Corporate Taxes: Don’t Beat Up on Apple: The Flaw is in the Law

This week it was the turn of Apple’s Chief Executive Tim Cook to sit in the Congressional hot seat. With lights blazing and cameras rolling, a bipartisan lineup of Senators grilled him about the relatively small amount of tax the company pays on its substantial corporate profits. According to a New York Times account of the hearing, Republican John McCain characterized Apple “as among America’s largest tax avoiders.” Democrat Carl Levin complained about the use of “ghost companies” to hide profits overseas.

Cook replied that Apple pays “all the taxes we owe — every single dollar.” He could have added that as Chief Executive, it is his fiduciary duty to look after the interest of his shareholders. He could go to jail if he passed up entirely legal methods of protecting their profits from the IRS. So don’t beat up on Apple. The flaw is in the law.

What exactly are the flaws in the corporate tax law?

The first is that the “corporate tax” is not really a tax on corporations. Yes, corporations can “pay” taxes in the sense that the check that goes to the IRS is printed with the corporate logo, but they can’t bear the economic burden of taxes, because they are not people. The entire burden of the tax ultimately falls on the corporation’s stakeholders—its shareholders, executives, workers, customers, suppliers and others. >>>Read more