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The debate over the nation’s budget deficit aside, government’s contribution to innovation is not financially rewarded. The benefits to government, it has alway

The debate over the nation’s budget deficit aside, government’s contribution to innovation is not financially rewarded. The benefits to government, it has always been argued, would be increases in tax revenues as companies grow based on its research. The fact that Apple avoids almost all taxes by international avoidance strategies, as do many other high-technology companies, shows such hypotheses to be largely bogus. This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... If spending on basic research leads to even a tenth of a percent of higher annual GDP growth, it will almost certainly pay for itself as that compounds over time into a much larger tax base.

eli_gottlieb 13y ago
>This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... Compare the real taxes reaped by the state from companies that make use of publicly-funded research versus the alternative: the government holds all intellectual-property rights to publicly-funded discoveries and licenses them for a profit to commercial firms.
- twoodfin 13y ago
  The government's goal isn't to turn a profit: It's to bring a better life to its citizens, improve its ability to defend itself, etc. Basic research being financially self-sustaining is a benefit, but it's not necessary or sufficient for the success of the programs. But putting that aside, if the government owns the basic research that it funds, why would any (self-interested) researcher or institution choose to work for the government vs. private industry, which can offer a share of future revenue? How does the government set prices for its licensing? Don't we benefit that Jobs and Wozniak didn't have to have a large amount of capital to invest in licensing in order to take advantage of all that basic research?
  - sanderjd 13y ago
    > why would any (self-interested) researcher or institution choose to work for the government vs. private industry For the same reason researchers choose to do so now: the government pays for a lot more fundamental research than private industry does.
  - eli_gottlieb 13y ago
    I'm not talking about whether the research is self-sustaining or not. I'm talking about whether the economic value of basic research is treated as a positive externality (current situation) or captured by some actor at a market price (my counterfactual). Why ask that question? Because, quite interestingly, without the value of basic research being captured as revenue with a market price, we don't have numbers to perform a direct comparison between research costs and research revenues to compute the profitability of basic research. We don't actually know right now whether basic research is financially self-sustaining - in which case the apparent "expense" is actually a state subsidy to technological industries - or whether basic research is a financial net-negative. We also don't actually know what lengths of time are necessary to realize the final economic result of basic research. So we kinda sorta feel pretty sure that basic research eventually helps the economy, but nobody's accounting ledgers actually get forced to reflect that or pay for it.
beloch 13y ago
I don't understand why some feel the need to defend Apple on this count. They've evaded taxes to an outrageous degree and are sitting on a pile of cash so big it would take generations for the company to get anywhere near bankruptcy again. Had they been forced to pay the taxes any sane tax regime would say they owe, they'd still be the same company making the same products. They'd just have a smaller nest-egg. Non sequitur or not, this actually cuts to the heart of the matter. Governments play a huge role in innovation, so we should stop using false claims to the contrary when rationalizing theft of revenues the government is owed for its work. Corporate tax evasion is a crime against innovation and theft from all of us who actually do pay our taxes.
- nickff 13y ago
  >"They've evaded taxes to an outrageous degree" How did you arrive at this (normative) judgement? They are paying the minimum in taxes that they legally can, so that they can invest the money in research, buy back stocks, or hold it in reserve for some period of time; why is this bad? Do you have any evidence that the government's allocation of additional funds would be more productive than Apple's use of the money?
  - gopher1 13y ago
    It's bad because it's unfair. If everyone, including small businesses, got to pay 0% tax, then you might have a good argument. But as it stands, we have a 35% corporate tax rate for everyone except large multi-national companies who have the means to take advantage of the loopholes. Regular Joe Business does not have those means. And of course, these same large companies are spending millions lobbying the government to not reform the code.
    - liber8 13y ago
      This doesn't take away from your point, but from a practical perspective, small businesses pay 0% corporate tax. When you have just a few shareholders, as nearly all small businesses do, all profits get paid out as salary. If small businesses didn't do this, their owners would be taxed twice (first at the corporate level and then again individually). The companies that get squeezed are not the Regular Joe Businesses but the midsize businesses that can't get away with paying out all profits as salary (because they have third party shareholders who don't work for the business) and yet can't afford to set up the necessary bureaucracy to take advantage of things like a Double Irish With a Dutch Sandwich.

