What You Won’t Read in the News about the Apple Hearing

Miguel A. Martínez, Jr. photo

The cameras were rolling in the Dirksen Senate Office Building today as Michigan Senator Carl Levin gaveled in his hearing on Apple’s tax practices.  The news accounts will cover the fiery exchanges between senators (Senator Rand Paul of Kentucky, for instance, said that the hearing had one purpose, namely “to bully one of America's greatest success stories . . . If anyone should be on trial here, it should be Congress. I frankly think the committee should apologize to Apple.”)  But what you likely won’t read about in the press coverage is the growing consensus among United States senators that corporate tax reform is urgently needed.  Here are two examples, statements from Democratic and Republican senators at the hearing, on their concerns about the current U.S. tax code, and what we need to do to fix it.

  • Senator Claire McCaskill, D-Mo.:  Apple is utilizing the tax code we have given them.  If we have any hope of changing that tax code to promote free enterprise and capitalism and the success of the American entrepreneur, but at the same time to make sure we are receiving enough taxes to fix our roads and bridges, to help educate our kids, to remain a country that is seen as the bright and shining light on the hill because of our infrastructure and our educated workforce, we’ve got to make sure we have a tax structure that supports those goals.  I think we can do both.
      
  • Senator Rob Portman, R-Ohio:  We’ve got to reform this code.  If we don’t do that, our companies will continue to be uncompetitive.  Think about it.  We have an uncompetitive tax system now.  We’re competing with one hand tied behind our back . . . That’s why we’ve got to do tax reform.  And we have to do it now.  We’re now living with an international tax code that is a relic of the 1960s.  It wasn’t even reformed in 1986 when the rate was lowered to 34 percent, now 35 percent.  So we’re looking at several decades, now, of tax policy that really is antiquated and doesn’t keep up with the times. 

While the early fireworks may grab most of the headlines, most senators made strikingly similar points, asking questions about the problems inherent with the current code and what can be done to fix it. 

Apple and the other tech companies that call ITI home have come together around three core tax reform principles that would strengthen our nation’s economic foundation and create jobs here at home. 

  • A competitive, market-based system that levels the playing field between U.S. companies and their foreign competitors;
      
  • A lower corporate rate to attract investment in the U.S. and keep our nation competitive; and,
      
  • Permanent tax incentives to promote breakthrough research and development, which would further fuel the revitalization of the U.S. as the world’s innovation hub.

At the hearing, Apple CEO Tim Cook made his case for this kind of approach, noting that Apple is the largest corporate taxpayer in the country.

 

We recommend a dramatic simplification of the corporate tax code.  This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates, and implement a reasonable tax on foreign earnings that allows the free-flow of capital back to the United States.  We make this recommendation with our eyes wide open, fully recognizing that this would likely result in an increase in Apple’s U.S. taxes.  But we strongly believe that such comprehensive reform would be fair to all taxpayers, would keep America globally competitive, and would promote U.S. economic growth.

 

(You can listen to his full opening statement here.)

The tech sector will continue to work with Members of Congress in a bipartisan fashion to shape a modern tax code that responds to the demands of the 21st century.  We live in a worldwide marketplace; it’s time America had a world-class tax system that helps to spark new jobs and new industries across the country.

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