earned, it may later decide that those funds will not be repatriated after all. At that later time it may then reverse the tax expense and shift financial statement income from the prior period into the current period.’’ (See ‘‘Present Law and Background Relating to the Interaction of Federal Income Tax Rules and Financial Accounting Rules,’’ JCX-13-12, Feb. 7, 2012, Doc 2012-2443 or 2012 TNT 26-15.)

An alternative explanation is that perhaps Apple — with its young, socioeconomically elite customer base — does not want the negative publicity that a low effective tax rate could generate with groups like Citizens for Tax Justice and US Uncut.

Re:So what?

[chrb]

The US is one of the few places where US companies have to pay income earned overseas when it brought back onshore. Which means the same income is taxed twice

No it isn't. When a U.S. company repatriates foreign profits they get a U.S. tax credit equal to the amount of mandatory foreign tax they have paid:

U.S. companies pay federal tax on their worldwide profits. This would result in double taxation of foreign earnings that are also taxed by a foreign country, but foreign taxes generally can be claimed as a credit against U.S. taxes on foreign earnings. For example, a U.S. company with an Italian branch deriving $100 million of income and paying $25 million of Italian taxes would pay federal taxes of $10 million ($35 million less $25 million). Forbes

Re:So what?

[chrb]

It is of-course NONSENSE that a nation without INCOME TAXES is a nation without public streets, without other infrastructure, without even laws.

That depends on the nation. There are certainly some (Somalia comes to mind) that would fit that definition. There are others (Monaco) where no income tax clearly works - but here's the important question to ask yourself: the government of Monaco does spend money on infrastructure, so where does that money come from? And could the U.S. get money in the same way? Some nations (United Arab Emirates) have no income tax, but pay for public infrastructure through social security levies, and by generating income through government enterprise e.g. state owned companies in the oil industry. Other countries just increase other taxes (like property or VAT or oil/gas) to compensate for the lack of income tax. Getting rid of income tax does not destroy government, it just makes it raise money through other means. Do you want government taking over private enterprise, or increasing tax in other areas?

Re:So what?

[colinrichardday]

Most of that was Medicare, which goes to retired/disabled people. Good luck slave driving them.

Re:So what?

[roman_mir]

That depends on the nation. There are certainly some (Somalia comes to mind) that would fit that definition.

- not at all. Somalia had huge governments. Just in the fifties it was still a British colony and until the early nineties it was a Communist dictatorship. They fought for their freedom from being oppressed by the totalitarian regimes of the world and they are getting quite an unfair rap, yet they actually now have a growing economy and even steady money - old currency, that's because nobody is printing it.

They have no income taxes, but that is not their issue.

And could the U.S. get money in the same way?

- it was very much able of getting enough money for the government from excise, sales taxes. 50% of federal income came from alcohol sales prior to 1913. Clearly the economy of USA was growing, after all, by the time the Fed was established USA already was the largest creditor nation, no debt, no deficit, it was the largest exporter as well, and none of it was done with income taxes and it did require plenty of infrastructure.

And certainly in USA the government was much smaller and it absolutely DID NOT take over private enterprise at the time.

Re:So what?

[Surt]

That almost all goes to the elderly.

Re:So what?

[nedlohs]

The US runs a defecit, 34% of the budget is not 34% of the total US tax revenue. It is 54% of the tax revenue.

Re:So what?

[mellon]

Turnpikes, community road service days, stuff like that. Also, sales taxes, property taxes, etc. Property taxes, as I'm sure you're aware, kind of suck when you get older and can't earn anymore. Income taxes are actually a step up from that.

Re:So what?

[TheRealMindChild]

Like Canada?

Re:So what?

[alexander_686]

Maybe. Depends on what type of tax treaty we have signed. We have a tax treaty with Italy today, so that holds. But not with Brazil, so if the branch was located there, the company could be doubled tax. I could go on. Many different tax treaties. But it does lead to some interesting distortions.

Re:So what?

[roman_mir]

There are 2 objections to income taxes.

1. Most important - the moral objection.
2. Less important, but very practical - economic objection.

Moral objection is the most important one - income taxes mean that you are property of your government. The premise is most disgusting, it is that the government owns you, owns your productivity, which means it owns your life. The only question that the government is asking is whether taxing your income at a certain rate is going to maximise the revenue of the government. Their question only asks: can we tax these people more and get more revenue, or will taxing them more will get us less revenue.

It isn't even a consideration that taxing somebody's work is actually immoral, turns the people into forced labour, which means simply turns them into the property of the government - slaves.

Economic objection, the practical one - income taxes take money away from savings and investment, take money out of hands of people who have shown that they are good at making profits and give this money to the wasteful, corrupt bureaucrats. This causes people to modify their behaviour in order to find a way to pay minimum taxes, rather than putting that same effort into improving their business. Income taxes worsen the economy directly and indirectly, and there is a multiplier, when some of the income taxes of some people are distributed towards other people, so this takes money out of the hand that can produce and put the money into the hands that can't, that only consume.

There is a very stupid notion, that taxing producers to subsidise consumers is good for economy, because it's good for sales, but this is really perverted, as the producers then face robbery, their productive capital is diminished, and their money is given to people who don't produce, but instead consume what these producers create. So the money is taken away from the producers and then somebody comes to them with this very money and buys their product, so there, there is a real economic multiplier that hurts the economy multiple times.

1. The producer has less investment capital.
2. The producer has to give away his product for his own money, so he has to work more, to produce more for no profit.
3. The consumer is allowed not to produce, but simply to steal, as he doesn't have to exchange his own production for the production of those, he buys from.
4. The gov't gets bigger, because it really takes 90% of the money that supposedly goes towards 'the people' it is distributing to, so more and more taxes have to be collected or money printed or borrowed to feed this ever growing government.

Re:So what?

[coinreturn]

For why socialism is bad in general, see every socialist and communist country ever.

You are, as most Fox-watchers, confusing socialism/communism with fascism. Also, note that one reason those regimes fail is the heavy-handed way the US and other countries deal with them. For example, we've been fucking Cuba up the ass for decades.

Re:So what?

[TheRaven64]

The problem is not socialism, the problem is receiving government handouts while spouting rhetoric about government handouts being bad and how you got where you are by your own hard work. See also: Ayn Rand.

Re:So what?

[Kelbear]

They didn't pay 8.3b in taxes.

8.3b is the "provision for income taxes". It's an accounting term for the estimated impact from taxes for a given year, (even if that impact doesn't happen for years, or doesn't happen at all).

3.3b is the "Cash paid for income taxes, Net" which is on the cash flow statement. That's the actual money that leaves the company and goes to taxing authorities.

