Businesses Go Where Taxes are Lower
Businesses will set up shop where the tax laws are more favorable to them.
And in other news, water is wet. Maybe it would seem obvious to most that people will be motivated by lower tax rates. However, if you listen to some on the left, especially locally, this isn’t true. But how do you argue it when it comes straight from the horse’s mouth?
“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.
A New York Times article today “How Apple Sidesteps Billions In Taxes” tells much of the story and explains some of the various ways that Apple has chosen various places around the world to open offices, strictly due to the favorable tax laws. One of their offices has as few as twelve people assigned to it, but records revenues of one billion dollars a year.
It’s not just international either. The California company even plays states off against each other.
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.
If this can happen in a state as large as California, where 200 miles to Reno is considered “nearby”, then can the same happen here where a 200 mile radius can land you in any of seven different states? Of course it can. It does! But yet, we still have those on the left who want to continually increase tax rates on businesses and further drive them away from Rhode Island.
It’s also interesting to see the outrage against Apple for paying so little in taxes or paying it to foreign countries or a state other than California, where they’re headquartered. The NYT spoke with DeAnza College President Brian Murphy, as DeAnza is a nearby neighbor in Apple’s hometown of Cupertino.
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.”
I’d have a question for Mr. Murphy and anyone else who criticizes Apple for legally paying as few taxes as possible. Do you take the standard deduction on your tax return? Do you have children and claim them as a deduction? Do you take the mortgage interest deduction? Do you take charitable deductions or any other kinds? If so, what’s the difference? Each of those are “loopholes” within the US tax law that we all legally take advantage of. Apple and many other corporations are merely doing the same.
If we don’t like the loopholes, then we should close them. Work with those in Washington who make the tax laws and get them changed. In the meantime, let’s see this for what it is, proof that businesses will go where the tax laws are favorable and at the same time ask ourselves, “How’s business in Rhode Island?”
(h/t Ted Nesi)