What Did Apple Do Wrong and Avoid Paying Taxes?

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Senator Rand Paul (R-KY) said it was offensive that Senator Carl Levin (D-MI) called in the leaders of a company that is trying to do right by its shareholders. He said:

Instead of Apple executives, we should have brought in here today a giant mirror, okay? So we could look at the reflection of Congress, because this problem is solely and completely created by the awful tax code. If you want to assign blame, the committee needs to look in this mirror and see who created the mess.

Why did members of Congress call Apple executives to testify on Capitol Hill yesterday. Apple makes money overseas, and big spending Senators want revenue to spend – that’s why. Right or wrong, the Senators, themselves, could care less about the moral issue of paying taxes. This is obviously a government spending concern.

The Senate subcommittee accused the company of “shifting” profits from the U.S. to other countries and avoiding paying taxes.

But Apple pays its U.S. taxes. Heritage tax expert Curtis Dubay said the earnings aren’t “shifted,” because “it’s not income that’s earned here in the U.S.” He said:

I can’t go down to the Apple store here in Washington, buy an iPad, and have Apple then ‘shift’ that income abroad.

The Senators were up in arms about Apple keeping income in Ireland. The issue was the company’s foreign income earned from all those iPhones and iPods that people around the world are buying.

The reason the Senate feigned indignation over an issue that had nothing to do with the U.S. is that some Members want Apple to pay more U.S. tax on all that foreign cash. They want Apple to bring all of that profit back into the U.S. and pay theU.S. corporate tax rate—the world’s highest—on it. But as long as we keep the U.S. rate the highest in the world, Apple and other multinational businesses are going to keep their foreign income abroad.