There is an unwritten social contract in the United States: You work and pay taxes, your tax dollars are put in a pool, and they benefit everyone. Some of those tax dollars pay for national defense, some pay for ensuring our food is safe to eat, that our roads are safe, and that our children receive an education. I have never really quibbled with paying my taxes, and most of us don’t. We know that those tax dollars are an investment and that as a society we share in the returns. We have decent roads, clean water, an educated populace, and no warlords cruising up and down our city streets. It seems like a fair trade off.
Of course over the years the tax burden has shifted. In 1962, corporate taxes were 21 percent of total federal revenue. By 2011, it was just 8 percent. While the corporate tax rate is officially 35 percent, the average rate paid by large corporations is 12.6 percent. You can guess who is picking up the slack for them.
It is no secret that large corporations have an army of accountants and lawyers whose sole job is to seek out and use every possible loophole they can to avoid paying taxes. The GAO estimated that 24 percent of profitable large corporations owed no income tax in 2011, 22 percent owed nothing in 2010, and 21 percent owed nothing in 2009. Of course, there are no bounds to corporate greed, as Apple CEO Tim Cook recently displayed.
"It is the current tax law. It's not a matter of being patriotic or not patriotic," Cook told The Post in a lengthy sit-down. "It doesn't go that the more you pay, the more patriotic you are."
Cook acknowledged that Apple was effectively taking advantage of a massive tax loophole, which he said was perfectly legal." "The tax law right now says we can keep that [profit] in Ireland or we can bring it back."
It is estimated that Apple has American corporations have over $2 trillion dollars parked in offshore accounts. And Tim Cook is correct: Patriotism has nothing to do with paying taxes. However, paying taxes has everything to do with having an educated work force, having a patent office and a court system that protects intellectual property, having the infrastructure needed to move products from coast to coast, and not having warlords hijacking those shipments.
All of this leads to a stable marketplace which allows the technology giant to sell its products not only here in the United States, but in overseas markets. Yes, it may be legal to stash corporate profits offshore. But it tears at the very social contract that allowed Apple to innovate and become the success story it is today.
It may be perfectly legal for Apple and other large corporations to use loopholes to avoid paying taxes. That certainly doesn’t mean it’s the right thing to do.