eli_gottlieb 13y ago

>This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... Compare the real taxes reaped by the state from companies that make use of publicly-funded research versus the alternative: the government holds all intellectual-property rights to publicly-funded discoveries and licenses them for a profit to commercial firms.

twoodfin 13y ago
The government's goal isn't to turn a profit: It's to bring a better life to its citizens, improve its ability to defend itself, etc. Basic research being financially self-sustaining is a benefit, but it's not necessary or sufficient for the success of the programs. But putting that aside, if the government owns the basic research that it funds, why would any (self-interested) researcher or institution choose to work for the government vs. private industry, which can offer a share of future revenue? How does the government set prices for its licensing? Don't we benefit that Jobs and Wozniak didn't have to have a large amount of capital to invest in licensing in order to take advantage of all that basic research?
- sanderjd 13y ago
  > why would any (self-interested) researcher or institution choose to work for the government vs. private industry For the same reason researchers choose to do so now: the government pays for a lot more fundamental research than private industry does.
- eli_gottlieb 13y ago
  I'm not talking about whether the research is self-sustaining or not. I'm talking about whether the economic value of basic research is treated as a positive externality (current situation) or captured by some actor at a market price (my counterfactual). Why ask that question? Because, quite interestingly, without the value of basic research being captured as revenue with a market price, we don't have numbers to perform a direct comparison between research costs and research revenues to compute the profitability of basic research. We don't actually know right now whether basic research is financially self-sustaining - in which case the apparent "expense" is actually a state subsidy to technological industries - or whether basic research is a financial net-negative. We also don't actually know what lengths of time are necessary to realize the final economic result of basic research. So we kinda sorta feel pretty sure that basic research eventually helps the economy, but nobody's accounting ledgers actually get forced to reflect that or pay for it.

beloch 13y ago

I don't understand why some feel the need to defend Apple on this count. They've evaded taxes to an outrageous degree and are sitting on a pile of cash so big it would take generations for the company to get anywhere near bankruptcy again. Had they been forced to pay the taxes any sane tax regime would say they owe, they'd still be the same company making the same products. They'd just have a smaller nest-egg. Non sequitur or not, this actually cuts to the heart of the matter. Governments play a huge role in innovation, so we should stop using false claims to the contrary when rationalizing theft of revenues the government is owed for its work. Corporate tax evasion is a crime against innovation and theft from all of us who actually do pay our taxes.

nickff 13y ago
>"They've evaded taxes to an outrageous degree" How did you arrive at this (normative) judgement? They are paying the minimum in taxes that they legally can, so that they can invest the money in research, buy back stocks, or hold it in reserve for some period of time; why is this bad? Do you have any evidence that the government's allocation of additional funds would be more productive than Apple's use of the money?
- gopher1 13y ago
  It's bad because it's unfair. If everyone, including small businesses, got to pay 0% tax, then you might have a good argument. But as it stands, we have a 35% corporate tax rate for everyone except large multi-national companies who have the means to take advantage of the loopholes. Regular Joe Business does not have those means. And of course, these same large companies are spending millions lobbying the government to not reform the code.
  - liber8 13y ago
    This doesn't take away from your point, but from a practical perspective, small businesses pay 0% corporate tax. When you have just a few shareholders, as nearly all small businesses do, all profits get paid out as salary. If small businesses didn't do this, their owners would be taxed twice (first at the corporate level and then again individually). The companies that get squeezed are not the Regular Joe Businesses but the midsize businesses that can't get away with paying out all profits as salary (because they have third party shareholders who don't work for the business) and yet can't afford to set up the necessary bureaucracy to take advantage of things like a Double Irish With a Dutch Sandwich.