Don't Mess With Taxes

Just as the 99 Percent movement is springing back to life with protests against companies that finagle very low or no tax rates comes another potential target: Apple.

A New York Times special report looks at how the technology giant's careful selection of corporate subsidiary locations has saved it millions in federal and state taxes.

Take, for example, Apple's branch in Reno, Nev.

By opening a small office with just a handful of employees in this Silver State city, Apple has avoided millions of dollars in taxes in California and 20 other states, says the Times.

"Apple's headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company's profits, Apple sidesteps state income taxes on some of those gains.

California's corporate tax rate is 8.84 percent. Nevada's? Zero."

Apple employs a similar tactic beyond U.S. borders.

"As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world."

The outlying Apple offices all are, of course, legal.

Some, however, have raised the issue of civic responsibility, especially when governments at all levels are facing tough choices on which programs to eliminate because they are bringing in less tax revenue.

Apple, in a statement issued in response to the Times' piece, addressed that question:

"In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of U.S. income tax."

But the tax strategies of Apple and GE and other corporate giants, not to mention the relatively low tax rates paid by wealthy individuals such as Warren Buffett and Republican presidential candidate Mitt Romney, spotlight the increasingly asked question of exactly what should be done about legal loopholes for both for corporate and individual taxpayers?

What to you think? Should most or all loopholes be closed? For all taxpayers or only those who earn more than a certain amount, say $1 million.

What about business taxes? The U.S. corporate tax rate is now the highest in the world, but that's not a problem for many companies thanks to careful tax maneuvering. Should these options also be ended?

You also might find these items of interest:

• Marginal tax rates vs. effective tax rates,
  or what Mitt's and Newt's taxes tell us
• Tax avoidance series earns New York Times reporter
  a Pulitzer Prize