What everyone agreed on during Apple CEO Tim Cook’s appearance before the Senate Permanent Subcommittee on Investigations Tuesday was that it wasn’t actually about Apple’s tax dodging. It could have been dozens of other companies.
Apple did nothing illegal, and they’re the largest corporate taxpayer in America. The subcommittee’s report presents Apple as a “case study” in how multinational companies game the tax code, not accusing them of anything, per se. And though Senator Rand Paul took issue with “the spectacle of dragging in” Cook, representing one of “America’s success stories”—an oddly combative tone to take, which seems to have everything to do with his upcoming trip to Silicon Valley—Cook voluntarily appeared, and the subcommittee report even refers to Apple as a success story too.
Chairman Carl Levin (D-MI) reassured Paul that it wasn’t about Apple, but about “investigating a tax code that is not working for the American people, is not working for businesses in this country, which some business decide how many taxes they’re going to pay, how many they won’t, what they’re going to leave offshore in terms of profit, cooking up all kinds of arrangements to avoid paying taxes.”
So why did Cook choose to appear? The Guardian’s Heidi Moore suspects this is because the subtext of Cook’s appearance was to build support for a tax holiday for repatriating overseas profits.
The reason why a lot of these multinational companies are so multinational is America’s corporate tax rate is one of the highest in the world, at 35 percent, which means companies park approximately 1.7 trillion in profits offshore (often figuratively) and don’t pay taxes on it. Everyone wants to lower it, but it’s the low-hanging fruit of tax reform—Paul called it a “sweetener” in his statement—so Congress holds out for a chimerical comprehensive tax reform package.
Two proposals have been released recently to repatriate foreign earnings. Rep. John Delaney (D-MD) has proposed tax exemptions proportionate to the company investing in infrastructure bonds.
Slightly better is Senator Paul’s repatriation bill, titled the Emergency Transportation Safety Fund Act, after the much less consequential infrastructure fund it also creates. Unlike the 2004 holiday which was largely used to repurchase stock and is widely seen as a failure, Paul’s bill doesn’t expire. (Why people see it as a failure is important—it’s clear that the expiration date led to short-term decision-making, that savings from the tax holiday went mostly toward repurchasing stock is a feature, not a criticism.)
These are both short-term fixes that do nothing to solve the underlying problem of high corporate tax rates, and mostly function as another tax loophole for large corporations.
It was easy to portray the hearing as just another lesson in harassment via the tax code, just like Tea Party groups, and that’s basically what Paul did. But it’s politically daft to suggest the hearing was in any way adversarial. Cook met with President Obama this November and was a donor to his campaign in 2008. Given the cozy relationship, he probably didn’t have to be “dragged” very hard to appear before a committee controlled by Democrats.
Some sort of tax holiday would be a massive boon for Apple. Why should Congress apologize to Cook for letting him make his case for why one is necessary?