7 ms·
How Apple avoids paying taxes in CA
- towndrunk 16y agoSeems like a smart business move to me. Are we suppose to be upset about this?
- dot 16y agowell, the state is bankrupt. partly because companies that embody its dreams are not chipping in with the bills.
- jrockway 16y agoThe state just needs to pass a better law. Apple is obligated by its contract to its shareholders to avoid taxes as much as possible; they are just avoiding a lawsuit. (I don't like this, but I understand it. The law just needs to catch up with the market, then everyone will be paying their fair share again.)
- starkfist 16y agoHas there ever been a lawsuit where the shareholders sued a company for not evading taxes?
- jbooth 16y agoSure, but whenever anyone proposes that, 40% of the country, suckers that actually pay their taxes, stand up and beat their chests and wail about the inequities of making a corporation pay taxes. Last I heard, Exxon-Mobil, the most profitable corporation in the entire world, doesn't pay a dime in US taxes. Meanwhile, I pay every other week. This is BS.
- orangecat 16y agoLast I heard, Exxon-Mobil, the most profitable corporation in the entire world, doesn't pay a dime in US taxes. You heard wrong: http://blogs.forbes.com/energysource/2010/04/07/exxon-says-it-does-pay-u-s-income-taxes/ http://blogs.forbes.com/energysource/2010/04/07/exxon-says-i...
- jbooth 16y agoThanks. So at least there's that. Meanwhile, google for "exxon subsidies us" brings up a 3 billion subsidy last year and who knows how much over the last 10. But at least we're probably not in the red. Although I'd say Exxon is getting a better-than-fair deal with all that the State Dept and US Military do for them.
- orangecat 16y agoAlthough I'd say Exxon is getting a better-than-fair deal with all that the State Dept and US Military do for them. No doubt. I'm always amused by claims that nuclear power or alternative energy is "too expensive", when they ignore the huge explicit and implicit subsidies that oil gets.
- neilc 16y agoApple is obligated by its contract to its shareholders to avoid taxes as much as possible; they are just avoiding a lawsuit. To which contract/obligation are you referring? Per http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1013744 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1013744 : "Among non-experts, conventional wisdom holds that corporate law requires boards of directors to maximize shareholder wealth. This common but mistaken belief is almost invariably supported by reference to the Michigan Supreme Court's 1919 opinion in Dodge v. Ford Motor Co ... U.S. corporate law does not and never has imposed a legal obligation on directors to maximize shareholder wealth."
- towndrunk 16y agoI hardly think the states issues with money are Apples problem to solve. The state is bankrupt because its congress spends more than it takes in.
- fletchowns 16y agoYeah, might be eBay's problem soon though.
- eli 16y agoCongress? That doesn't really explain why the state is bankrupt. Don't you think Sacramento deserves just a wee bit of blame? That and California's ridiculous constitution that has voters deciding on complex matters of state finance instead of legislators.
- jsz0 16y agoI can see both sides of it. These companies do provide jobs (income taxes) to people who can then buy homes (property taxes) and consume local goods & services (sales taxes, creation of more jobs, etc) but it's really unfortunate the tax system seems to be setup to put the biggest burden on individuals and small businesses that can't find creative ways out of paying taxes. There should probably be some sort of minimum tax for these companies posting billions in profits even if it only exists to break even and take some of the tax burden off small businesses. It certainly doesn't help that the state has been cooking the books for years. If the state can't even be honest with the people about budgets there's no hope of having a fair tax system.
- dedward 16y agoWhere do you draw the line? The bigger businesses create more jobs and do more for the economy, and even with the lower percentage they leverage in return for this, they are responsible for the majority of actual tax dollars taken in. If individual income tax were eliminated, while it sounds good, it would be one less thing for people to get riled up about and take an interest in politics.
- nradov 16y agoThe state is "bankrupt" because it cranked up spending during the boom years, giving ridiculous pay and benefits to public employees instead of saving for a rainy day. Fighting the war on (some) drugs and passing out free services to illegal aliens hasn't helped much either. Of course there is currently no legal way for the state government to file for bankruptcy. But I except that within the next 10 years it will default on its sovereign debt.
