April 30, 2012

Businesses Go Where Taxes are Lower

Patrick Laverty

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)

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

"But how do you argue it when it comes straight from the horse's mouth?"

Easy. Call them irrational, immoral, or dishonest, and then blame other states for creating a race to the bottom. It's basically the same argument as: "XYZ Communist/Banana Republic country can't succeed because free capitalist states steal their wealth and oppress them."

Posted by: Dan at April 30, 2012 7:50 AM

Isn't it criminal, immoral, and just downright UNFAIR to take advantage of the TAX CODE to reduce your tax liability? Don't rich people pay less taxes than poor people? Aren't Republicans stealing from the poor to give to the rich?

Posted by: Max D at April 30, 2012 9:19 AM

I could not find anywhere in the article what the State of Nevada gained by Apple having a tax shelter located in their state.

Posted by: Phil at April 30, 2012 5:37 PM

Earth to Anchor Rising. Anybody there?

Posted by: Phil at April 30, 2012 9:45 PM

Sure, Phil, right here. What's up?

Posted by: Patrick at April 30, 2012 10:16 PM

Read this maybe it will change your mind about the legal money laundering companies do to avoid paying taxes. If only I could move my money to different states or countries to avoid paying taxes.


Posted by: Alan at April 30, 2012 11:24 PM


What does the low tax state such as Nevada gain from having a company such as Apple locate an office with a handful of employees in Reno and avoid taxes in Ca.?

Posted by: Phil at May 1, 2012 7:22 AM

Phil - Some tax revenue is better than none.

Posted by: Dan at May 1, 2012 7:43 AM

Well, I didn't make any claims that they do gain, so I can't say definitively. You'd need to ask the Nevada state legislature to really know for sure. But one thing that they did definitely gain was jobs for its residents and income taxes from those employees.

See, that's exactly the philosophy shared by many at the State House. What do we have to gain by lower taxes except lower taxes? Well, there's jobs and an economy for one. Lots of other things come along when you have a workforce.

But if you want a full answer, please contact the state legislature out there. I'm hoping they're more than happy to fill you in.

Posted by: Patrick at May 1, 2012 8:30 AM

"But one thing that they did definitely gain was jobs for its residents and income taxes from those employees."

The article stated that the Reno business had a "handful" of employees. That's what you refer to as jobs and how much income tax is involved here.

Phil - Some tax revenue is better than none.

You're right there. If you lie down and spread your legs for these tax dodging corporations you should be paid the same as any other prostitute in Reno.

Posted by: Phil at May 1, 2012 10:22 AM
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