Apple’s Tax Saga Shows Why We Need to Get Rid of the Corporate Tax

Mark Kennedy explains:

Apple has traditionally been known as an apolitical company. Americans should be thankful that CEO Tim Cook is abandoning that approach to come to the U.S. Senate today to push for a change to one of the most ill-advised aspects of America’s gargantuan tax code: its global corporate tax structure.

It is true that Apple holds $100 billion offshore, but rather than breaking out the pitchforks, Americans should ask why one of the world’s savviest tech companies is behaving this way.

The United States, unlike nearly every other advanced economy, taxes foreign earnings brought back to its shores. That approach has forced American companies to fight global competitors with one hand behind their backs.

When Apple is competing with Samsung in the cell-phone market or Caterpillar is competing with Komatsu to determine who helps build the skyscrapers in tax-free Dubai, Apple’s California-based and Caterpillar’s Illinois-based workers are at a cost disadvantage because their employer must pay tax on its earnings in Dubai while Samsung and Komatsu do not.

To mitigate this disadvantage, companies have been allowed to defer paying this tax until they bring the money back to the United States. That creates an incentive to invest in international markets, not the United States. This is like America shooting itself in the foot. It’s extremely difficult for a one-armed, one-footed company to compete against multinational corporations whose governments don’t impose additional burdens on their international business operations.

In addition to being a drag on American businesses, it’s also one of the most misrepresented aspects of the tax code. President Barack Obama and others who oppose removing this provision demonize it by calling it a tax loophole that “encourages American companies to ship jobs overseas.” It’s a charge that political fact-checkers have 
disputed, but the line lives on. The true effect is that it simply makes it more difficult for American goods and services to compete in a global marketplace.

Read the whole thing. We very much need tax reform, and eliminating the corporate tax must be part and parcel of that reform.