- anamax 16y ago> partly because companies that embody its dreams are not chipping in with the bills. Nope. CA has a spending problem. CA is taking in about what it spent in 2008. Unless you think that 2008 was a disaster, spending that amount now should be perfectly acceptable. CA has a deficit because it is spending far more than it spent in 2008. As to my "spending plan", it's rewind the spending until the budget is balanced. If the legislature and governor want to keep any specific new spending, they get to cut an equivalent amount of old spending.
- kelnos 16y agoThe state is bankrupt because it mismanages money and spends more than it takes in. It's certainly not Apple's problem to solve.
- dumber 16y agoYou prefer VAT increase of Apple paying CA taxes ? Moron...
- mkramlich 16y agomany would consider it unethical many would say that just because one is involved in a business activity does not exempt one from being ethical. regardless of what some piece of paper says.
- eston 16y agoIt's a wonder that Apple is still a primarily American corporation at all. Really big companies like Accenture are multinational corporations, generally incorporated in a tax haven with decent legal standing and running its HQ in the US as a domestic subsidiary.
- wallflower 16y agoThey seem to take pride in U.S. provenance: "Designed by Apple in California Assembled in China"
- zach 16y agoApple isn't even a Delaware corporation, as maybe 99% of publicly-traded companies are, but is still a California corporation after all these years.
- nitrogen 16y agoMaybe the "California corporation" ethos is a part of their brand image. Some people may associate the "Deleware corporation" designation with scheming and untrustworthy businesses.
- technomancy 16y agoMS does the same, though they have to buy off statesmen to get away with it: http://boingboing.net/2010/04/23/microsoft-wins-its-1.html http://boingboing.net/2010/04/23/microsoft-wins-its-1.html
- harshpotatoes 16y agoMS brings in far more money for the state then these tax right offs, which is why the state is so nice to its largest employers. Wa would much prefer to keep MS headquarters here, then pocket a few hundred grand in taxes and lose MS. The state is equally kind to Boeing, who regularly makes threats to move their headquarters elsewhere, and very recently Boeing did just that. So i think in the immediate future WA will continue to bend over backwards for MS.
- jbooth 16y agoYeah, taxes come out of worker paychecks, so it doesn't matter that the big corporate entity with billions in the bank doesn't have to pay any. We can just hit up the workers with their mortgages and families. Personally, I'd prefer a little more honest accounting, and maybe some more money going the workers' way, a little less going investors' way.
- harshpotatoes 16y agoAt least in Washington, there is no state income tax, the only thing removed from a workers paycheck is federal tax and social security. The taxes come a bit more indirectly, in the form of spending from employees. With a 9% sales tax, and at least 50,000 employees each for Microsoft and Boeing, Washington still gets money. Additionally, both Microsoft and Boeing more directly support the state economy in other ways (many donations, and support of public works, etc etc). Obviously, these tax breaks do lose the state some money, but there are some benefits to keeping these huge employers happy.
- jbooth 16y agoThanks
- riferguson 16y agoJudge Learned Hand: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
- sumeetjain 16y agoDoesn't this just beg the question of letter vs. spirit of the law?
- megablast 16y agoThey are only avoiding some california taxes as well, at least according to the wiki page. This is nowhere near as bad as IKEA, which is the largest charitable organisation in the world, pulling in billions of dollars a year, and paying out a million to help design new furniture.
- dcurtis 16y agoIkea is so good at not paying taxes that I would say the whole company is a tax evasion hack. The number of subsidiaries in random countries and crazy charities that make up the company is astounding. See: http://en.wikipedia.org/wiki/IKEA#Corporate_structure http://en.wikipedia.org/wiki/IKEA#Corporate_structure
- smallblacksun 16y agoSounds like a money-laundering setup, honestly.
- btmorex 16y agoThat may be true, but the simple fact is that it's a lot easier for a large corporation to minimize its taxes than it is for a small business or individual. For example, a company like apple can afford to pay 10 people full time to move around money and assets in order to minimize taxes. Those people will save Apple far more than it costs to employ them. A 5 person company not only can't match that effort, but if they tried they would find that the necessary expertise cost more than the actual tax savings would bring. That gives large corporations a pretty significant advantage in the marketplace.
