Thursday, June 6, 2013

Apple and a Flat U.S. Tax Code

The NJ Star-Ledger said in a recent editorial that Apple's tax avoidance highlights the need for tax reform. But they took a cheap shot at Apple, labeling the company a "money launderer." But, surprisingly, the editors gave the company a back-door compliment by saying that Apple and other big companies would "likely dominate any new tax debate that involves our money-hungry federal legislators." 

Such a description of Washington politicians as "money-hungry" is rare in a "liberal" newspaper, which usually directs such pot shots at producers, rather than looters. Apple, whose CEO Tim Cook called for tax reform before congress, would be doing the country a favor by fighting to keep as much money as possible in the hands of the companies and individuals that earned it. Unfortunately, most would likely do so by fighting to preserve their favored tax breaks, rather than by lowering rates. That's why the editors pessimistically referenced the 1986 tax reform which, as I have previously noted, left the door open to special tax structures and thus failed to solve the problem.

These peripheral issues aside, the editors are right about tax reform in one sense--we need it now. I left these comments:

Whenever you hear incantations to the "public welfare" and the "national interest," you know that someone is about to get screwed. Since the "public" and the "nation" is merely an association of individuals, these collectivist terms mean that some people's interests and welfare takes precedence over some others.

Sure enough, Apple is smeared as a money launderer for keeping more of the money it earned by providing products that billions of consumers value enough to voluntarily buy. This, despite the $6 billion in taxes it actually did pay.

Yes, the income tax code is a mess. However, I don't share the editors' pessimism about reform. Congress should create a new flat corporate tax code that eliminates all current tax preferences and statutorily bans all future preferences and drastically lowers the rate from the criminally confiscatory 35%. This would eliminate the special interest feeding frenzy. Similarly, the individual code should be scrapped and replaced with a low flat rate, but with a single, generous personal exemption (Steve Forbes has proposed a plan that would make roughly the first $46,000 of income for a family of 4 tax free).

Flat taxes are fair. And, considering the recent scandals involving the IRS, these reforms are the least we could do to protect our economic and political liberty. It would reign in the dictatorial power of that corrupt institution.

In the meanwhile, kudos to Apple for its highly moral and patriotic legal tax avoidance. It's always heartening to see producers keep as much of their earnings from the "our money-hungry federal legislators" as they legally can.

Related Reading:

Apples Patriotism Highlights Urgent Need to Abolish the IRS and Institute a Low-Rate Flat Tax

Time for a Flat Tax

Toward Less-Unfair Corporate Taxes

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