Also, US doesn't tax the income twice. That is wrong. The US wants to /know the amount/ of income overseas. A heavily simplified example: if you owe say $100k to the US based on that income, but you already paid $50k to the foreign country, the US acknowledges that by giving you a credit and will only expect you to pay $50k to the US when the money comes back to the US. A total of $100k.

External ref:
http://www.taxpolicycenter.org/taxtopics/encyclopedia/Foreign-Tax-Credit.cfm

"Although foreign tax credit is available to individuals with foreign source income (including wages earned abroad), the great bulk of foreign tax credits goes to U.S. corporations with operations abroad. U.S. corporations earn foreign source income by operating branches abroad and by operating or investing in affiliates incorporated abroad. Foreign source income earned through a foreign branch is subject to U.S. tax in the tax year in which it was earned. The tentative U.S. tax is simply the U.S. tax rate times the income of the branch. A credit is given for foreign income taxes and for any foreign withholding taxes that are levied when the branch remits the income to its U.S. parent. Losses a foreign branch incurs can be deducted from the corporationâ(TM)s domestic income to reduce the corporationâ(TM)s U.S. income tax. However, if the branch becomes profitable in succeeding years, its income is treated as U.S. source income, and no foreign tax credit can be claimed on it until the U.S. Treasury recovers the reduction in tax revenue caused by the branchâ(TM)s initial losses."

Re:So what?

[tbannist]

Those numbers are do not agree with Apples own numbers in the same report. It appears they actually paid somewhere between 10% and 18% not 24% (the 24% is technically not a lie because the percentages are based on money they set aside to pay potential taxes at some point in the hypothetical future). However, it is difficult to determine what the actual rate was because Apple reports taxes paid in a year, not taxes paid for a year. The difference is that in each year they pay taxes to the federal government based on the previous years profits and the difference between the tax bill of 2 years ago and the tax bill of 1 year ago. Additionally the reported tax paid is the total tax paid to every government in that year. So it includes U.S. state taxes, and foreign governments.

Re:So what?

[stdarg]

They pointed out potential problems with the numerator but their real error was in the denominator. They correlated the tax payments to the wrong year of income, and since Apple's income has been growing rapidly, that incorrect too-large denominator makes the tax rate look lower than it is.

Re:So what?

[cpu6502]

Most of the money being transferred from the Democrat states to the Republican states is simply corporate welfare for Monsanto, ADM, and other farming megacorps. Also there's a ton of spending on military bases, nature preserves which are often located in the rural states.

Eliminate the corporate welfare for Big agriculture, and the balance between the D and R states will be restored again.

Re:So what?

[coinreturn]

For why socialism is bad in general, see every socialist and communist country ever.

You are, as most Fox-watchers, confusing socialism/communism with fascism. Also, note that one reason those regimes fail is the heavy-handed way the US and other countries deal with them. For example, we've been fucking Cuba up the ass for decades.

Socialism and communism as economic systems are a failure. If you're in doubt take a good look at the Soviet Union and it's sattelite nations. Notice that the Peoples Republic of China has largely dismantled it's own economic system and incorporated capitalist elements. Ther is a reason for that. Capitalism works.

Yes, capitalism works, I'm not denying that. It especially works great for the robber-barons and the dynasty-rich; the serfs, not so much. I'm not promoting socialism or communism, I just think that people who dismiss them out of hand as failures generally don't even know what they are.

Re:So what?

[JBaustian]

There were a great many bloggers who pointed out the NY Times' mistake only a few hours after the original article was posted.

I do not know why this is a subject for Slashdot discussion, weeks later.

Color me not surprised.

[PaddyM]

Lately, I've seen lots of tabloid-esque headlines at Forbes supposedly drumming up controversy. I read the article and realize I was trolled. I think that magazine is not going to be around much longer.

Re:Color me not surprised.

[MickyTheIdiot]

Much like CNN and Fox News, it's now an opinion organ. That's the state of factual reporting in the U.S.

Re:Color me not surprised.

[PaddyM]

Aagh. I misread the summary. I guess I was wrong about Forbes this time.

So color me surprised.

Re:Color me not surprised.

[Tharsman]

Like the Weekly World News, once in a while, they do get lucky and print a real story.

Re:Color me not surprised.

[khipu]

That's the state of factual reporting in the U.S

... and internationally as well, for that matter, or do you really think that the small cabal of European publishers and "public" media is any more factual?

Re:Color me not surprised.

[ArsonSmith]

Anything not in the US is correct and factual. The US is always wrong. Even when they are right, they are wrong. Come on you should know this by now.

Oh

[Overly Critical Guy]

Whoops. Well, I'm sure Slashdot's comments to the previous article were totally reasonable.

Why does Apple hate America? (Score:5, Insightful)
by Anonymous Coward on Saturday April 28, @06:23PM (#39834399)

Good citizens pay their fair share, so it must be asked: why does Apple hate America?

...oh.

Found it

[SirGarlon]

OK, so if you follow a link in TFA and manage not to balk at an even more inflammatory headline, you get to Mr. Worstall's claim that http://www.forbes.com/sites/timworstall/2012/04/18/apples-9-8-tax-rate-entirely-mind-gargling-nonsense/">Apple paid approximately 24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively -- which doesn't really answer the question of what they paid in 2012 but does explain why a figure of 9.8% sounds unreasonable.

Re:Found it

[Anonymous Coward]

which doesn't really answer the question of what they paid in 2012.....

You're not going to get that number for a few more months, mate

Re:Found it

[Anonymous Coward]

You are confusing "effective" rate with "marginal" rate.

Re:Found it

[KhabaLox]

You don't understand what Effective Tax Rate is. It is the tax rate they paid on income, after taking into account the tiered nature of taxes you described (which is how it works for individuals - I'm not sure about corporations but I'll take you're word for it). Their highest marginal rate therefore would have been higher than the 24% (and their lowest would have been lower).

Re:Found it

[alexander_686]

I am not sure that I am following you.

The above numbers are Apple “Effective” (I would use actually) tax rates. Apple had 33.8b operating income and paid 8.3b in taxes, or 24%. So we know that.

I think you are trying to say is that we don’t know Apple’s marginal tax rate. Which is true, but I am not sure what you are trying to drive at. Tiered taxes means the more you make the higher your marginal tax should be. (I am making a generalization here. Apple works in a lot of different tax jurisdictions and I don’t know all of them). IIRC, the top US corporate tax tier starts at 18m, which means that about 99.95% of their income is in the top tier.

Since that is basically a rounding error, I am not sure what your point is.

