How Apple Stops the IRS from Biting

From “Here Comes the Sun,” Joe Nocera, NYT:

“Among the many things Tim Cook apparently learned at the knee of Steve Jobs, during his long tenure as Apple’s No. 2, was how to create a ‘reality distortion field.’ Or so it would appear after watching Cook, now Apple’s chief executive, testify on Tuesday at a Senate hearing on the company’s tax avoidance schemes.

“Jobs was so persuasive that he could claim the sun was setting when it was actually rising, and everyone would nod in agreement. On Tuesday, despite the overwhelming evidence presented by the Senate Permanent Subcommittee on Investigations that Apple engaged in dubious tax avoidance gimmicks, Cook claimed that Apple never resorted to tax gimmickry. Even though the company appears to pay about ten percent of its pretax income in taxes — when the federal corporate tax rate is 35 percent — Cook said, ‘We pay all the taxes we owe — every single dollar.’ He added that Apple had never shifted any of its American profits to an offshore tax haven when, in fact, that is basically what it has done, routing tens of billions in pretax profits to a shell corporation in Ireland that exists solely to avoid taxes in the United States. He even said that the low taxes Apple pays overseas is on the profits of its overseas sales. Not to put too fine a point on it, but this was a flat-out lie.

“In other words, Cook spent Tuesday claiming that the sun was setting when it was actually rising, and, predictably, by the time the hearing had ended, most of the senators were agreeing with him.

“Yet as documented both by The Times and the Senate subcommittee, Apple is as much an innovator in tax avoidance as it is in technology. Take, for instance, a scheme known as The Double Irish, which it largely invented and which many American companies have since replicated. This strategy, which was the primary focus of Tuesday’s hearing, involves setting up a shell subsidiary in an offshore tax haven — a k a Ireland — and transferring most of Apple’s intellectual property rights to the dummy subsidiary. The subsidiary, in turn, charges ‘royalties’ that allows it to capture billions of dollars in what otherwise would be taxable profits in the United States. In Ireland, according to Apple, it pays an astonishing 2 percent in taxes….”

Emphasis added.

Pro-Life Murder

Like many all over the world, I am saddened and outraged by the death of Savita Halappanavar, who was killed in a Dublin hospital because of a refusal to treat her miscarriage, dooming her to die of blood poisoning.

In addition to anger at her death, I am angry at how it is being framed, as the denial of an abortion.  She arrived at the hospital with her fetus miscarrying.  There was no way to save this fetus, either inside her body or outside.  The fetus was doomed.  The issue was providing proper care for her miscarriage, so that she would not die as well.

If we start thinking and talking about basic, established medical care for miscarriages as “abortions,” simply by using this terminology, we are caving to the crazies.

In Ireland, they just unnecessarily murdered a young woman under the sick and twisted guise of being pro-life.  If it were up to Paul Ryan and others in the GOP who share his extremist views, the same thing would happen to American women.

Spain Is the Big Story

I know everyone’s focused on Greece, but today’s big story really is Spain.  For the first time, the interest rate on its ten-year bonds went over the magic number, 7%.  That’s the point at which Greece, Ireland, and Portugal had to get bailouts.  Spain’s economy is bigger than those three combined, so bailing out Spain would be a huge deal.

Italy’s interest rate went over 6% today.  Bailing out Italy, whose economy is bigger than Spain’s, would probably be impossible.  Italy is the third largest economy in Europe, after Germany and France.

A War Between Debtors and Creditors That We Are All Losing

From “Obama’s Fate Rests in Part on Europe,” Eduardo Porter, NYT:

“Battle lines have been drawn across the Continent between a political establishment that defends austerity at all costs in the name of preserving the euro, and increasingly radical oppositions.

“This kind of political polarization may be a standard feature of financial crises.  Economists have noted that such crises naturally widen the chasm between the interests of creditors — like banks, investors and even governments — and debtors, who are suddenly made insolvent by a crisis that takes away their jobs and destroys the value of their homes.

“Creditors push austerity as the best way for debtors to repay their debts.  They oppose efforts to write down or renegotiate loans, or to allow higher inflation to erode their value.  And creditors, better financed and organized, usually gain the upper hand.  Debtors, who are generally poorer, lose.

“This cleavage is evident in Europe, where German voters have staunchly opposed committing more German resources to aid indebted Southern European countries.  It is also evident on Capitol Hill, where Republicans have countered the administration’s stimulus plans with proposals to cut public spending to finance tax cuts that would favor the most affluent Americans.  The ensuing gridlock has paralyzed policy-making on both sides of the Atlantic.  And it could produce a lot of economic damage.

“When Lehman Brothers went bankrupt in 2008, sending the global financial system into a tailspin, its debts amounted to about $600 billion.  Government debt alone in Greece, Spain, Portugal and Ireland…adds up to about $1.9 trillion.”  Emphasis added.

It’s The GOP That Will Turn Us Into Greece

“You may ask what alternative countries like Greece and Ireland had, and the answer is that they had and have no good alternatives short of leaving the euro….

“But the main point is that America does have an alternative:  we have our own currency, and we can borrow long-term at historically low interest rates, so we don’t need to enter a downward spiral of austerity and economic contraction.

“So it is time to stop invoking Greece as a cautionary tale about the dangers of deficits; from an American point of view, Greece should instead be seen as a cautionary tale about the dangers of trying to reduce deficits too quickly, while the economy is still deeply depressed.

“The truth is that if you want to know who is really trying to turn America into Greece, it’s not those urging more stimulus for our still-depressed economy; it’s the people demanding that we emulate Greek-style austerity even though we don’t face Greek-style borrowing constraints, and thereby plunge ourselves into a Greek-style depression.”  Emphasis added.

“What Greece Means,” Paul Krugman, NYT