Big Tech deserves no gratitude for dodging its US taxes

Big Tech deserves no gratitude for dodging its US taxes
© Getty

Apple apparently expects an outpouring of national gratitude for avoiding $40 billion in U.S. taxes. President TrumpDonald John TrumpTrump calls for Republicans to be 'united' on abortion Tlaib calls on Amash to join impeachment resolution Facebook temporarily suspended conservative commentator Candace Owens MORE and his fellow Republicans are happy to oblige, since handing huge tax cuts to wealthy corporations is one of the principal purposes of their new tax law. But the rest of us can be excused for withholding our applause.

The tech giant recently announced it was paying $38 billion in repatriated U.S. taxes on the $252 billion in accumulated cash and “cash like” assets it has stashed offshore. That may sound like a lot of money, but it only represents a 15.5 percent tax rate —a lower rate than many working families pay on their income.

Before Trump signed the massive corporate tax cuts into law, Apple owed $78 billion on those overseas earnings. American corporations altogether owed $750 billion on $2.6 trillion in offshore profits of Fortune 500 companies, but got a tax break of about $400 billion from the Trump tax plan.

This unconscionable tax giveaway was the GOP’s reward to huge corporations for decades of vigorous international tax dodging — and just as vigorous Washington lobbying to change the rules in order to make most of that dodging permanent.

Backers of the deeply-flawed new tax law — including, prominently, President Trump — are understandably desperate to raise its deservedly low reputation among the public. So they jumped on Apple’s announced $350 billion “direct contribution” to the U.S. economy over the next five years” as proof that the GOP tax overhaul was spurring the economy, just as they had promised it would while they were rushing the plan through Congress.

But in their eagerness, they read into Apple’s announcement something that isn’t there: nowhere does the company say the new tax law is responsible for its $350 billion “contribution.”

First, note the word “contribution.” As Apple’s press release explains, it covers everything from existing spending on current employees, domestic suppliers and manufacturers to new investments. And those investments appear to be a continuation of existing ones; or if they are new, they were planned before the massive tax giveaway was a glimmer in CEO Tim Cook’s eyes.

If any of the investments are new, they’re only a small fraction of that headline $350 billion figure. Here’s the math (as noted in the New York Times):

Apple’s current pace of spending in the United States is $55 billion for 2018, so it was already on track to spend $275 billion over the next five years. After the $38 billion tax payment is subtracted, that leaves its new investment at roughly $37 billion over the next five years.”

Taxes are legal obligations, not voluntary investments. It’s up to Congress to decide what to do with Apple’s long overdue tax payments on its offshore profits.

If you subtract from the $350 billion figure those two out-of-place numbers ($275 billion in existing spending and the $38 billion tax payment), you’re left with just $37 billion over five years — or about $7.5 billion a year — in what might be new investment. But one can’t tell because Apple doesn’t say. For a company whose market value is approaching a trillion dollars, that’s small potatoes.

If it really wanted to make new and substantial investments in American communities and workers, Apple could use that big pile of offshore profits — which, even after the discount tax payment, totals over $200 billion.   

But like a lot of its fellow profit-offshoring corporations, it probably has another plan for that money: further enriching shareholders through higher dividends and stock buybacks rather than increasing worker compensation or making new investments. That’s what companies mostly did the last time the federal government gave them a tax discount on their overseas earnings — even though the claim then, just as now, was that the corporations would use the money to boost employment.

Apple has laid out just such a capital return program for its stockholders. The company is well on the way to its current goal of returning $300 billion to its mostly wealthy shareholders through  dividends and buybacks. That goal may well be raised, now that it has another $200 billion to play with. But President Trump’s unlikely to tweet about that.  

Frank Clemente is executive director of Americans for Tax Fairness.