Bill Whittle over at Pajamas Media had a great piece in his Afterburner segment this week. Calling statistician William M. Briggs’ “The love of theory is the root of all evil” “The Best Sentence Ever”, Whittle discusses how the love of the theory of Communism caused the deaths of well over 100,000 million people during the 20th century. The crux of his piece is that liberals, living in their world of theory and planning have no clue how the world actually works.
Just such liberal fatuousness was on display in Saturday’s New York Times. The paper ran a 3,800 word piece bemoaning the fact that Apple Computer, the most valuable company in the world was short changing California (and the United States) on taxes. Somehow, the company, which employs over 20,000 people in the state is not doing its fair share. According to the Times, Apple, which is headquartered in Cupertino, California, could earn up to $46 billion this year worldwide and California is getting bilked. The Times states that Apple utilizes offices as close as Nevada and as far away as Luxemburg to shield itself from California and US taxes.
While the Times explicitly states that Apple is not responsible for California’s budget problems, in a piece Mark Antony would be proud of, it helpfully points out: Apple serves as a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. And if the subtlety makes the point too opaque, the Gray Lady makes it clear: The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed…
The message is clear. The fact that California is an economic basket case is Apple’s fault, (along with other high tech companies). It couldn’t have anything to do with the fact that California’s budget grew by 40% from 2000 to 2010 while the population grew by a mere 13%. It couldn’t have anything to do with the fact that the government has been chasing companies and jobs out of the state for decades with their regulatory straightjacket. It couldn’t have anything to do with the fact that state employees, most supported by unions, earn an average salary of $68,000 (vs. a state average salary of $54,000) and total compensation in excess of $105,000. No, the problem is that Apple is legally taking advantage of the tax code to reduce the amount of money it pours down the bottomless pit known as Sacramento. That should be obvious to anyone.
The Times suggests that if Apple were not using these “tactics” its federal taxes would have been $2.4 billion higher in 2011. Assuming that Apple does half of its US work in California, that figure suggests that Apple would have paid approximately $300 million dollars more in California taxes than it actually did. Obviously that would have fixed the state’s $25 billion shortfall.
To put this in perspective it might be helpful to examine what Apple actually does in California. It employs over 20,000 people in the Golden State, with an average salary of $70,000. Their $1.5 billion in wages contribute $132 million directly to the state’s coffers via income taxes. According to Apple, for every one employee in the United States, it creates or supports 11 jobs outside the company via suppliers, partners, service providers etc. Taking Apple’s metric and applying it to those 20,000 employees would give you an additional 220,000 California jobs. Given that the average salary in California is $54,000, those 220,000 employees doing the jobs created or supported by Apple generate an additional $12 billion in salary which would generate another $1.05 billion in state income taxes. Then of course all of those employees likely spent most of that $13 billion wage income in California, which in turn generated much income and more taxes.
Not to be forgotten are the shareholders such as California’s many shareholders, pensioners and mutual fund holders who own shares of Apple stock. The country’s largest pension fund, CalPERS, owns 2.8 Apple shares and provides benefits to more than 1.6 million California employees and retirees. Because the company has done such a good job of husbanding its resources, its stock has quadrupled in three years, generating almost half a trillion dollars in wealth. No doubt many of those investors and pensioners have enjoyed the capital gains Apple has provided, which are of course taxed as ordinary income at 9.3%. Not only did those capital gains generate tens of millions of dollars to state coffers, they no doubt generated revenue at the local coffee shops, grocery stores and movie theaters as well.
The Times provides a perfect example of Whittle’s point. California is a fiscal basket case and the solution is fairly straightforward: Change the tax code to force companies like Apple to pony up hundreds of millions or billions more in taxes. As liberals often do, they sit in their little cubbyholes and play with their calculators. “We can raise taxes or plug that loophole and the money will just pour in”. They rarely look at how the world really works. Certainly California and Congressional legislators could revise the tax code to make it more difficult for companies like Apple to reduce their tax burden. But would it generate a tax windfall? A balanced California budget? Not likely. What’s more likely is that Apple would start looking to reduce its California footprint and begin to open offices and actually employ people outside the state and the country, imperiling the real impact the company has on the state.
Despite decades of crystal clear proof that they simply don’t work, liberals maintain their devotion to the theories of high taxes, centralization and state control like members of the People’s Temple following every Jim Jones dictum as if it were gospel, regardless of its rather negative consequences. The only problem is, they not only want to drink the Kool-aid themselves, they want to force us to drink it as well. As a good libertarian I’m happy to let anyone put anything in their bodies they choose, but I’d just rather not drink the cyanide myself.
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Will spendthrifts learn to control their actions by increasing their allowance? My experience says no.
California needs to replace its leaders. As delusive as they are, only a credit collapse will persuade them that they must live within the means of their taxpayers. Big earners are bailing out of the state; 600 thousand since 2001.
What the author wants is to start expelling successful companies like Apple. The power to tax is the power to destroy. Companies targeted for taxation will pick up and go. Their employees will likely move with them, rather than risk being fired.