Apple tax

[sandytaru]

When I first read the headline I thought the "Apple tax" was that of common parlance, e.g. the overpriced hardware, the $99 iOS developer fee, etc. I had to reread it once I started to read the summary.

Re:TOTALLY missing the point

[Overly Critical Guy]

This doesn't apply at all to Apple putting business locations in other states like Nevada to avoid paying California taxes.

Yes, they do this. So what?

Tax on Profit vs Revenue

[sanosuke001]

Why can't I pay off expenses before taxes are levied? I want to pay my rent, student loans, food, electricity, etc with pre-tax money. Regardless of what Apple pays, it still feels unfair (even if there are good reasons for it being the way it is, it FEELS unfair).

Re:Tax on Profit vs Revenue

[MightyYar]

It's not unfair at all. Anyone can incorporate. Funnel your income through the corporate entity and enjoy what the Apple stockholders do - double taxation. Of course, like Apple, you can write off business expenses prior to being taxed the first time. You can also form a pass-through and only get taxed once, which is what I do as a contractor. But at no point can you deduct personal expenses... so just like Apple, you can deduct business expense rent but not your apartment. You can deduct education that is required to keep your job but not education that benefits only you. You can deduct business lunches but not food that you would have consumed anyway. You can deduct electricity used for your business, but not for your home.

Mind you, I think it is all BS and they shouldn't tax companies at all. Tax the money as it comes out - no special rates for dividends or capital gains. Not only would it make the US an attractive place to locate a corporation, it would encourage richie-riches to keep their money in their business. It might even improve politics, since it would be harder to hide corporate welfare in the tax code. Not that I have my hopes up there, since corporations have absolute free speech right now - but now we're on another topic.

Re:Tax on Profit vs Revenue

[ColdWetDog]

Get a good accountant. You'd be surprised with what you can do.

Re:Tax on Profit vs Revenue

[Quiet_Desperation]

Oh, you! With your silly facts and rational economic concepts. This is Slashdot. You must drink from the Derp-Aide, and call for ALL the taxes to be 100%!

Re:Tax on Profit vs Revenue

[MightyYar]

Oh, I should add one part that I have run into that is VERY unfair. Retirement plans. As a contractor, I can pack away about $17,000 plus 25% of my net income. If I were an employee I couldn't get anywhere near that unless my employer was extremely generous. As a practical matter, most people can only do the $17,000 if they are in a 401(k) program plus whatever employer matching they get. If they qualify for an IRA, they can pack away an "amazing" (sarcasm alert) $5000.

There really should be just a blanket maximum for any retirement program, no matter how one is employed.

Re:Tax on Profit vs Revenue

[PPH]

That would mean that [insert super rich person] could write off their million dollar homes, their giant yacht (that's a home after all), the giant bill for such, their $250/plate dinners, etc. All pre-tax!

OK, that's fine. Its a start.

Now we can set tax policy based on the assumption that everyone (even those people/corporations) get the same write-offs. Now we write rules and set rates that are applied the same across the board.

Re:Tax on Profit vs Revenue

[Dcnjoe60]

Why can't I pay off expenses before taxes are levied? I want to pay my rent, student loans, food, electricity, etc with pre-tax money. Regardless of what Apple pays, it still feels unfair (even if there are good reasons for it being the way it is, it FEELS unfair).

Because you can't buy enough of congress to get that put in place.

Re:Tax on Profit vs Revenue

[HornWumpus]

There is a fine line between aggressive accounting and tax evasion. Make sure you stay on the good side.

Re:Tax on Profit vs Revenue

[ArsonSmith]

On one side, I don't think corporations are people so they shouldn't be taxed. On the other side the Supreme Court thinks they are people so yes they should be taxed. At some point those profits have to be paid out to an individual who will then pay taxes on it...again.

Re:Tax on Profit vs Revenue

[the eric conspiracy]

Call up Fidelity and ask them about naked annuities.

401ks are not the only way.

Re:Tax on Profit vs Revenue

[MightyYar]

By "naked", do you mean a regular tax-deferred annuity that is not wrapped in a trust?

In general I'm not a big fan of annuities, and in any event they do not have the same up-front tax benefit as a 401(k) or IRA. You can't write off payments to the insurance company (unless I've missed something, I'm by no means an expert on annuities, but I did look into them). Once money is in them, they are similar to an IRA or 401(k) in that you get taxed based on the money you suck back out at regular income tax rates.

The reason I didn't chose an annuity (despite having term life insurance for the kids) is that I believe that my money will do better in a standard brokerage account in equities. I try to minimize selling and hopefully my taxes in retirement will mostly be of the much-lower capital gains and dividend variety (except for what comes out of my 401(k), naturally. We also have a significant portion of our assets in our house, which we can sell completely tax free under current law.

Re:Tax on Profit vs Revenue

[MightyYar]

I read my own comments and it sounds like I insured my kids :)

My wife and I are insured and our kids are the beneficiaries...

Re:Tax on Profit vs Revenue

[the eric conspiracy]

Naked annuities don't have an insurance product tied to them.

They are a good place to put the bond component of a diversified portfolio because bond income would be taxed at ordinary income rates. As such bond income can grow tax free in these instruments once you have maxed out your 401K. Once you get to be a certain age you will probably, like me, find yourself with a lot of excess income, a maxed out 401K contribution and a desire to have a substantial fixed income investment component.

Don't fall into the trap of thinking of a house as an investment. It isn't. For you it's an expense and an illiquid asset in your estate.

Re:Tax on Profit vs Revenue

[MightyYar]

I'm still a little confused about the "naked annuities" because usually an annuity is distinct from a bond. Are these a type of indexed annuity that are tied to the price of some underlying bonds? In any case, annuities are great in that they are tax deferred, but someone with the ability to stick $30,000 into a 401(k) still has a huge (immediate) tax advantage over someone who can only stick $5000 into an IRA.

True a house is not an "investment", but since you have to live somewhere and the government will subsidize you if you live in a house, it is at least worth the consideration. Houses are not illiquid at all - take reverse mortgages, for instance. They are only "illiquid" in the sense of selling them, which is obviously not the only way to get at the money. If you have an immediate need you can get at 80% of the equity by taking out a traditional mortgage, and you can still have the house on the market.

Re:Whatever Apple's paying

[doston]

Cause you're stupid and don't know how to shelter money (and refuse to learn). Apple - not so much!!!

When I say Apple, I mean ANY corporation and when I say you, I mean ANY of the unwashed masses that just wanna drink beer, eat cheetos, watch porn and then wonder why their wang is orange.

