The rich don’t pay taxes! U.S. Senate praises Apple tax scandal

Scan page 3

tigations revealing that Apple Computer had avoided paying billions of dollars in taxes on its nearly unprecedented foreign profits, members of the Senate were mo­ mentarily outraged. The senators took to the corporate media to pillory Apple’s top executive, Tomothy D. Cook, for a few days until they got the word from on high to back off.

“The Corrosive Effect of Tax Avoidance by Apple and other Multinationals,” head­ lined the May 24 New York Times. Yet it was a scandal that most Americans under­ stand is the rule, not the exception. The rich get richer and pay little, or no, taxes while the rest of us become poorer and are taxed to the hilt to pay the government’s bills. These bills include “obligations” to bail out failing and/or profitable corpo­ rations, banks, hedge funds, agribusiness, and insurance conglomerates and bills for the endless wars that bring trillions to the military industrial complex and its secre­ tive super-spy spinoffs like Homeland Se­ curity and the CIA.

For several days Apple was accused of stealing from seniors’ Social Security ben­ efits, and from all other social programs that have been brutally slashed in Wash­ ington’s austerity game of “sequestering” working people to pay for the annual trillion-dollar deficit and largess to the failed banks and corporations. This time, the Senate committee led by Republican John McCain and Democrat Carl Levin set out to publicly expose the big guys, who everyone knew got away with the same tax evasion practices that almost all U.S. corporations employ daily. A few days into the farce, however, in late April, the word came down that Apple’s “tax transgressions” were really above suspi­ cion, and indeed, practiced by virtually every corpora­ tion in the country.

Apple’s Timothy Cook confidently appeared before the Senate committee, texts and “experts” in tow, to present proof positive that his corporation—which has “off-shored,” or better, sheltered from taxes a re­ cord $108 billion in overseas profits—had simply fol­ lowed the adopted regulations in the U.S. tax code.

Floyd Norris’ May 24 “High and Low Finance” New York Times column made this point quite clearly. Said Norris, “The shameful thing about Apple Inc.’s ability to structure its business to avoid United States taxes was not that it did it. In fact, as Apple executives tried to point out at the Senate hearings at which their tax strategies were detailed, they could have chosen to pay much less in American taxes than they did.”

Norris continued, “The shameful thing is that we have a tax system that seems to allow multi-national corporations to choose what they want to pay.”

Cook said that Apple was not to be blamed for shift­ ing its multi-billion-dollar foreign profits to low-tax jurisdictions, or sneaking them into Cayman Islands or Cyprus-type tax havens. This is commonplace in the world of high finance, where ruling-class “lobby­ ists” actually write the tax codes and/or related regu­ lations into the “law,” as was revealed in the case of Citibank in late April. Who else would write the tax laws but the corporate hired guns who work for the same ruling class that runs the government?

In Apple’s case, its much praised “legal team,” ac­ cording to Norris, “found a way to move a large part of its foreign income to Apple subsidiaries that claimed to not exist anywhere, at least when it came to paying taxes.”

Apple simply transferred its foreign profits to an Ap­ ple-owned entity incorporated in Ireland that is not subject to U.S. tax law. Indeed, Apple even transferred its huge Irish subsidiary profits to Manhattan banks and used them for whatever investments it deemed necessary while legally “deferring” paying U.S. taxes on the profits until such a time that Apple decided to officially “repatriate” the profits.

In short, Apple used a “legal” tax scheme to defer taxes until such time as it could “negotiate” a deal with the government to reduce the tax rate to a level below the current 35 percent—a rate that virtually no corporation or business pays. Cook boldly told the Senate that a rate sufficient to entice Apple to pay any taxes would have to be “in the single digit” range.

Such “tax holidays” or “amnesties” simply require the insertion of a few words, usually written by the top corporate lobbyists, into some obscure section of the tax code to satisfy the various congressional committees assigned to “oversee” or perhaps over­ look such standard “legal” transactions. Our readers should remember that—as with President Obama’s kill list or his now-requested rules as to who may be spied on or murdered with drones, or tortured or held indefinitely in prison without recourse to due process—everything is “legal” in America, provided only that it is approved by Congress—that is, made the “law of the land.”

Even so, invoking U.S. “national security” interests by the president virtually always negates whatever formal rules or regulations might exist to protect basic democratic rights. Today this includes theft disguised as tax law or murder legalized as necessary to protect the “national security interests” of the capitalist state. Corporate stealing is daily legalized in the volumes of unreadable and largely unscrutinized tax codes that collectively legalize corporate tax corruption.

The often-heard hue and cry emanating from the Re­ publicans (the Democrats’ partners in crime) to the effect that U.S. corporations have the highest corpo­ rate tax rates in the world is a myth. Graham Bowley, writing in the May 24 New York Times, says it well: “Some of the biggest and most powerful companies in the United States are fighting for a cut in the official tax rate, arguing that it is necessary to allow them to compete effectively in the global market.”

