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EDITORIAL: Grilled Apple

Some envious senators club a famous cash cow

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Even after taking new hits to its stock price, Apple Inc., remains the most valuable corporation in the world. That makes some senators green with envy. They assume such success could only have come at a cost to the government.

The Senate Homeland Security and Governmental Affairs permanent subcommittee on investigations on Tuesday summoned Apple CEO Tim Cook to appear before the panel to explain why the technology firm isn't paying more taxes.

Apple isn't exactly a scofflaw. It paid almost $6 billion to the Treasury last year, which, the firm says, accounts for "$1 in every $40 in corporate income tax the U.S. Treasury collected last year." The company's 50,000 U.S. employees also pay taxes, as do the hundreds of thousands who sell software on Apple's online "App Store."

Apple avoided billions more in taxes by shifting intellectual-property ownership and overseas revenues to three subsidiaries — registered in Ireland, but without a physical operation there — where the profits are not subject to the long arm of the Internal Revenue Service. Apple uses (critics say "exploits") a part of the tax code known as Subpart F, a regulation written by the Kennedy administration 15 years before Steve Jobs and Steve Wozniak built the first Apple computer kits in that famous household garage.

Senators on both sides of the aisle issued bold press releases before the hearing began to condemn the company. "Apple has sought the Holy Grail of tax avoidance, offshore corporations that it argues are not, for tax purposes, resident in any nation," thundered Sen. Carl Levin, Michigan Democrat. "Apple is exploiting an absurdity, one that we have not seen other companies use. The absurdity need not continue."

Sen. John McCain, Arizona Republican, chipped in with a scold. "By engaging in these elusive corporate strategies aimed at deferring and reducing tax payments, Apple's tax department has given new meaning to the company's old slogan, quote: 'Think different.'"

Sen. Rand Paul, Kentucky Republican, demurred. He suggested that Congress hold up a mirror to see just who created this taxation mess. "I am offended by a $4 trillion government bullying, berating and badgering one of America's greatest success stories," he tweeted during the hearing.

Mr. Cook and his company are eager to repatriate some of that overseas money to the United States, to create more jobs here, if Congress reorders the tax structure to make it fair. Suggestions: "Lower corporate income-tax rates, and implement a reasonable tax on foreign earnings that allows free movement of capital back to the U.S." U.S. corporations often pay a 35 percent tax rate, which is the highest in the developed world.

That would be a good start. Instead of encouraging U.S. companies to move assets to Ireland and other places, we should slash our uncompetitive tax rates to invite the world's great companies to come to our shores for refuge. With America's economy continuing to languish, the Congress, too, should "think different."

The Washington Times

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.

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