Yeah, the person named Apple has billions in cash, teams of accountants and lawyers. Other "people", not so much. And btw, I can tell from your post that you're part of the "unwashed masses". Self hate much?

Re:Whatever Apple's paying

[khipu]

It's not nearly enough. These people (er i mean corporations) should be paying taxes just like other people. Last year I paid 28%. Sound good, Apple?

Why? That just encourages them to move more and more of their operations overseas because they can't stay competitive if the US charges them 28% but their competitors pay a fraction of that elsewhere.

Furthermore, corporations just have to raise prices, so in the end consumers pay for it. And they pay for it in a regressive way.

And assuming you work for a corporation, those 28% that "you" paid was actually paid by your employer, because that's where all your money comes from.

Corporations should pay taxes proportional to the costs they impose on the community. Most of those are imposed through labor, and that's covered by the income tax. If they impose additional costs, they should pay for it. But just trying to milk them because you can makes no sense and only hurts people.

Re:TOTALLY missing the point

[Sparticus789]

This doesn't apply at all to Apple putting business locations in other states like Nevada to avoid paying California taxes.

Yes, they do this. So what?

I don't care where their offices are. Every company does this. Just look at the DC area. Drive around the Maryland side and it's mostly trees, some buildings but not too many. Drive around the Virginia side and there's corporate headquarters after corporate headquarters. The difference? Taxes on personal income, businesses, and property is lower in Virginia.

I was only pointing out that if Forbes was hoping to make some sort of solid argument, they failed miserably by addressing half of the issue and ignoring the other half.

Wacky Slashdot logic

[Anonymous Coward]

If you can't answer that, then you can't say the figure itself is incorrect, only the means used to arrive at it.

What the hell? If the means used to arrive at a figure is wrong, then the figure is wrong. What kind of ass-backwards logic is this, where the figure can still be right even if the means used to calculate the figure is wrong...? Seriously, that's one of the weirdest, dumbest things I've ever seen.

Apple already reports its tax rates in its shareholder filings. Their 2011 tax rate was 24.2%.

Re:Wacky Slashdot logic

[narcc]

What the hell? If the means used to arrive at a figure is wrong, then the figure is wrong.

No. The figure could still very well be correct, even if it was generated randomly. A stopped watch will accurately report the time twice a day, you know.

Re:Wacky Slashdot logic

[c0lo]

What the hell? If the means used to arrive at a figure is wrong, then the figure is wrong. What kind of ass-backwards logic is this, where the figure can still be right even if the means used to calculate the figure is wrong...?

The formal logic used by everybody that has the slightest clue? (false premises can lead to anything by correct rationing).

Re:Whatever Apple's paying

[HarrySquatter]

Why make them pay taxes at all? Oh and we might as well repeal all worker safety and environmental laws so that the corporations aren't inconvenienced. Don't forget to' shutdown the SEC as well because having to try to accurately report information to investors is a terrible burden.

Why?

[Impy the Impiuos Imp]

That a successful company is viewed by many as a cash cow for government indicates a diseased thought process that assumes primacy of government over freedom and the economic might that derives from freedom.

In short, it's putting the cart before the horse. An overloaded cart with fused axels and square wheels.

Re:Why?

[PPH]

If the cart is too heavy, it really doesn't matter where the horse is.

Doesn't matter

[kthreadd]

According to Wikipedia NY Times is a reputible source and thus is "the truth". Sorry Apple, no original research here.

Re:Whatever Apple's paying

[Quiet_Desperation]

You realize you went down this slippery straw slope all by your lonesome, right?

Forbes Article is Wrong

[jbrower]

Tax Accountant Here - Whoever wrote the Forbes article is patently wrong. Large corporations like Apple cannot base all of their current year's estimated tax payments on their prior-year's tax liability (See Section 6655(d)(2) of the Internal Revenue Code), only their first quarter's estimated payment. Apple's 2011 Form 10-K shows that their current tax expense (the amount of cash taxes paid or payable on 2011 profits) was $5,415,000,000. They also have a deferred tax expense (taxes that have economically accrued on 2011 earnings but that aren't due until certain events occur in the future) of $2,868,000,000. Their total tax expense for 2011 was $8,283,000,000 on pre-tax profits of $34,205,000,000, an effective tax rate of 24.2%. They were able to "save" about $3.9 billion in taxes by keeping profits generated in foreign countries parked outside of the USA. Other tax savings came from utilization of the Research & Development tax credit ($167 Million) and the Domestic Production Activities Deduction ($168 Million).

Re:Forbes Article is Wrong

[drerwk]

Can you also comment on the accuracy and sources of uncertainty in the original NYTimes article? thanks.

Re:Forbes Article is Wrong

[Anubis IV]

Not a tax accountant here, but didn't Forbes come up with the same 24.2% you just came up with for Apple's 2011 effective tax rate?

I'll be honest, I can't make heads or tails of what you're saying or what the article says, but is it just a case of a bad summary of the Forbes article, rather than Forbes itself being incorrect, or are their other numbers correct, even though they matched you on that one?

Re:Forbes Article is Wrong

[ceoyoyo]

Um, do you realize that the post you replied to, from an actual tax accountant, is saying that Forbes's conclusion is correct (much higher tax rate than 9.8%: 24.2%) but that their reasoning about why the NYT made such an error is somewhat incorrect?

It seems the NYT didn't do their proper due diligence before publishing an inflammatory anti-Apple article.

Also, the "one thing" the Foxconn documentary "got wrong" was actually several utter fabrications. If a "documentary maker" lies and fabricates evidence, he SHOULD have his reputation dragged through the mud, and his documentaries ARE worthless. Daisey himself has said that the production "is theatre." http://www.washingtonpost.com/lifestyle/style/this-american-life-cites-fabrications-in-documentary-on-apple-suppliers/2012/03/16/gIQAsJ6sGS_story.html

Re:Forbes Article is Wrong

[abigsmurf]

Read the article, the only thing outright wrong the article mentions is the armed guards. It admits the poisoning happened (albeit at a different Foxconn factory), other elements happened but were 'blown out of proportion' (because journalists never do that usually!).

Daisey said his production "is theatre"... Maybe because it is quite literally is a show he's doing in a theatre?

Re:Forbes Article is Wrong

[ceoyoyo]

He claimed to visit more factories than he did, and claimed he spoke with more workers than he did. So his sample size was inflated. He claimed to meet with workers who were poisoned. He probably didn't since the incident happened a long way from where he said it did. He completely fabricated a scene where he interviewed a worker. He lied to his producer about the name of his interpreter.

The author himself admits that his piece is fiction. He says "it uses a combination of fact, memoir, and dramatic license." You can make all the silly justifications about it "being a show he's doing in a theatre" but the fact remains that it is not a factual work, as it was originally presented.

