Liberals Decide to Take a Bite Out of Apple

Apple -- the world's most valuable business and an engine of economic growth and personal freedom across the United States and around the world -- is coming under fire because it had the nerve to structure its global business in such a way that saves the company on taxes.

The New York Times has a very lengthy story exploring all of the ways that Apple minimizes its tax bill. The article, entitled "How Apple Sidesteps Billions in Taxes," makes a great effort to tie Apple's strategy, which is legal, to the ongoing budget problems faced by California, where Apple has its global headquarters, and to the federal budget deficit.

According to the New York Times, Apple's accounting methods and business structure -- including subsidiaries in countries around the world -- has helped it cut its U.S. tax bill by $2.4 billion.

The federal government currently spends approximately $6.9 million per second.

That extra $2.4 billion would fund the U.S. government for 348 seconds -- or less than six minutes.

Six. Minutes.

For six minutes of spending, the New York Times tries to portray Apple as a greedy, selfish company that doesn't care about education or the deficit. The financial problems of a community college near Apple's California headquarters are blamed on Apple because it routs some of its business through a subsidiary in Reno, Nevada -- where the corporate tax rate is zero, rather than through California, where the  corporate tax rate is 8.84 percent -- rather than on the political leadership of California, which can't seem to stop spending money on things like bullet trains even as its fiscal and tax policies continue driving employers out of state.

The New York Times buried the lead. The real story here is not "greedy corporation evades taxes." Rather, it is this: America has the highest corporate tax rate on earth, and Apple, which does business globally, prefers to do business in states and countries with lower tax rates.

Fox Business's Elizabeth MacDonald reports that the NYT may have misstated the numbers, making Apple's effective tax rate in the U.S. appear much lower than it really is, but even if the numbers aren't wrong, the New York Times completely missed the forrest for the trees on this one. It veered close to the real story early in the article, reporting that, "As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands..."

But rather than follow that thread and focus on how high corporate tax rates drive Apple to structure its business in odd ways, the NYT slants the story to imply that Apple is doing something wrong -- which it isn't. By doing so, the New York Times  continues the narrative pushed by the Obama administration and the Left, that greedy corporations are the cause of America's economic problems.

But that's a hard argument to make, especially when it comes to Apple. Apple's products are beloved, its customers are happy and its products make millions of people more productive and have enabled the creation of countless new companies. The company is profitable, its shareholders are making money, the company generates jobs, and it pays billions of dollars in taxes. Even the anti-capitalist, anti-corporate "Occupy Wall Street" movement loves Apple -- as evidenced by the huge numbers of Apple iPhones, iPads and MacBooks the Occupiers use to spread their message.

And yet, the New York Times story depicts Apple as greedily using tricks to avoid taxes. 

Why? James Pethokoukis nails it, in a good blog post today speculating how the Left would treat Apple's founder and legendary CEO, the late Steve Jobs, if he were alive and had become the Republican presidential nominee: "The Left is uncomfortable, to say the least, with the innovation and creative destruction generated by market capitalism and how it upsets the best-laid plans of government. Recall the president’s comments about job-killing ATMs. A tech CEO would be treated no better by liberals than a private-equity CEO. And Jobs would quickly go from entrepreneurial saint to capitalist sinner," Pethokoukis writes.

In one example of Apple's sins, the NYT reports that an Apple subsidiary in Luxembourg processes about $1 billion worth of iTunes sales to customers across Europe, Africa and the Middle East, where it pays a lower tax rate than it would elsewhere. 

From the NYT story:

The advantages of Luxembourg are simple, say Apple executives. The country has promised to tax the payments collected by Apple and numerous other tech corporations at low rates if they route transactions through Luxembourg. Taxes that would have otherwise gone to the governments of Britain, France, the United States and dozens of other nations go to Luxembourg instead, at discounted rates. “We set up in Luxembourg because of the favorable taxes,” said Robert Hatta, who helped oversee Apple’s iTunes retail marketing and sales for European markets until 2007. “Downloads are different from tractors or steel because there’s nothing you can touch, so it doesn’t matter if your computer is in France or England. If you’re buying from Luxembourg, it’s a relationship with Luxembourg.”

"Almost every major corporation tries to minimize its taxes, of course," the New York Times does admit in its story.

Yes, that's true. So do most American taxpayers when they visit financial planners and tax advisers, seeking ways to keep more of their own money in their own pocket.

It's a safe bet the owners of the New York Times -- and the reporters who wrote the Apple story -- do it, too. Somehow, however, it's only wrong when it's someone else doing it. Funny how looking at a story about Apple gives us liberalism in a nutshell.

Matthew Sheffield
Matthew Sheffield
Matthew Sheffield, creator of NewsBusters and president of Dialog New Media, an internet marketing and design firm, left NewsBusters at the end of 2013