- smackfu 16y agoDesigned in California. Made in China. Taxes avoided in Nevada.
- sant0sk1 16y agoNitpick: "Assembled in China" I guess nobody "makes" Apple products...
- dot 16y agoFunny fact via http://www.storiesofapple.net/braeburn-capital.html http://www.storiesofapple.net/braeburn-capital.html: Like the McIntosh, the Braeburn is a type of apple, known for a unique combination of sweet and tart flavour and its ability to store well.
- zacharyvoase 16y agoI have to side with the late, great Kerry Packer on this one: “I am not evading tax in any way, shape or form. Now of course I am minimizing my tax, and if anybody in this country doesn’t minimize their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.” EDIT: Granted, he was talking about Australia, but the same applies to every government.
- patrickgzill 16y agoNote that the employees are still stuck with the full tax load.
- hop 16y agoArticle title is misleading, they only minimize some capital gains tax on their cash and investments with the nevada entity. And they certainly have a duty to shareholders to do so. They pay hundreds of millions in income tax on their profit in California, plus everything else - property tax, payroll tax, sales tax on purchases in CA...
- andrewf 16y agoDoes anyone know what percentage of Apple Inc's shares are held by California residents? I'm guessing that if Apple returned its nest egg to shareholders as a dividend, rather than investing it, California wouldn't see much out of it.
- _delirium 16y agoI don't think there is actually a "duty to shareholders" to reduce taxation by jurisdiction-shopping. At least, having done some research, I'm unable to come up with a single case where a shareholder lawsuit against a company that declined to do so succeeded.
- invisible 16y agoI think the "right thing to do" for shareholders is probably a better way to describe the situation. Duty so much as to reduce their costs (with taxation being a cost).
- jbooth 16y agoYeah, but that's a crappy thing to do. Lots of unethical practices are legal but we don't encourage companies to do them. Why this?
- eru 16y agoWe don't encourage them to do this. The shareholders elected the board that is currently minimizing the taxes. If you don't like that, you can become an activist shareholder (or just an activist) and campaign for changing this company policy. This is no question of company ethics. It might be a question of the ethics of shareholding.
- Scott_MacGregor 16y agoIt would be nice if California became the most business friendly state in the nation. One of the reasons we chose Austin over California for our startup is the high California taxes and loads of red tape to operate. Texas seemed a lot more business friendly to us, the only downside we can see is the humid climate.
- _delirium 16y agoFor a company founded in the 70s like Apple, Texas has much higher property taxes. Prop 13 means that Apple's grandfathered in with extremely low property valuations in California, while Texas has both present-day valuations (no equivalent of Prop 13) and one of the highest property-tax rates in the nation.
- aero142 16y agoIt sounds like you are new to the area. It has been unusually wet recently, but give it time. It will be back to hot and dry soon enough.
- dooshydoo 16y agoI think most rational people have a schizophrenic response to bits like this. It’s glib and cliché for the player to beg forgiveness because the game itself is corrupt. In a different time I naively thought that if the contest is crooked, don’t play. However, you get older and realize nobility is shortsighted, and that one of the trade-offs we willingly accept, to live amongst endless possibility, is the reservation of veto power for those prepared to pay for the protection of their self-interests. So I remain realistically optimistic. After a hem and haw, I’ve settled on believing that business with a capital B-for-billion is a much different animal with greater responsibility. But only in that their duty is to succeed for their shareholders, for their employees, and for their customers; in that order. Taxes suck, life is short, and none of us ever feel that our share is spent wisely. Seeing a company do their homework to pay less shouldn’t feel any more like salt in a wound than meeting an octogenarian. If you knew that was your future, you’d play a similar game.
- stretchwithme 16y agoApple is well with in its rights to do this and I do think there is a duty to shareholders to not overpay for things, including government. That said, Apple pays a lot more taxes than most corporations, simply because they are successful and they should be commended for producing so high a return on capital. Some will be ripping their hair out over such a comment. Apple is successful and therefore worthy of punishment, they will tell you. I respectfully disagree.
- digispaghetti 16y agoApple should just change their official status from a company to a religion and be done with all this. They certainly have enough of a fanatical following and it worked for Scientology.