It may paint an accurate picture of working conditions in China. It may not. You can't tell from that piece, because it's a work of fiction. Which is fine. The problem is, he originally presented it as a factual documentary. That's wrong.

Re:Whatever Apple's paying

[Dcnjoe60]

Cause you're stupid and don't know how to shelter money (and refuse to learn). Apple - not so much!!!

When I say Apple, I mean ANY corporation and when I say you, I mean ANY of the unwashed masses that just wanna drink beer, eat cheetos, watch porn and then wonder why their wang is orange.

Yeah, the person named Apple has billions in cash, teams of accountants and lawyers. Other "people", not so much. And btw, I can tell from your post that you're part of the "unwashed masses". Self hate much?

I am not part of the "unwashed masses" however, if the supreme court wants to rule that corporations are people and have the same rights, then why not tax them like people? People can deduct interest paid on their primary residence from taxes. Why not only allow corporations to deduct interest on their primary headquarters? People are limited on most deductions to a percentage of AGI. Why not the same thing for corporations?

If I am a small business, employing 150 people, why should I pay more in income tax as a sole proprietor or a partnership, where business income flows through and is taxed as personal income, than if I run the same business but structure it as a corporation? (I know all the reasons to form a corporation, so please don't respond in that way).

Corporations in America get far more state and federal "welfare" than people get. We just don't call it that. Maybe it's about time they pay their fare share, too.

Re:Apple has already reported its tax rates

[KhabaLox]

those are effective taxes, not the total percent they paid based on their profits. Do you understand what an "effective" tax rate is? An effective tax rate of 24% is not 24% of their total profit.

Do you? No, you don't.

Re:Whatever Apple's paying

[doston]

Cause you're stupid and don't know how to shelter money (and refuse to learn). Apple - not so much!!!

When I say Apple, I mean ANY corporation and when I say you, I mean ANY of the unwashed masses that just wanna drink beer, eat cheetos, watch porn and then wonder why their wang is orange.

Yeah, the person named Apple has billions in cash, teams of accountants and lawyers. Other "people", not so much. And btw, I can tell from your post that you're part of the "unwashed masses". Self hate much?

I am not part of the "unwashed masses" however, if the supreme court wants to rule that corporations are people and have the same rights, then why not tax them like people? People can deduct interest paid on their primary residence from taxes. Why not only allow corporations to deduct interest on their primary headquarters? People are limited on most deductions to a percentage of AGI. Why not the same thing for corporations?

If I am a small business, employing 150 people, why should I pay more in income tax as a sole proprietor or a partnership, where business income flows through and is taxed as personal income, than if I run the same business but structure it as a corporation? (I know all the reasons to form a corporation, so please don't respond in that way).

Corporations in America get far more state and federal "welfare" than people get. We just don't call it that. Maybe it's about time they pay their fare share, too.

The whole discussion's stupid for me, because I don't agree with the supreme court ruling on corporations being people, so why should i bother getting into a serious discussion on how they should be allowed further advantage? My original post was not a serious invitation to discuss how best to work within the confines of an incalculably stupid decision by the right wing supreme court.

Re:Whatever Apple's paying

[Thavilden]

So if the 28% he paid was actually paid by his employer and the employer (a corporation) raises prices to pay for it so that the consumers ultimately pay for it with the money they get from their employers who raise prices to pay for it and so on... I have no point, just a circle I found.

Not totally useless.

[HornWumpus]

Very useful if you are trying to tell a story. NYT so I have no doubt this was deliberate propaganda.

Re:Whatever Apple's paying

[djchristensen]

Furthermore, corporations just have to raise prices, so in the end consumers pay for it. And they pay for it in a regressive way.

That's not true. There's no economic law or theory that says a corporation MUST make a certain amount of profit. Taxes are on profits, not on revenue, so the taxes reduce the amount of profit a company makes, but they don't make it any more expensive to produce and sell a product. Saying that companies "have to raise prices" is ridiculous. Companies set prices according to what the market will bear (notwithstanding monopolies and such), and profits follow based on how efficient the company is at producing and distributing its products.

And you need to stop and use your brain for a moment. How much in taxes do you think an employer pays on the salary for an employee? If your answer is anything other than zero, think some more. That salary is an expense to the employer (along with benefits, etc) and so is not part of the operating profit. As such, no taxes were collected on that money.

Perhaps you should pick up a copy of "Economics for Dummies".

Have you heard the good news about tax software?

[mveloso]

Wow, you must suck at doing your taxes. If you're paying the full rate you should invest in something called "TurboTax." It's a software program that helps you file and do your taxes. It also suggests tax deductions you might want to take, etc.

What you're doing is saying "I'm dumb and other people aren't - those other people should be penalized." That's patently unfair. Why should other people get penalized for your stupidity?

Re:Apple has already reported its tax rates

[Surt]

That's actually the definition of effective tax rate. total taxes paid / total profit. It exists specifically to clarify the actual rate of tax paid after factoring in profit shifting, exemptions, progressive rates, etc.

 

Re:Have you heard the good news about tax software

[doston]

Wow, you must suck at doing your taxes. If you're paying the full rate you should invest in something called "TurboTax." It's a software program that helps you file and do your taxes. It also suggests tax deductions you might want to take, etc.

What you're doing is saying "I'm dumb and other people aren't - those other people should be penalized." That's patently unfair. Why should other people get penalized for your stupidity?

I shouldn't have mentioned my tax rate. The point was, your insults aside, corporations should pay as much as people, since they are people, asshole. ;)

Re:Whatever Apple's paying

[Frequency Domain]

Furthermore, corporations just have to raise prices, so in the end consumers pay for it. And they pay for it in a regressive way.

And assuming you work for a corporation, those 28% that "you" paid was actually paid by your employer, because that's where all your money comes from.

Your claims reflect a very common misconception. Basic supply/demand analysis shows how it actually works. The relevant slides are on pages 2-3 of the handout. The question of who bears the brunt of taxes depends on the relative elasticities of supply and demand.

Re:Whatever Apple's paying

[Surt]

I have serious doubts about whether any TEA party members have a HS diploma. Your claim to the contrary is unproven to the best of my knowledge.

Re:Whatever Apple's paying

[swb]

Why? That just encourages them to move more and more of their operations overseas because they can't stay competitive if the US charges them 28% but their competitors pay a fraction of that elsewhere.

We should pass a law that says that a corporation based in the US keeping more than N% of profits overseas is "not a US corporation" and thus ineligible for copyright or patent enforcement claims within the U.S., ineligible for H-1b or other guest worker visas, and the Departments of State and Defense will not protect or advocate on their behalf with foreign governments.

