Epstein on "The Apple Show Trial"

The Apple Show Trial
Richard A. Epstein
Defining Ideas
May 29, 2013

The recent hearings convened by Senator Carl Levin of Michigan turned the spotlight on the complex tax transactions of Apple, Inc. Apple, Levin insists, “is exploiting an absurdity, one that we have not seen other corporations use. And the absurdity need not continue." John McCain joined Levin in denouncing Apple, making the attack bipartisan. The most explicit charge, which Apple disputes, is that “it avoided U.S. taxes on $44 billion in offshore, taxable income between 2009 and 2012.” It should be noted that Apple paid about $6 billion in U.S. corporate tax on its overall income.

In orchestrating these hearings, Senator Levin used a scathing report of the Senate’s Permanent Subcommittee on Investigations, which was carefully embargoed until the day before the Senate’s May 21, 2013 hearing about Apple. The report charges that “Apple has used a variety of offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent.” The primary allegation is that “U.S. citizens and multinational corporations have exploited and, at times, abused or violated U.S. tax statutes, regulations and accounting rules to shift profits and valuable assets offshore to avoid U.S. taxes.”

The conscious decision to make Apple the focal point of this special investigation offers a bittersweet commentary on the fragile state of American political economy. There is little question that Apple has suffered mightily since the untimely death of Steve Jobs, a genuine American icon, in October 2011 at 56 years old. Jobs was of great value to Apple not only for his extraordinary entrepreneurial skills, but also for his towering reputation, which shielded Apple from political attack.

Faculty: 
Richard A. Epstein