Recently there’s been a large debate between Americans and their corporations. Why should juggernaut multinationals pay lower tax rates than many of the middle-class workers who use their products? A good question, but not necessarily an easy one to answer.
Apple is a great example of a huge company who only has to fork over only a minimal percentage in tax on equally huge profits ($74 billion to be more precise) earned between 09 and 12. How are they able to get sneak by with such a small government hand in their pocket, you ask? They’re only BASED in America.
Robert J. Samuelson, prominent economist and columnist for the Washington Post, recently made an interesting point in the ongoing debate. He said, while large corporations dodging certain taxes is a hard concept to sell to the middle class, we need to be mindful of the impact such dodging has. It’s a wanting to have your cake and eating it too situation. As country we take a lot of pride in the success of American based companies, especially when they dominate a sector like Apple. But how can we expect that level of success if we’re also demanding the same companies pay out billions more to the U.S. Treasury?
Samuelson also notes that American corporations increasingly rely on foreign revenues for their success. They’re not just operating at home. These companies are also building manufacturing, distribution, and sales markets overseas and possibly experience greater growth in those markets than they do in the US. With such well-rooted integral markets in other countries, can companies like Apple truly be counted as American? Or is it just a global giant that just so happens to have its headquarters cozied up within our borders?
These questions are particularly pertinent given that multinational companies are quite often in the center of bidding wars between the countries they do business in. Often enticing the corporations with lower taxes and fewer regulations, countries will lure them in with promises of an even lower bottom line. Basically, the nations these “American” companies operate in and out of are based in profits, not patriotism. And the more the general public learns this, they’ll become even more discontent with these companies’ tax avoidance.
Finally, Samuelson observed that the US tax code plays a large part in driving a multinational’s behavior. Our nominal corporate tax rate of 35% is the highest among developed countries, but the US based multinationals take advantage of the fact that their foreign profits are completely untouched by the American government. They’ve accumulated almost $2 trillion in foreign earnings that have gone untaxed by the US. What’s Samuelson’s proposal? Compromise. Raise taxes on the foreign earnings of American corporations and use that revenue to slash the 35% corporate tax rate.