Don't want to pay the fucking freight for the benefits of being based in America? Fuck right off then, perhaps you can rely on the diplomatic, military or civil court services of the Bahamas, the Cayman Islands or wherever you're hiding your money. They'll surely enforce your patent claims, lean on the Chinese when they steal your designs or make sure your product doesn't get hijacked in international waters.

Re:Whatever Apple's paying

[oldspicepuresport]

If you like the Wal-Mart economy approach...a shattered peasant class with little money buying cheap crap, then you're on the right track. What you prefer depends on who you are. Rich and corporations and those stupid enough to be indoctrinated by corporations (Teabaggers, Ron Paul, etc) want lower taxes on the rich and corporations or the same as everyone else pays. The rest (people who aren't living off of capital gains, educated people who aren't subject to corporate propaganda) would prefer a more progressive tax system. If people had more money...like say things were manufactured in the US again, they wouldn't mind paying $65 more for an iPhone. And since 28% is capital gains, that means you don't know if I'm getting my money from my employer and paying in that bracket or capital gains. The fact that you assume to know where my income comes from, shows that you're not a real disciplined thinker, but more the Teabagger type who makes emo assumptions based on limited information. You know, like how teabaggers seem to think they know how the global political and economic system work even though they barely got a HS diploma?

Leaving aside all the immature rhetoric and petty name calling, your comment doesn't even make sense. The current system is obviously flawed, but you don't add to your credibility by rudely portraying an ill-thought out populist idealism.

In theory everything the OP said is 100% right on the money, in practice there are too many loopholes for it to function the way it should, but don't confuse the system's current disfunction with the capitalist system that has brought more wealth and more prosperity to an enormous amount of people than any other system in human history.

Corporate taxes are in theory meant to encourage reinvestment in a company, making it cheaper to reinvest than pay yourself. The problem is that it's possible (and totally legal) to do a huge number of things which effectively allow you to "pay" yourself at the corporate rate, like loaning yourself money from the corporation or buying yourself property and then leasing it to the corporation, etc. etc. etc. The solution is to ensure that if actual people take money from a corporation (they make a financial gain), that this money is taxed at a fair rate and then be done with it. People don't have problems with companies reinvesting in themselves (it's the reason I support low corporate tax rates in theory)... people have a problem with some rich jackass rigging the system to pay way less than his fair share of taxes. Tax code reform is the key, anyone going on about tax rates for the super rich clearly doesn't understand how the system works, they don't really care if you raise their taxes as they'll find a way around them anyway.

Re:Whatever Apple's paying

[doston]

I have serious doubts about whether any TEA party members have a HS diploma. Your claim to the contrary is unproven to the best of my knowledge.

Was going to say 8th grade education, but isn't dropping out before 18 illegal or something?

Re:Whatever Apple's paying

[Surt]

Well there's a significant criminal element involved there, of course.

Re:Apple has already reported its tax rates

[bws111]

Hmm, he put effective in quotes. Must mean something important. Let's see, what does effective mean - "actual; not merely potential or theoretical". So, in other words, an "effective" tax rate of 24% is ACTUALLY 24% of their profit.

Re:Whatever Apple's paying

[whisper_jeff]

Is 24% close enough? http://apple.slashdot.org/comments.pl?sid=2842145&cid=39958777

Re:Whatever Apple's paying

[doston]

Is 24% close enough? http://apple.slashdot.org/comments.pl?sid=2842145&cid=39958777

Truthfully, I was expecting it to be about half that.

Re:Whatever Apple's paying

[doston]

Last year I paid 28%.

I bet you didn't. I bet your marginal tax rate was 28%, and I bet you paid an effective tax rate of 18-19%, which is about what you'd expect for a software engineer making about 110k per year.

Unless you actually made the ~$422,000 (single) or 575-600k (married/joint) required for you to have actually paid 28% *effective* tax rate.

What's that, you say? Effective income taxes are far lower than top marginal rate?! NO WAY!

At least you "bet" and don't claim to know. Kudos for that.

Re:Whatever Apple's paying

[CrimsonAvenger]

How much in taxes do you think an employer pays on the salary for an employee?

7.2%, which is the employer share of your SS/Medicare taxes, last I looked.

And yes, I know that that 7.2% is really a hidden tax on the employee's income...

That does it!

[PPH]

I'm sticking to pears.

Re:Whatever Apple's paying

[doston]

I also think that all corproations should be worker controlled,

s/corproations/coprorations/g

There, FTFY

Grow up

Re:Whatever Apple's paying

[oldspicepuresport]

Okay, you're obviously angry and it wasn't my intention to further your rage. (by OP I meant khipu, I apologize for my egregious error...)

I've got to say that after reading this latest rant I realized I'm not dealing with a rational adult capable of critical thinking. Typical Marxist garbage, why has it NEVER worked? Why did all the "worker's paradises" turn into hellholes of human misery? Your belief in an ideal world ignores reality and ignores human nature, that's why it has NEVER worked. Why is it that every single system who's main premise is to build an idealistic organic national community results in massive human misery?

Go read a history book you little shit, start with:
- Equality of Means Vs. Equality of Opportunity
- State control of the economy Vs. private control of the economy
- East Germany before and after capitalism
- Capitalist Countries (North America, Western Europe, Australia/NZ, and some Asian countries) vs. The Soviet Union, Mao-ist China, North Korea, Saudi Arabia, Yemen, etc.

Your ignorance of history and human nature is disgusting. People like power, it is innate. It is also why leaders "for the people" eventually ALL becoming autocratic thugs that live luxurious lives while their people suffer. There is an obvious problem with the current state of affairs and I can agree that reforms are needed, but what you suggest is pure ignorance.

If the world could be the ideal paradise that you wish it was, it would be, but it's not... To think that someone as ignorant and hate-filled as you claims to be a member of this new "ideal society" for "community good" kind of proves my point... and not to invoke Godwin's law and destroy my whole rant, but the Brownshirt's, Italian Fascisti, and Soviet Partisans thought they were noble young geniuses fighting for an ideal society. (I imagine your ideal society would eventually turn out like theirs did, history would agree with me)

Re:Whatever Apple's paying

[oldspicepuresport]

Really?? I seriously doubt someone is going to blow a mod point on this comment, within mere minutes of you posting it.

You can't let your actual message speak for itself so you have to artificially inflate your score with duplicate accounts... well pathetic is as pathetic does and you just proved it!

Re:Whatever Apple's paying

[khipu]

Why make them pay taxes at all?

