At the New York Times on Saturday (in Sunday's print edition), reporters Charles Duhigg and David Kocienewski, in a report riddled with conceptual flaws and misleading statistics, bemoaned "how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy." They focused their attention almost entirely on Apple, seemingly in simultaneous awe and disgust at how "Apple’s accountants have found legal ways to allocate about 70 percent of its profits overseas, where tax rates are often much lower, according to corporate filings."
Well guys, a look at Apple's latest 10-K annual report to the Securities and Exchange Commission on Page 73 reveals that Apple's net sales in "The Americas" geographic segment -- from the northernmost portion of Canada to the southernmost tip of Chile -- in the year ended September 24, 2011 were $38 billion out of a companywide total of $108 billion. Apple doesn't segregate U.S. sales, but it would seem that they probably aren't any more than $30 billion of that $38 billion. So the vast majority of Apple's sales are "overseas." An even larger majority is outside of the U.S. Even after allowing for aggressive tax-avoidance maneuvers, why should it surprise anyone that the large majority of profits are also earned overseas?
On his radio show today, Rush Limbaugh had a more fundamental objection to the Times reporters' take on Apple's tax posture, implying that it and other tech companies are starving California of much-needed public funds. Not once did it ever occur to the pair that California is among the most egregiously overspending states (if not the outright champion) in the nation.
Here are excerpts of Rush's related on-air comments today:
The Times is all upset that they're not reporting the sale in California, where they are. And Apple says, "Well, we've got a financial subsidiary." It's a kind of Apple. I forget the name of it right now. But they named this company that they own, a subsidy. It's just a collection agency, which is where all the revenue goes 'cause there's no corporate tax in Reno, or in Nevada. And Nevada is happy to have 'em. They do this in Luxembourg in Europe. They run everything through Luxembourg and Ireland and so forth to avoid high taxes in the European Union. And The Times finds this just unacceptable. It's outrageous. If they sold cars or something tangible, they wouldn't be able to do this.
But digital? When you buy a song, you're not touching anything. It's a download. And if Apple wants to say the sale gets recorded in Nevada, that's where it gets recorded. So The Times is just beside itself, and the people who write the story make it clear that Apple is not being patriotic. Apple is not paying its fair share even though it's not breaking the law. It goes on to describe the education deficits in California and the state budget deficits in California and the federal budget deficit and how Apple's not paying it's fair share. There's a guy runs a community college near Cupertino, and this guy's quotes are amazing.
Yes they are. Here are a few quotes from the Times article from Brian Murphy of De Anza College, who does a near imitation of a bad comedy skit in the final excerpted paragraph below:
A mile and a half from Apple’s Cupertino headquarters is De Anza College, a community college that Steve Wozniak, one of Apple’s founders, attended from 1969 to 1974. Because of California’s state budget crisis, De Anza has cut more than a thousand courses and 8 percent of its faculty since 2008.
Now, De Anza faces a budget gap so large that it is confronting a “death spiral,” the school’s president, Brian Murphy, wrote to the faculty in January. Apple, of course, is not responsible for the state’s financial shortfall, which has numerous causes. But the company’s tax policies are seen by officials like Mr. Murphy as symptomatic of why the crisis exists.
“I just don’t understand it,” he said in an interview. “I’ll bet every person at Apple has a connection to De Anza. Their kids swim in our pool. Their cousins take classes here. They drive past it every day, for Pete’s sake.
“But then they do everything they can to pay as few taxes as possible.”
... Still, some, including De Anza College’s president, Mr. Murphy, say the philanthropy and job creation do not offset Apple’s and other companies’ decisions to circumvent taxes. Within 20 minutes of the financially ailing school are the global headquarters of Google, Facebook, Intel, Hewlett-Packard and Cisco.
“When it comes time for all these companies — Google and Apple and Facebook and the rest — to pay their fair share, there’s a knee-jerk resistance,” Mr. Murphy said. “They’re philosophically antitax, and it’s decimating the state.”
“But I’m not complaining,” he added. “We can’t afford to upset these guys. We need every dollar we can get.”
Memo to Murphy, Duhigg and Kocienewski: The problem isn't Apple. The $2.4 billion additional the company "should have" paid into the Treasury during the past year according to your experts' estimates is less than 0.2% of the $1.3 trillion to $1.4 trillion federal deficits run during each of the past three years. There aren't enough Apples around to solve the problem even if every "loophole" were closed. The problem is out-of-control spending at virtually all levels of government. My math done on my Mac's calculator indicates that Uncle Sam's deficit alone is at over 500 times more important than what Apple is or isn't paying.
Cross-posted at BizzyBlog.com.
