/// Apple and Taxes: What the New York Times Missed

April 30, 2012  |  All Things Digital


I have never seen the exterior of the offices of Braeburn Capital in Reno, Nevada, and so I have the New York Times to thank for the photograph of its offices that accompanied its Sunday front-page story on how Apple avoids paying certain taxes, among them California state corporate income taxes. As the person who six years ago this month revealed in BusinessWeek that Apple had incorporated in Nevada where the corporate tax rate is zero, I found the account by Charles Duhigg and David Kocieniewski of the many financial tricks that Apple employs to minimize its tax exposure to contain a lot of old news, but also some new fascinating details. Who couldn’t love a phrase like “ Double Irish with a Dutch Sandwich ” to describe arcane accounting and legal tricks? But the implication the story leaves you with — that Apple is somehow doing society a disservice by not paying its fair share of corporate taxes — is simply wrong on many levels. The most dubious of lines that the Times attempts to draw is between Apple and the budget crisis at De Anza College, a local community college where Apple co-founder Steve Wozniak was once a student. The college is facing a “ death spiral ” because of a decline in funding from the state. This funding, the reader is led to conclude, would be more plentiful if corporations like Apple were to step up and pay and not escape the tax bill by setting up an office in neighboring Nevada. What the Times fails to make clear is how community colleges are funded in California. The picture is much more complicated. California community colleges draw the majority of their funding from the state’s general fund — which is drawn directly from the state’s personal and corporate income taxes — and from local property taxes collected by counties. As of the 2009-2010 budget cycle, these two buckets made up about 88 percent of the system’s funding. State lottery funds, federal funds and student fees made up the remainder. Tax policy wonks — which I’m not — will remember that California was the birthplace of the property tax revolt movement in the 1970s. In 1978, California voters overwhelmingly approved a measure that limits the amount by which property taxes can increase each year. Since then, at least one estimate pegs the amount that the state’s taxpayers have avoided paying at north of half a trillion dollars as of 2009 . In February, the property tax shortfall facing the state community college system was $41 million . Conclusion: If there is to be blame for the shortage of taxpayer funding at De Anza College, a healthy portion of it should be laid at the door of California’s own voters and taxpayers, who in 1978 thought that property tax limitations were a good idea. I had a few other problems with the story. Take sales taxes. When you buy a Mac in New York, you pay a sales tax of 8.875 percent

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Apple and Taxes: What the New York Times Missed

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