@Louis Wheeler: You are spot on Louis!! If history has taught us anything about Democrats in California and how reality and them do not ever come together, it is with respect to spending and taxes. There is no amount of tax that Californians could ever pay that would satisfy the needs that they can dream up. Tax a dollar spend two is the way. It is time for California to live within its lucrative means!!
The humorous way to look at this is that California is high maintenance. Sure, she is beautiful, but she is driving you crazy on the way to the poorhouse. Given her free spending, dissolute lifestyle, she’ll lose her looks and figure, soon enough.
A less flashy state, with good, home spun values will grab your interest. She wants to plan for the future. She won’t ever appear on Cosmo, but she feels so good to cosy up to.
I remember the exodus from California began in the ’70s, many small to medium sized businesses finding peace and tranquility just across the border in Nevada. I never realized the migration was that huge. It’s not a stretch to imagine the cause when you know that Boxer, Pelosi, and Feinstein were hatched there.
This is an amusing story in a way. It seems that soft socialism requires — REQUIRES — capitalists to work hard in order to provide lazy socialism with its income. When that was not enough, soft socialism decided to increase its expendable revenue by borrowing more from — suprise — capitalists. Now that the talk of “haircuts” for investors in government is more than chit-chat, investors — capitalists — have lost money in Greece this year as in Ecuador in 2006, and it is assured that capitalists will learn the lesson. This predicts that soft socialists will try to lure capitalists into further funding them, and that is the joke. Socialism operates more on “other people’s money” than any mortgage or business investment. Why? Because mortgages and business investments pay back their loans, while soft socialism merely rolls them over until collapse, and then plans to walk away. Businesses walk too, because they are capital enterprises. This “walking” takes place over time, but it takes place. When it does the soft socialist cries “foul,” but the joke is even more amusing. The soft socialist wants to put pensions into investments and have capitalism pay them a profit. The answer is simple. Soft socialism is not a profit center, and does not even break even. It is a loss center, and will always walk into economic collapse.
On a similar note, Spain’s unemployment has reached 25 percent. When the “great depression” in the US was ongoing, it showed unemployment at 25 percent. Why is the modern media not saying the truth? There are nations and cities already in depression? Courtesy of government programs, inner cities in the US are in collapse and in a true depression. Soft socialism has bred this, and what does capital do? It walks away. What do the productive do? They walk away. This is as true with the New York Times, because checking their readership and stock price over a few month window shows them up and down, but checking them over a fifteen year window shows them in a huge collapse in both clientele and capital position. Let us not believe a media which, like Greece, Spain and Detroit, is in collapse. Best wishes.
@ Vince, Well done.
It remains puzzling to me that we ask companies to pay taxes, when it is absolutely necessary for all companies to ‘fund’ those taxes through appropriately adjusted ‘pricing’. Customers in fact pay for those corporate taxes because they are included in the prices of the goods and services they purchase. It all sits on the back of the taxpayer.
Taxpayers just don’t quite see it as being so obvious and it is part of the smoke and mirrors used by the tax-and-spend bureaucrats along with help from idiotic politicians, who build their empires. If corporations were allowed to repatriate the trillions of dollars sitting offshore avoiding taxes, those funds would seriously boost the national economy.
I’ve yet to hear a valid argument for taxing companies the way we do. Big, bad companies provide good fodder for Obama as he spews his class warfare mantra on his believers, but it makes little common sense to attack businesses, big or small. They are the financial lifeblood of our system, and their potential existence gives new entrepreneurs encouragement to create. They are critical to human nature’s fruitful progress.
James, when does a symbiote turn into a parasite? When does an abusive relationship turn deadly? It is evident that California’s government is despotic and self destructive. Tyrants always have enablers; minions ready to do their dirty work; intellectuals justifying their exalted status. The New York Times has long encouraged the left’s lust for power.
We are in end times. The Taxpayers are beginning to flee. Will California, like the Soviet Union, put up fences to keep the exploited in? California’s credit will collapse before that occurs.
@Louis Wheeler: #7,
For many years I lived in Northern CA and launched a number of companies – not a single one was based in CA. I liked the climate so that’s where I lived, but every corporate head and every entrepreneur I knew laboured against an oppressive bureaucratic and political climate – and that’s before they complained of the tax burdens.
Your comment on CA’s credit collapsing – it may not much matter. Why? . . . . . In the mid-term we will witness a major market correction which will be so severe as to impact the broader economy. First Hint . . . . check the major ‘false bottoms’ which have been created. Second Hint . . . . the shorts have been driven from the markets, (remember that the ‘shorts’ were very critical in the last crash and were the only thing that stood in the way of a complete destruction). So, . . . await a newly euphoric but absurd mania building a market surge. And then . . . . 🙁
When you then add the insane levels of debt, personal and government, to this toxic mix now embroiling the global economy, you have yourself a ripe mess. Then we will all start over clean and rebuild. AND we will depend on the entrepreneur.
