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Apple is right about taxation and Robert Reich is profoundly wrong

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The story was that Apple has been accused by a US senate committee of being “the biggest tax avoiders in the US.”  Apple point out in response that they are actually one of the biggest taxpayers in the US.  Much of their profit is made abroad, and they tend to leave it abroad rather than bring it into the US and incur the 35% corporation tax it then becomes liable to.  This is sensible, as is their decision that borrowing investment money in bonds is cheaper than bringing their own money back and incurring the tax.

The BBC Today programme featured an interview with someone they gave an easy ride to, with powder puff questions that allowed him to develop his theme, rather than their usual critical barrage designed to make someone justify their position.  This person was not only wrong on everything, but came with a mindset that felt like that of an alien observer.  I eventually learned this was Robert Reich who was Secretary of Labor under President Clinton from 1993-97, and author of “Aftershock: The Next Economy and America’s Future.”  It was a surreal experience.  He had no concept of the value that companies such as Apple and Amazon provide for people, or of what they add to our lives and to the economy.  He occupied a strange world in which businesses were bad and governments were good.  Businesses sought only their self-interest, whereas governments were benign and pursued the public good.  The problem for him was that businesses sought out tax-friendly jurisdictions, so that politicians could not spend their money.

It never seemed to occur to him that shareholders and employees might spend money more wisely and obtain better value than if governments took it instead to spend “on their behalf” (meaning on the priorities of politicians).  To him the value of a company seemed to be measured by how much money it gave to government, rather than by the goods and services it offered that people would willingly pay for.  His ‘remedy’ was rather frightening.  It was world tax governance by agreement so that all countries could set the same high tax rates from which there would be no escape.  As I have said before, tax competition is one of the few restraints on the rapacity of politicians, and on their ability to use ever more of our money to buy votes with.  Given a choice, I’d rather have companies like Apple offering me choices than have advisors like Robert Reich denying them to me.

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