Apple Pie is American, But Apple Computer Isn’t. Not Anymore.

Richard Eskow

Did you know that Apple Computer has become a foreign entity? Did you know that it’s more Irish than anything else, at least as far as taxes are concerned? Or that it pays very little in income tax, even though its products wouldn’t exist if it not for U.S. taxes?

Apple products were designed in the United States by U.S.-educated individuals and entrepreneurs. (Even Steve Jobs, who famously dropped out of college, said he came up with essential elements of Apple’s product design by auditing courses at Reed College.)

The company’s logo is an apple, which may or may not have been inspired by the Beatles-owned company of the same name. But since then the image has become synonymous with two iconic qualities of this country’s Silicon Valley: creativity and entrepreneurial drive. And what’s more American than apple pie?

Now that the world has seen its tax payments, maybe Apple should change its logo to a shamrock.

(You can tell Apple to pay its fair share of taxes by signing this petition we’re co-sponsoring with Americans for Tax Fairness.)

Who put the “Mac” in “MacBook”?

Even though only 4 percent of its workforce is based in Ireland, and only a small percentage of its profits are earned in that country, Apple recorded 65 percent of its worldwide profits there. Many other “American” companies are also taking advantage of Ireland’s lax tax laws, including Google, Facebook, Pfizer, Johnson & Johnson and Citigroup.

We now know that, as The Wall Street Journal reports, “Apple used technicalities in Irish and U.S. law to pay little or no corporate taxes on $74 billion over the past four years.”  Sen. Carl Levin described Apple’s bookkeeping as the product of “alchemy” and “ghost companies,” and that’s certainly true as far as the United States is concerned.

A Senate panel concluded that Apple negotiated a deal with the Republic of Ireland whereby it would declare earnings there and pay an ultra-low rate of 2 percent.  That arrangement sits atop a corporate tax filing in which, as The New York Times reports, Apple assigns more than $100 billion in profits to overseas subsidiaries.

As the Times also reports, Apple created an entity called Apple Operations International and incorporated it in Ireland. But despite the fact that this entity is purportedly based on the Emerald Isle, it “keeps its bank accounts and records in the United States and holds board meetings in California.”

Apple Operations International gets all the benefit of being an American company, and collects the lion’s share of profits for one of the most profitable companies in the world.  And yet it pays a tax rate of only 2 percent.

Man, talk about the “Luck of the Irish”!

OSX-pats

It was a big deal when it looked as if a foreign company might take over Yahoo!  But Apple’s expatriation happened without a whisper.

Under the Foreign Agents Registration Act, a foreign “principal” is defined as “any entity organized under the laws of a foreign country or having its principal place of business in a foreign country.” And if Apple’s a foreign corporation, shouldn’t its lobbyists be forced to report their activities under the Foreign Agents Act?

As a U.S. government website explains

“The purpose of (the Act) is to insure that the U.S. Government and the people of the United States are informed of the source of information (propaganda) and the identity of persons attempting to influence U.S. public opinion, policy, and laws.”

That’s worth noting the next time President Obama calls somebody like Tim Cook – or speaks with the CEOs of other non-American companies – to discuss “deficit reduction” with them.

After all, our middle-class economic crisis isn’t Ireland’s problem.

The Evading of the Green

Deal or no deal, even the Irish Apple may be too slippery for that nation’s tax collector. Adds the Times: “Apple Operations International has not filed a tax return in Ireland, the United States or any other country over the last five years.” To invert the old Beatles song, when it comes to taxes Apple is “not here, not there, not anywhere.”

CEOs like Apple’s Tim Cook (complain that they can’t “repatriate” their earnings to the United States because our taxes are too high. And yet, remarkably, the Times reported today that much of that money is already here.

“Multinationals based in the United States,” writes the Times, “now hold more than $1.6 trillion in cash classified as ‘permanently invested overseas.’” Permanently overseas? Apple’s $100 billion in offshore profits is managed in Reno, tracked by accountants in Austin, and stored in New York banks.

That’s called having your apple and eating it, too.

unGrateful

U.S. tax dollars funded the creation of the Internet and the many of the design breakthroughs that drive Apple’s tax products. American taxpayers underwrite the agencies that protect Apple’s U.S. assets. They educated most of its workers in Reno, Austin, and New York. They’re paying for the police departments and other agencies that protect Apple’s offices and keep the people inside them safe and healthy.