No tea-leaf reading, this is just common sense. The road signs are too obvious. Meanwhile, go to cash where possible, save every nickel you can, and hold on tight – those nickels add-up.
It’s hard to know how things will unfold. Normally, I would expect the states to run into a brick wall in the credit markets. They would then place demands on the Federal Government to bail them out. Are states “Too big to fail?” Is California’s Pension Fund too big to fail?
We are currently in a Stagflation: a stagnant economy with increasing unemployment and price inflation. The only growth in the country is in the Red States. The government lies about the statistics. A source I use says the real price increases are about 10% annually and getting worse.
http://www.shadowstats.com/alternate_data
The point is that stagflation is temporary. The economy is trying to correct for excess debt; which can only be cured by a deflation of the money supply. The FED tries to kick the can down the road by increasing the money supply. Trying to avoid a deflation is what grows the debt. Diminishing rates of returns have set in; it requires ever more stimulation to get a response. Think of it as a drug which you get used to, so you must inject more. But, this gets you closer to an overdose.
I think we have run out of road. The FED will try to save the day and fail. It is unclear to me if we will have a deflation or a hyper inflation. I’m hoping for the former, but I don’t bet that way.
Meanwhile, expect a predatory Calif. Bureaucracy to save itself by savaging everyone. I’ve heard stories of the bank accounts of ex residents being garnisheed for failing to file for state income tax long after they left the state. The only way to clear that and get your money back is to file an amended return (and prepay a late filing fee.)
they have allowed unproductive people to enter more than should have been allowed, it create an unbalance on the scale of finances, they try to feed those people by taking it from the one who create jobs,
it is crazy ,and it make the local being pushed out by the newcomers, it make the local citizens who work loosing their jobs because the newcomer work for less, it’s crazy again, it create hate toward the newcomers,
and hate for those on welfare as freeloders on the back of rooted citizens watching the influx of also criminals and drug dealers always following the newcomer, the money is getting unsafe inthe hands of the wealthy who create jobs, they are feeling the greed and envy and it show they are endangered,
so they back up and leave , they know their money will be welcome somewhere else, they realize that
they have become unhappy in paradize.
the times are changin
All I can say is that insanity is catching.
California is unique in that it’s elites can live their entire lives inside a Liberal bubble. They discount anyone who is politically incorrect. Since the Elites believe that government can achieve anything, they don’t care about costs. Partly, this is because they have exempted themselves from the tax burdens. One tenant of liberal ideology is that they do not believe in absolute truth. If there is no truth then there is no price to be paid for disobeying reality. But, this is self deluded.
Some people, inside the government, know that the ship of state is sinking. They merely want for it to sink on someone else’s watch. Hence, they will get while the getting is good and prevent any diminution of their privileges. But, it is their exorbitant privileges which are dragging the state down. They will try to prevent anyone from getting into the lifeboats. But, they are, at most, a year ahead of the rest of the country.
@Louis Wheeler: #11,
“California is unique in that it’s elites can live their entire lives inside a Liberal bubble.”
A perfect example of the phenomenon you refer to here over the past 30 years has been Palo Alto vs. East Palo Alto.
The ‘bubble’ crowd did not want to “see” the slum on the other side of the highway from their mansions – let someone else deal with it, donate a few bucks here and there to causes that will look good in the local rags, pretend you care, but in fact the wealthiest privately say “who gives a crap? Just don’t let them come near me.” And these morons vote for Dems. and Obama, and they actually don’t know why, but it provides salve for their egos.
Notice how the left always wants to take more and more from the middle class and “wealthy”?
It’s because they need desperately to prove themselves right and all their beliefs about themselves as right too.
It’s why they insist on trying the exact same thing over, and over, and over, on a bigger and bigger scale.
It’s like a gambling addict, except they drag us down with them.
Reality? That haven’t a clue what it is and if you try to introduce it to them, be prepared for a very vicious and personal attack upon your person at least verbally if not physically. It’s akin to a nervous breakdown because their entire worldview, and more importantly their image of themselves is based on the fantasy they have constructed. They are not interested in a real conversation, just shutting you up.
I wish perceiving the truth wasn’t so painful. But, nothing real is gained without blood, sweat and tears. California has the reputation of being La-La Land. The Elites strove to make it into one. Everything was for show, no substance.
Behind the beauty and comfort renown in California was a tissue of lies. It was the belief that life can be attained without effort, thought or pain. The Elites would be unashamed to call themselves an aristocracy or a gentry. Anyone who would call themselves a working man would be shunned.
We, the workers or entrepreneurs, are not the Elites nemesis, because we have fled. A pack of jackals, California’s teachers and bureaucrats, are prepared to maul the Elites to save themselves. That is not possible, so they will turn on each other. It will not be a pretty sight. California is on the verge of being a failed state — a Somalia. I suspect that many of the remaining Californians will go to their graves screaming about how THEY were cheated.
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