That's a good question, and one you should ponder for a while. Hint: the corporate tax rate should be non-zero, but it also shouldn't be picked based on the kind of naive political views you seem to have.

Oh and we might as well repeal all worker safety and environmental laws so that the corporations aren't inconvenienced. Don't forget to' shutdown the SEC as well because having to try to accurately report information to investors is a terrible burden.

Those are stupid ideas. But then it's pretty obvious that you are a fan of stupid ideas.

Re:Whatever Apple's paying

[khipu]

That's not true. There's no economic law or theory that says a corporation MUST make a certain amount of profit. Taxes are on profits, not on revenue, so the taxes reduce the amount of profit a company makes, but they don't make it any more expensive to produce and sell a product.

The profit a corporation makes is compensation for the financial and personal investments of its owners and shareholders. If these people get less profit, they'll invest their time and money elsewhere, often in countries with lower corporate tax rates.

And you need to stop and use your brain for a moment. How much in taxes do you think an employer pays on the salary for an employee? If your answer is anything other than zero, think some more. That salary is an expense to the employer (along with benefits, etc) and so is not part of the operating profit. As such, no taxes were collected on that money.

Don't be so daft. Obviously, a company doesn't pay the employee's income tax directly to the IRS, but it pays the money that the employee uses to pay the income tax, and that money goes to the US government. In the end, the US government receives tax revenues commensurate with the number and salary of employees of that corporation.

That was entertaining

[Huge_UID]

You two went downhill together quickly. BTW, I support doston's position. Cheers.

Re:Whatever Apple's paying

[khipu]

Forward to pages 4 and 5: "The burden of a tax is independent of who physically pays the tax.", "Both employer and employee contribute the same percentage of before-tax wages to the Social Security fund.", and finally "On average, labor supply tends to be less elastic than labor demand, so the Social Security tax burden is primarily on employees."

In different words, the very slides you point to support my point: even though you make the employer pay more taxes, in the end most of the tax burden ends up with the employee anyway, because, as the slides observe, labor supply is less elastic than labor demand.

(I don't think elasticity of labor supply/demand is the best way of analyzing this, but since you point to this kind of analysis and it supports my point, so be it.)

Re:Whatever Apple's paying

[khipu]

We should pass a law that says that a corporation based in the US keeping more than N% of profits overseas is "not a US corporation" and thus ineligible for copyright or patent enforcement claims within the U.S.,

Brilliant idea! Next thing, Europe and Asia are going to stop enforcing US copyrights and patents in retaliation. Then you will doubtlessly want to put import duties on any product created by people willing to work for less than you do, and in retaliation, they will do the same. We had that kind of system for a long time, run by morons with ideas like yours, and it was a f*cking disaster.

Re:Whatever Apple's paying

[Graff]

Maybe it's about time they pay their fare share, too.

Yeah, Apple! Next time we take a cab together you better chip in!

Apple Tax? oh

[Barlo_Mung_42]

At first I assume this was about people having to pay for OSX when they buy a powerbook that they are just going to run Win7 on.

Re:Whatever Apple's paying

[Macrat]

It's not nearly enough. These people (er i mean corporations) should be paying taxes just like other people. Last year I paid 28%. Sound good, Apple?

And GE paid ZERO taxes.

Re:Whatever Apple's paying

[djchristensen]

Please educate me, then. If it costs me the sum total of $10 to put a widget in your hands and you pay me $15 for said widget, how is it that it becomes more expensive to make that widget if the government takes $1.50 of the $5 profit I made?

I'm not arguing that taxes don't have implications, just that there is not necessarily a direct connection between the tax rate and the price of goods sold. It would be like arguing that I should take a lesser salary in order to pay less in taxes. There may well be an artificial connection, but that's a different argument.

Enron Accounting

[ThatsNotPudding]

is still Enron Accounting, even when the cool kids do it.

Re:Whatever Apple's paying

[djchristensen]

That's not true. There's no economic law or theory that says a corporation MUST make a certain amount of profit. Taxes are on profits, not on revenue, so the taxes reduce the amount of profit a company makes, but they don't make it any more expensive to produce and sell a product.

The profit a corporation makes is compensation for the financial and personal investments of its owners and shareholders. If these people get less profit, they'll invest their time and money elsewhere, often in countries with lower corporate tax rates.

That wasn't my point at all. Tax rates are obviously going to affect decision making and maybe determine how much or how quickly a business grows, but I still fail to see any direct connection (in a general sense, anyway) where tax rates can cause the cost of production to go up. You might argue that lower taxes would allow for more investment in equipment that could lower production costs, but then that investment tends not to be taxed, rendering that line of argument mostly moot.

And you need to stop and use your brain for a moment. How much in taxes do you think an employer pays on the salary for an employee? If your answer is anything other than zero, think some more. That salary is an expense to the employer (along with benefits, etc) and so is not part of the operating profit. As such, no taxes were collected on that money.

Don't be so daft. Obviously, a company doesn't pay the employee's income tax directly to the IRS, but it pays the money that the employee uses to pay the income tax, and that money goes to the US government. In the end, the US government receives tax revenues commensurate with the number and salary of employees of that corporation.

That seems like an endlessly circular argument. By extension, just about any money I spend, money I earned and paid taxes on, is subsequently paid taxes on by those that receive it. If I spend $100 at the grocery store, the store pays income taxes on the portion that becomes their profit, the employees pay taxes on the portion that becomes their salary, the suppliers pay taxes on the portion that goes to them, etc. If I work for one of those suppliers, am I effectively taxing myself every time I purchase one of their products?

So how does that translate?

[Quila]

What would that $500 iPad have cost the consumer if not for 24% of company profits going to various governments?

Don't forget, that's profits down the supply chain too. Foxconn gave a chunk of its profits to the government, so did every component supplier. This also doesn't include dozens of other taxes that are paid before a customer can walk out of the store with an iPad.

Re:So how does that translate?

[nobodie]

Excuse TFooM but how much would the iPad have cost without the obscene profit margin Apple builds into its shiny fashion accessories/ portable physics game machines/ consumption pads? Apple uses the governments of every country to supply roads, property for building, police and fire and rescue services for employees, health services (in first world countries anyway, like say China and Greece), communication services, and a complete and reliable infrastructure that is consistent and complete (again in those first world countries, not countries run by international corporations, you know, the banana republics where you have communication service lapses between competing companies, no universal health insurance, obscene corporate profits hidden from the paid corporate lackies that run the government).

Consider how much extra an iPad would cost in a real first world country that provides those services and uses taxes to maintain a first world infrastructure. Oh, it's the same price? how can that be? That must mean that the consumers in the US are being.... ripped off????

