How Apple Sidesteps Billions in Taxes

Taxes are purely a construct of law though. The only reason it's immoral not to pay taxes is because it's immoral to break the law, at least if the law is just. But we're not talking about people breaking the law, we're talking about people obeying the law.

Think of it this way: if you can get an effective tax rate of x% by doing this and y% by doing that, and x other laws that allow you to effectively lower your effective tax rate to the same amount?

If they repealed all the Bush era tax cuts, the deficit would still be growing at a higher rate than before. Obama has run up the deficit at a faster pace (approaching double) than Bush and those tax cuts aren't even the major part of it.

The biggest problem is the lack of a passed federal budget in over a 1,000 days. This is causing a lot of budget increasing in a time when we cannot afford it. What the media and politicians (from both sides) chose to concentrate on is emotion grabbing (good for votes and ratings), systemic issues with how the government is being run are boring and not emphasized.

Low taxes don't kill budgets (check right after WWII when they had to drop), it is runaway spending. Income from taxes of all sorts has averaged 19% GDP, spending above that is the problem.

The implied but never fully-articulated point of this article is that high-tax domiciles resent it when rational actors having a choice in the matter will routinely structure their business affairs to incur tax to the maximum extent possible in low-tax as opposed to high-tax domiciles.

The issue becomes almost formulaic. Given (1) rational actors, (2) freedom to choose and to structure business affairs using a multiplicity of entities for different purposes, (3) resources with which to hire and pay for the talent needed to sort out the tax issues and their complexities, (4) a business goal of maximizing after-tax profits, (5) a multiplicity of domiciles from which to choose, and (6) a ready means by which to direct resources from one domicile to another (as with digital assets), it inevitably follows that every sophisticated company meeting these criteria will avail itself of the tax avoidance/minimization strategies. As the article notes, it is perfectly legal and every big company does it (see, e.g., this similar write-up from a couple of years ago on Google's comparable tax strategies: http://news.ycombinator.com/item?id=1815195).

Nothing, of course, stops a given company from voluntarily subjecting itself to higher tax rates by declining to follow this formula but why would it? Big companies will routinely want to avoid high taxes if they can. So too do small businesses. People may have social views that higher taxes are desirable but, as individual economic actors, they will seek to avoid them. This may be right or wrong but it is reality.

This means that high-tax domiciles will have no choice but to continue to remain frustrated that they cannot have unchecked means of taxing their citizens. As long as people have freedom, governments have to strike a balance that people can live with. And that is not a bad thing.

California is "struggling" because of atrociously bad management. It's not like the state lacks in physical or human capital. I mean, Jeebus, the Golden State is home to the capitals of two of the world's greatest industries (entertainment and technology). It takes world-class incompetence to squander such riches.

Don't blame the state government, though. The problems are structural, not personal. If we replaced the current slate of corrupt, incompetent politicians, new ones would take their place. The internal incentives of the system would see to that. In modern politics, corruption is a winning strategy.

On the other hand, if the state government of California were run more like, say, Apple, they wouldn't be in such a bind. But that would mean running California more like a for-profit business. This suggests a possibility: the problem may not be that capitalism has gone too far—it could be that it simply hasn't gone far enough.

Unless I'm grossly mistaken, there's no tax benefit to incorporating in Delaware. Their franchise tax is actually pretty high. The reason to incorporate there has to do with reducing legal costs, AFAIK, which is a separate matter.