Rich Galen

According to the Wall Street Journal, Apple (neé Apple Computer) "is the most valuable company" in the world. On the heels of its quarterly report last week, stock in Apple reached nearly $620 per share before settling back to end the week at $602.

The WSJ reported that Apple "posted a 94% profit jump to $11.6 billion and a 58.9% revenue increase to $39.2 billion."

This is not a stock picking column, and that is about everything I know about the stock market, but I wanted to tell you that so that what follows made more sense.

The New York Times published a long piece looking at how Apple cleverly, but legally, has built a tax strategy that saves it billions of dollars.

The Times reported that "the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent."

"By comparison, Wal-Mart last year paid worldwide cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate of 24 percent, which is about average for non-tech companies."

Apple fired off a response over the weekend stating it "pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes."

The Times said one of the strategies Apple (and other companies that have copied) is called - this is true - a "Double Irish With a Dutch Sandwich," which, according to writers Charles Duhigg and David Kocieniewski, "reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean."

Apple, in its response pointed to jobs (not Steve):

"By focusing on innovation, we've created entirely new products and industries, and more than 500,000 jobs for U.S. workers - from the people who create components for our products to the people who deliver them to our customers."

That is an important point. Apple has decided to begin paying a dividend which means it will be sending at least some of the money it is not paying in taxes to its shareholders (who will pay taxes on their dividends).

It also means Apple has more money to continue innovating and investing in new technologies and new products which means people like me can choose to buy one or more of them on the theory that they will make me more efficient, thus generating more revenue and paying more taxes.

Just about a year ago the NY Times ran a story about how GE deals with its taxes - very similar to the one they published last weekend about Apple. According to its quarterly report, GE's first quarter earnings for 2012 were $3.03 billion on revenues of $35.2 billion. GE didn't pay any federal corporate taxes last year and it would not surprise me if they paid about the same amount this year.

GE employs 287,000 people worldwide. I couldn't find a number for U.S. employment. But each of those people pays taxes and each of the shareholders, like Apple investors, pays taxes on their dividends and on any profits on sale of GE stock.

All raising taxes on corporations will accomplish would be to make more companies move more operations out of the U.S. Don't believe me?

Let's go back to the Times piece on Apple which begins with an explanation of its dateline: Reno, Nevada.

"With a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states."

California, you see, has a corporate tax rate of 8.84 percent. Nevada's corporate tax rate is … zero.

Let's assume you had the power to make major, successful corporations pay more taxes and you used that power.

How many jobs would GE or Apple paying higher taxes create? How many more students would go to college? How many more houses would be bought? How much would gasoline prices go down?

Nada, would be my guess.

If anything, jobs (and the income that goes with them) would move according to the rules of a Double Irish With a Dutch Sandwich.

None of which includes the United States.


Rich Galen

Rich Galen has been a press secretary to Dan Quayle and Newt Gingrich. Rich Galen currently works as a journalist and writes at Mullings.com.