Too bad Apple Inc. isn’t pulling its weight for all these expenses.  You are. Individual taxpayers paid more than $1 trillion in federal income tax in 2011, while corporations paid only $181 billion. Remember those figures the next time they tell you we can’t afford to provide the government services that have helped Americans for generations.

We’re footing the bill for their almost unimaginable success – and the imbalance is getting worse.

Lone Star State of Mind

After Apple made the politically-motivated decision to manufacture one of its product lines (only one) in the United States, it chose Texas as the location.  That tells us even more about Apple’s patriotism and loyalty, since Texas is an anti-union state (they call it “Right to Work,” when “Right to Be Underpaid” is more like it) with lax regulatory enforcement.

What’s more, at least one reliable report says there’s a decent chance that the Texas factory will be owned and operated by FoxConn.

That’s right: Apple’s Texas plant could be owned and operated by the Chinese company that was so lax in its safety procedures – with Steve Jobs’ knowledge and approval – that workers there died horribly in fires.

Will manufacturing one of its product lines in the U.S. make Apple an American company again? Hardly. Toyota manufactures nine models here: the Avalon, the Camry, the Camry Hybrid, the Corolla, the Sequoia, the Sienna, the Solara, the Tacoma and the Tundra.

That’s one down, eight to go, before Apple catches up with its inarguably Japanese counterpart.

An Apple Repair We Can Afford

Senators were eager to express their enthusiasm for Apple’s products yesterday, and why not? They’re beautifully designed. I use a couple myself. But Apple’s a for-profit entity. It’s no more generous to its customers than it is to the taxpaying public at large, without whom it couldn’t exist.

If you’ve ever tried to repair an iPhone you know exactly what I mean. The Wall Street Journal says that “Apple earns almost as much from its customers’ butterfingers as it does through corporate tax loopholes.”

Tim Cook is almost certainly telling the truth when he says that Apple complies with all appropriate tax laws. (We’re not so sure he’s right when he says that Apple complies with the “spirit” of those laws, but since that’s intangible and unquantifiable we won’t quibble.)

The law itself is the problem. That’s why we find ourselves in agreement with Sen. John McCain, who said, “We don’t have to wait and have a grand bargain. It’s a cop-out. We all know there are loopholes that are outrageous.”

Closing those loopholes is one Apple repair we can’t afford not to make.

Under Another Flag

We’re not trying to red-bait or vilify Apple or any other multinational company when we say they’re no longer American corporations. We don’t mean they’re “un-American” in the subversive, treacherous, Sen. Joe McCarthy sense. It’s just time to recognize reality: They fly under no flag but their own.

Don’t blame executives like Cook, either. Their fiduciary duty compels them to place profits over people – or patriotism. To paraphrase Jessica Rabbit: They’re not bad, their charters are just drawn that way.

We should treat Apple and other formerly American multinationals as neutral entities with whom we can cooperate at times for our mutual benefit. We should encourage them to invest in the United States and hire American workers, as we do with other non-American corporations.

What we shouldn’t do is treat them as U.S. corporations. The very concept is probably obsolete in the multinational arena.

iBorrow

In a final irony, Apple – which is hoarding $145 billion in cash – borrowed $17 billion last month. Why would a company with that much money on hand choose to go billions of dollars into debt?

One reason for the indebtedness is that it’s yet another legal way to avoid paying taxes. But here’s what really gets the Irony Meter trembling: As the New York Times Dealbook blog notes, Apple issued this debt because it was able to obtain “interest rates that hovered near the low-cost debt of the United States Treasury.”

Investors are essentially paying the United States government to borrow their money, because the U.S. Treasury is still one of the safest places to park your money on the planet. Apple’s rates, as you can see from the above, are nearly as good. When debt is this cheap, it’s fiscally irresponsible – literally – not to borrow.

And what was the President calling Tim Cook about? Ways to avoid borrowing more money. That’s how off-kilter our economic debate has become. At these rates the United States government should be smart enough to do what Apple is doing: Borrowing money to fortify its future.

Bringing Apple Back Home

Our government will have more of the money it deserves someday, too, if Apple becomes an American corporation again.

We can’t wait for Tim Cook to do that. In fact, it would be fiscally irresponsible for Cook or any other executive to voluntarily give up more of his company’s income than is legally required.  It’s up to our leaders, not corporate executives, to fix this problem.

Let’s hope that yesterday’s Senate hearing means that the process has finally begun.

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