The other (much more brief) quibble I have is in regard to the piece Felix wrote on Tim Cook’s testimony before Congress today regarding Apple’s tax avoidance (really, exploitation of completely legal tax loopholes). I actually learned quite a bit from the piece Felix wrote, and it is well worth reading in its entirety. I have very little to contribute because I know nothing about corporate tax liability (and even after reading multiple Felix Salmon articles on Apple I still don’t understand how they pay as few taxes as they do), but I was struck by the following statement:
Still, it does seem that Apple’s total actual federal tax payments in both FY2010 and FY2011 were less than 10% of its reported net income…This is particularly shocking to the US public, which has to pay taxes on its global income. Every other country’s billionaires are extremely good at escaping into a state of tax-free statelessness; America’s aren’t, and we expect that if you’re rich American, you’re going to pay a substantial amount of US taxes.
The reason I was struck by this is because I fully expect very wealthy Americans to pay a very low effective tax rate, and I thought this was a somewhat commonly held viewpoint. Didn’t we hash this all out in the election? Romney paid an effective tax rate below 14% (without taking the maximum deduction possible) because his income is entirely investment based, so he is only taxed at the capital gains rate. Same with Warren Buffet. Same with the richest 400 Americans . Same with pretty much anyone that derives the majority of their income from investment (in other words, rich Americans). Granted, the simply rich (rather than the very richest) pay a higher effective tax rate than the top 400, but their effective tax rate is still, on average, much lower than the top tax rate, and solid majorities of the country believe that the rich pay too little in taxes.