Here’s a math problem: what does this sentence, from John McCain, tell you?
“Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” he said in Monday’s pre-hearing comments.
The answer, of course, is that Apple is among the most profitable companies in America.1 If you have a lot of profits, you can not pay taxes on a lot of them, and still pay lots of taxes on a different lot of them. There is much focus on the exceptions, but for the most part I’d guess that “biggest taxpayers” and “biggest tax avoiders” are both highly correlated to “biggest profits.” Warren Buffett pays more taxes than his secretary, but at a lower rate.
The Senate, not being known for its quickness with math, is holding hearings today on the avoiding part; here you can read (pdf) the committee’s report. Apple does two main things to avoid taxes that the committee doesn’t like:
- It incorporated two of its main foreign subsidiaries, Apple Operations International (AOI) and Apple Sales International (ASI), in Ireland. Those subsidiaries are, however, managed and controlled in the U.S. by their California-based directors. The U.S. taxes corporate income based on place of incorporation; Ireland taxes corporate income based on place of management and control. So if you’re incorporated in Ireland and managed and controlled in the U.S. you pay taxes nowhere, as AOI does and ASI more or less does. This is … honestly isn’t the surprise that everyone doesn’t do this?2 I’m incorporating myself in Ireland as we speak.
- It entered a cost sharing agreement that gave ASI the economic rights to Apple intellectual property outside of America, in exchange for ASI funding a share of Apple’s California-based R&D proportional to its share of Apple’s total sales. Apple is in the business of manufacturing cheap electronic components in China, slapping expensive cool on them in California, and selling the package for $500. ASI effectively got the California cool at cost, rather than paying retail, which means that the international share (some 60%) of the profits of that cool are, for tax purposes, “earned” abroad (in a zero-tax subsidiary!) rather than in California.
Once upon a time, the United States Postal Service was a big deal. It was sort of founded by Benjamin Franklin. The Postmaster General was a Cabinet-level post. Now, like so many arms of our government, it’s a financial albatross that hemorrhages money as a statutory requirement.
Since Congress doesn’t appear to be in any hurry to do anything about it, USPS is taking what it thinks is a dramatic step and holding on to your first-class mail for an extra day. This will save $2 billion a year, the Post Office says, or roughly 13% of the $15.9 billion it lost last year. And it’s drummed up a nifty if specious legal argument for the move.
Under a Congressional mandate that has been in place since 1981, the Postal Service is required to deliver mail six days a week. But post office officials argue that since the government is operating under a stopgap budget measure, known as a continuing resolution, that mandate does not apply, giving them the authority to make the changes without Congressional approval.
The whole thing doesn’t seem likely to evince much opposition from those who are not employed by the USPS. Or our elected representatives, defending, on the one, less important hand, what they think is important to their constituents, and on the other, more important, hand, their own dignity in interminably delaying a solution to the problem. Read more »
Elizabeth Warren, Director of the Consumer Financial Protection Bureau, Doesn’t Sound So Bad Anymore, Does It?By Jon Shazar
Not much of a surprise at this point, but Massachusetts Senator-elect and former Republican Elizabeth Warren was formally nominated for a seat on the Senate Banking Committee. That appointment still requires a vote of the Democratic caucus, but it’s all but a foregone conclusion that the woman who calls herself the intellectual godmother of the Occupy Wall Street movement and who has pushed for tougher rules for banks will now be among those writing the rules. At the very least, she has won a hell of a bully pulpit. Read more »