Bowley notes that “the vast majority of American businesses, including some large and prominent Wall Street firms, actually do not pay corporate taxes at all.”

This is the result of the tax code invention of “pass through” companies in the 1980s wherein corpora­ tions, initially small businesses and partnerships, were excused from paying corporate taxes and in­ stead distributed their profits to their shareholders, who were then supposed to pay on the basis of their personal income taxes.

Today, the “brilliant” corporate tax specialists repre­ senting giant ruling-class firms have largely convert­ ed their mammoth operations to “pass through” enti­ ties, thus evading federal corporate taxes entirely, and even more so when the 1986 “tax overhaul” slashed personal tax rates below corporate levels. Bowley properly concludes with a stunning tax fact:

“Of the 34 million business tax returns filed in 2009, the most recent tax data available [demonstrates that] 32 million were pass throughs [paying zero in federal corporate taxes].” This figure “represents 70 percent of all net business income…” That is, 70 percent of all corporate income was excluded from taxation, as op­ posed to 25 percent in 1980.

Further, with recourse to new laws lowering person­ al tax rates on capital gains, the ruling-class few are further able to lower their tax rates to 20 percent, not counting the myriad of additional deductions pressed into law by the corporate elite that further reduce this figure, in many cases to zero or less—“less” meaning that the government gifts them tax refunds!

Meanwhile, working people—by means of a steady stream of tax and related mechanisms daily introduced at the national, state, and municipal levels—are com­ pelled to make up for the trillions that corporations are gifted, including the across-the-board austerity measures implemented in every aspect of daily life. This includes massive college tuition increases, cuts, or outright elimination of pensions, cuts in virtually all social programs, doubling and tripling of healthcare costs, and nearly hidden hikes in the cost of food, home heating, and fuel.

Despite all these trillions allocated by the always bought-and-paid-for bipartisan capitalist politicians, there is no end in sight in the U.S. or anywhere else in the world. Austerity measures of every type are im­ posed everywhere—proof positive that the capitalist system is incapable of anything other than pursuing the ever-widening division of wealth between the rul­ ing rich and all others (the 99 percent). Capitalism’s inherent contradictions are today fully operative, evi­ denced by the wars against working people at home and the ever-increasing wars around the world— wars to impose neocolonial regimes subordinate to the biggest imperial players.

World capitalism’s last major economic catastrophe, the 1929 Depression, gave rise to a world war that took the lives of tens of millions of people. The horrific destruction of the economic infrastructure of much of the world was required to resolve the system’s inher­ ent contradictions. On the ashes of this world horror and with the U.S. emerging as the only virtually un­ scathed participant—free from the economic com­ petition of its wartime allies and enemies alike—the system of plunder and exploitation gained a new lease on life.

Today, the competition between the major indus­ trial and military players has again reached fever pitch. A rebuilt and re-arming world system, based on the endless and deadly struggle once again stem­ ming from ever-declining profit rates due to fierce world-wide competition, has no choice but to resolve its crises at the expense of the world’s exploited and oppressed.

Apple Computer amassed its super-profits at the expense of Asian workers who are paid near slave wages—while American workers saw theirs ever ap­ proaching poverty levels, with vast numbers of unem­ ployed, partially employed, and casual workers (not to mention immigrant and prison workers) today comprising a near majority of the work force.

Apple’s rules of conduct with regard to taxes and all other aspects of capitalist production are the norm for all corporations. Were this not the case, they would have folded long ago and, indeed, many of the weaker competitors have been destroyed, absorbed or merged into giant entities that, like their equiva­ lents abroad, rule over the world economy, increasing (continued on page 9, in “Growing resistance to UPS contract proposal”)

SOCIALIST ACTION JUNE 2013 3

Scan page 4

Arnaud Roine / AP at Timbuktu, Mali.

(Left) French armored vehicle guards the airport According to a UN humanitarian affairs news report, in the week following the May 13 declaration of a state of emergency and the accompanying attack by Nigerian fighter jets on suspected Boko Haram camps, tens of thousands of the residents of the state of Borno quickly fled to Niger or Cameroon. The same agency reports that the Nigerian government has imposed a “food blockade” on the whole north of the state where the insurgency is rooted.

A USAID report says that security measures in the north have raised costs for farmers, and these, com­ bined with flooding and a rise in the market price for more profitable export crops like cotton, have come together to create a regional shortage of staples.

The food blockade, like the military conflict in gener­ al, has seemingly affected civilians more dramatically than the relatively small force of Islamic insurgents. While Boko Haram has never grown larger than 4000 fighters, Human Rights Watch estimates that the con­ flict so far has resulted in the deaths of about 3200 Nigerians, not a small number of whom were killed in extrajudicial killings by the Nigerian army.

Like the Tuareg rebellion that touched off the crisis giving France the pretext for its invasion of Mali, the insurgency in northern Nigeria was born of the scarci­