Re:So how does that translate?

[Quila]

Excuse TFooM but how much would the iPad have cost without the obscene profit margin

You played your anti-business hand a little too soon here. The iPad operates in a very free market. Profit will be whatever the market will bear, whatever the people are willing to pay. The ultimate democracy. What is obscene is how much is consiscated from those who do create jobs and wealth.

Apple uses the governments of every country to supply roads, property for building, police and fire and rescue services for employees, health services (in first world countries anyway, like say China and Greece), communication services, and a complete and reliable infrastructure that is consistent and complete

This figure is federal income tax only. Apple separately and additionally pays taxes for police/fire/rescue and other infrastructure through local and state taxes, and communications services are taxed separately. Roads are paid for by a mix of state and federal gas taxes, and Apple already contributes a huge chunk to each employee's healthcare and pays its half of Social Security. And then of course each employee individually pays all of his taxes. We also haven't yet calculated the millions Apple will spend to ensure compliance with tax regulations.

Consider how much extra an iPad would cost in a real first world country that provides those services and uses taxes to maintain a first world infrastructure.

The German price converts to $620 for the base iPad 3 that is $499 here. The disparity is worse with the iPad 2, where $399 here becomes about $515. However, that includes 19% VAT*, which is added by state and local governments here as sales tax (yet another tax layered onto the price), but at a lower rate. Still, you're close to $100 ahead.

* VAT started at 10%, and I can remember when it was 15%. They raise it every few years to balance their obscene spending habits.

When the total tax burden in a country hits 25% you should start to get worried about how much the government is sucking out of the economy. Even if taxes go to things you think are worthwhile, there is a huge overhead cost in material and economically unproductive workers. The countries you admire tend to run around 40% and up. Think about that, about half of a krone generated in the Danish economy goes to the government. That is sick.

BTW, China's total tax burden is less than ours, and their top corporate tax rate is less than ours.

Re:Whatever Apple's paying

[khipu]

That wasn't my point at all. Tax rates are obviously going to affect decision making and maybe determine how much or how quickly a business grows, but I still fail to see any direct connection (in a general sense, anyway) where tax rates can cause the cost of production to go up.

I wasn't talking about "cost of production", I was talking about who ultimately bears the burden. Investors are not going to bear the burden of additional taxes on corporate profits because it just takes them the push of a button to transfer their capital to some place where the taxes are lower.

That seems like an endlessly circular argument. By extension, just about any money I spend, money I earned and paid taxes on, is subsequently paid taxes on by those that receive it

It's "circular" in the same sense that accounting for the current in an electrical circuit is "circular": there is current going into and coming out of each node, but in the end the power driving everything originates in batteries somewhere. Taxes are like withdrawing some of that current to run the government, but no matter where you withdraw it, it ultimately still drains the batteries. And corporations are like electrical circuits without power: they just redistribute the current, often in very clever and useful ways, but they don't generate power themselves. The "batteries" of the economy are labor, raw materials, and innovators.

So, the question is what corporate taxes actually give you that income and sales taxes don't already give you. Right now, when a company employs a thousand people, the state receives income tax for a thousand people and sales tax for whatever the company sells. When you impose an additional tax on corporate profits, theoretically, it might come out of the pockets of investors who get a lower return (it also reduces the ability of the company to grow and create new jobs). But those people can move their investments at the push of a button when they aren't satisfied with their returns. So, that means that the company has no choice but to take that money either from salaries or by increasing sales prices, just as if you had increased income taxes or sales taxes.

Of course, overall, it's quite a bit more complicated than that. And I'm not opposed to corporate taxes in principle. But the idea that corporations should automatically be taxed like people is ludicrous. Furthermore, corporate taxation has a big potential impact on corporate growth and international competitiveness, so it is important to tread carefully.

Re:Whatever Apple's paying

[djchristensen]

So, the question is what corporate taxes actually give you that income and sales taxes don't already give you.

Ignoring the argument of how much government should or should not be providing, there is a certain cost associated with a government for which revenue must be raised. The comment above seems to suggest that revenue should come solely from individual taxpayers. If that were to be the case, then workers would demand far more in wages in order to maintain the current standard of living. I can't imagine that's what you are really suggesting.

Of course, overall, it's quite a bit more complicated than that. And I'm not opposed to corporate taxes in principle. But the idea that corporations should automatically be taxed like people is ludicrous. Furthermore, corporate taxation has a big potential impact on corporate growth and international competitiveness, so it is important to tread carefully.

I agree with the last sentence. However, I would like to point out that corporations benefit from government services (roads, police, fire stations, etc.) just like individuals, so I think there is a valid argument that they should be subject to income taxes just like the rest of us. Note that corporations don't typically pay sales tax. They do pay property tax, which pays to educate the workers they will need, so that's fair as well.

There's certainly room for middle ground here. I'm not in favor of shifting the majority of the tax burden to corporations, but I don't think they should be exempted, either.

Re:Whatever Apple's paying

[khipu]

The comment above seems to suggest that revenue should come solely from individual taxpayers. If that were to be the case, then workers would demand far more in wages in order to maintain the current standard of living. I can't imagine that's what you are really suggesting.

What I'm suggesting is that it really doesn't matter that much: the distribution of tax burden between workers, prices, and shareholders is determined by markets; there is no other place the money can come from. You increase corporate income tax, and they'll have to either decrease wages or increase prices.

However, I would like to point out that corporations benefit from government services (roads, police, fire stations, etc.) just like individuals, so I think there is a valid argument that they should be subject to income taxes just like the rest of us.

Those are all local services, and are usually paid for through property taxes and user fees. How does that justify federal and state corporate taxes?

They do pay property tax, which pays to educate the workers they will need, so that's fair as well.

That's a pretty depressing view of humanity: minions educated to corporate specs. I view education as something I benefit from, both directly (increase my market value and hence my wealth) and indirectly (increase the competitiveness and reason of my fellow citizens).

Maybe your perspective would change if you thought of corporations not as these gigantic amorphous and anonymous entities, but something you might found yourself. Think about how this might work. You get together with a bunch of friends, borrow some money from family to buy equipment, and start a web consulting business. You pay property tax for your office (directly or as part of rent), plenty of licensing and other fees, sales tax when you shop and eat during work days, and income tax on the salaries you pay yourself. Now you make some profit, and pay corporate income tax on it. With the rest, you pay dividends to your investors (which are also taxed as income), and you want to replace some failing equipment (that you may end up paying sales tax on). What exactly did the corporate tax on your profits achieve? You can invest less, and your investors end up getting effectively taxed at a much higher rate than regular income.