While Web developers and techies jetted to San Francisco this weekend for Apple’s Worldwide Developer Conference, protesters gathered at Apple stores across the country to oppose their effort to reduce the corporate tax rate.
Apple, Google, Microsoft, and other high-profile companies started this year a lobbying campaign, which they call WIN America, seeking to reduce companies’ tax rate. They say this will enable them to bring money stashed in offshore tax havens, like Ireland and the Netherlands, back to the U.S., which they are unwilling to do now because of the 35 percent corporate tax rate. Corporations that store U.S. profits in foreign accounts don’t pay taxes on those profits. If WIN America gets its way, Apple would get a $4 billion tax cut.
The campaign backs a bill introduced last month called the Freedom to Invest Act, which would lower taxes on American companies involved in selling goods and services overseas. The campaign makes the argument that the tax breaks they would get from the bill would be reinvested in the U.S. to stimulate job growth, as well as repeating the well-worn argument that these cuts are necessary for technological innovation.
This is a nice promise, but the history of giving tax breaks to tech companies hasn't shown an increase in hiring. For example, the 2004 tax holiday, which was predicted to open up the job market, failed to increase employment or U.S. investment. Apple reduced its taxes by $255 million under that effort, and more than other 800 corporations, including Pfizer, Dell, and Ford, had their rates reduced to just 5.25 percent. This generated more than $362 billion in profits from these companies’ foreign operations. Instead of spurring the American economy with job growth, these companies actually laid off employees. The cuts also benefitted shareholders.
The Freedom to Invest Act already has bipartisan backing from Democrats desperate to create jobs and Republicans eager to create corporate tax breaks. But in terms of results, there's little indication that this would be any different than the break in 2004 was. Don't be surprised if this second round of tax loopholes results in even fewer U.S. investments to uplift the desperate job market. Instead, expect corporations like Apple to continue outsourcing cheap labor, which helps them pour extra resources into maintaining their top-of-the-line status and the brand for a cultural elite.
