Monday, May 20, 2013

King of Pain

Last year, we were raising red flags when Nevada State, Washoe County, and Reno City officials rushed to supply Apple with cover right on the heels of The New York Times catching the multinational tech giant red handed in tax evasion (and misusing Nevada's lax tax laws to do so). Not only was our state swooping in to (inappropriately) cover Apple executives' asses, but this exposed Nevada to some serious risk. But wait, what would that be?

Think about it. Apple has effectively exploited numerous loopholes to avoid paying corporate taxes to California and the federal government. What made Governor Brian Sandoval (R-Denial) and various Northern Nevada politicians think we would never face the same fate?

Well, to be fair, Apple finally seems to be moving on the new data storage center long promised to Washoe County. However, the also promised Downtown Reno business center still looks very MIA. And one must wonder just how worthwhile that $89 million worth of corporate welfare tax breaks is turning out to be.

Before Apple officially selected Northern Nevada to house its fourth data center project, both the city of Reno and Washoe County agreed to nondisclosure agreements with the company until the plans for the project, including $89 million in tax breaks, were announced at public meetings in June 2012. [...]

Generally, the area where Apple could build in downtown Reno is limited to the so-called Tessera District, which is a state-sanctioned (and City Council-approved) “tourism improvement district” located in one of the city’s most blighted neighborhoods. It encompasses the northeastern section of downtown east of Virginia Street and north of Fifth Street.

The Tessera District will allow Apple to keep 75 percent of the sales taxes it owes on equipment purchases for the data center, saving the company an estimated $72 million in sales taxes that otherwise would have been paid to the state, schools and local governments over the course of a decade.

Last fall, the Reno Planning Commission gave its approval to a 14,800-square-foot light industrial building on an empty parcel at 520 Evans Ave., located on the southern edge of the Tessera District. [...]

While the building permit was issued in October, United Construction still has not picked it up. In April, the contractor requested an extension through Oct. 10 on the permit.

There's been a glaring lack of transparency with this project. And it's been unclear when Apple will finally begin delivering on its promises to Reno and Nevada. And many are still scratching their heads and wondering why Nevada would reward Apple for its "legalized" tax evasion program. (Imagine if Apple was instead a family in need of food stamps.) Thanks to Apple's "legal" tax dodging, the federal government lost $9.2 billion in revenue. That's money that could have kept 70,000 kids in Head Start, rescinded the 10.7% cut in unemployment benefits now taking effect, fully funded disaster relief efforts, and undone even more Manufactured Crisis induced budget cuts now ravaging the country.

The scheme that Apple cooked up this week to finance a $55 billion stock buyback for its shareholders was orchestrated to avoid paying $9.2 billion in taxes, Bloomberg reported Friday. That $9.2 billion tax bill that Apple dodged would have been enough to make unnecessary all of the major budget cuts we’ve been writing about this week as part of our “Repeal the Sequester” campaign. [...]

Apple was able to do this because of techniques it uses to keep its U.S.-made profits offshore, and because of provision in the tax code that allows it to deduct interest it pays on money it borrows. That’s a double whammy: It does not pay the taxes it should on the money it earns from all of those i-whatevers we buy (including the Macbook Pro I am using to type this post) and it gets money from the government when it borrows money from a big bank rather than using the money from its overseas stockpile.

Apple makes great products, but the obscenity of its use of the tax code to avoid paying its fair share for the functions of government that make its success possible is only exceeded by the tax code itself and the nexus of ideology and corporate greed that created it.

This latest news from Apple underscores the need to end corporate tax evasion – not with lobbyist-written schemes like the “territorial tax” that would essentially engrave offshore tax dodging into the tax code but with fair, more progressive tax structures that require corporations to pay taxes on their earnings just as working people must by April 15 every year.

Nevada is now feeling the pain of the latest Manufactured Crisis, along with the rest of America. So why again are we rewarding a company that's refusing to pay its fair share? Why are we rewarding a company that's denying the federal government revenue that could have been used to help people and maintain our public infrastructure?

And in case that's not bad enough, Apple now wants a "tax holiday"! Supposedly, it's to encourage "repatriation" of corporate investment in America. Over the weekend, The Guardian's Heidi Moore reminded us of what happened last time we tried this.

Companies had a tax holiday once before, in 2004, when a set of major corporations were allowed to bring back their overseas profits at a tax rate of only 5.25%. You might imagine that it resulted in an enormous economic boost, but here's what happened instead, in the words of Treasury official Michael Mundaca:

"There is no evidence that it increased US investment or jobs, and it cost taxpayers billions … the nonpartisan Congressional Research Service reports that most of the largest beneficiaries of the holiday actually cut jobs in 2005-06 – despite overall economy-wide job growth in those years – and many used the repatriated funds simply to repurchase stock or pay dividends."

So we tried a tax holiday before, it accomplished nothing except lining some corporate coffers, and it hurt the economy. It actually gave a kind of moral permission for companies to cut jobs, even when the economy was booming.

Perhaps this time will be different... But only if there are strings attached. Rep. John Delaney (D-Maryland) has proposed a corporate tax break in exchange for investment in infrastructure bonds. At least that isn't a total giveaway.

On the other hand, Carson City has been giving away the entire store and doling out tons of corporate welfare. And what have we seen in return? Oh, we have amazingly busted public infrastructure and an incredibly tattered social safety net. Multinational corporations avoid paying us taxes, and we get screwed.

As of late, we've been seeing discussions on "The T Word" in Carson City devolve into pure nonsense. And with the clock beginning to run out up there, time is running incredibly short. And with time running incredibly short, state legislators don't seem to be agreeing on any kind of major "T Word" reform.

Alas, it's incredibly difficult for Governor Sandoval and Nevada legislators to agree on any kind of "T Word" change that would make the wealthiest and most powerful corporate interests pay something closer to their fair share. And in turn, it's incredibly difficult for them to provide what our state truly needs. This is why we're stuck with busted schools and broken hospitals and plenty of pain for the 99%.

This is the problem. As long as we fail to change the status quo, Nevada will remain the King of Pain. And the same is true in Washington.

Think about it. Why are our people suffering? And why are companies like Apple rewarded for tax evasion? Is this pain truly necessary?

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