The case for reform of tax code

The following editorial ran in the San Jose Mercury News on Thursday:

Tuesday’s congressional grilling of Apple CEO Tim Cook offers irrefutable proof that the U.S. tax code is, as stated so eloquently by House Ways and Means Chairman Dave Camp, “a mess.”

For starters, let’s admit that U.S. corporations don’t pay the highest corporate tax rate in the world. They dodge the highest corporate tax rate in the world, largely by stashing profits offshore.

And the iPhone and iPad maker is the leader of the pack in terms of both profits and offshore maneuvering. All told, Apple had piled up more than $102 billion in overseas cash as of the end of March.

It’s a system that both discourages companies from reinvesting profits in the United States and shortchanges federal tax coffers. The upshot is that, while firms such as Apple hire herds of lawyers to find ways to stash their cash, individual taxpayers assume a greater portion of the tax burden.

A fair and equitable overhaul of the entire tax system is needed. We wish that were imminent, but lawmakers can’t even agree on whether revisions should be revenue neutral or should bring in additional dollars to reduce the deficit.

Policymakers who designed the tax code never dreamed so many firms would be conducting so much of their business in the global marketplace. The code was written for another time.

A proposed one-time repatriation “tax holiday” didn’t work particularly well in 2004. Congress allowed corporations to bring back an estimated $300 billion from offshore stashes with a one-time 5.25 percent corporate tax rate instead of the standard 35 percent. U.S. firms, including Silicon Valley’s, promised to use the cash to reinvest in their companies and create jobs. Instead, about 90 percent went to shareholders and executive bonuses.

Cook suggests a top corporate tax rate in the “mid-20s” and a repatriation rate in the “single digits.” That has great appeal to Silicon Valley firms, but it’s a nonstarter in Congress unless it’s accompanied by elimination of some loopholes and tax breaks. President Barack Obama is moving in that direction, offering up a reduction in the corporate tax rate to 28 percent and closing dozens of loopholes.

The opposing views expressed by members of Congress at Tuesday’s hearing make it clear that a grand bargain on tax reform is unlikely. Unless Cook’s Cupertino wizards can concoct an app for that, the president’s proposal may be the best incremental step in the offing.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Opinion

toon
Editorial cartoons for Thursday, March 28

A sketchy look at the news of the day.… Continue reading

Initiative promoter Tim Eyman takes a selfie photo before the start of a session of Thurston County Superior Court, Wednesday, Feb. 10, 2021, in Olympia, Wash. Eyman, who ran initiative campaigns across Washington for decades, will no longer be allowed to have any financial control over political committees, under a ruling from Superior Court Judge James Dixon Wednesday that blasted Eyman for using donor's contributions to line his own pocket. Eyman was also told to pay more than $2.5 million in penalties. (AP Photo/Ted S. Warren)
Editorial: Initiative fee increase protects process, taxpayers

Bumped up to $156 from $5, the increase may discourage attempts to game the initiative process.

Protecting forests and prevent another landslide like Oso

Thank you for the powerful and heartbreaking article about the Oso landslide… Continue reading

Boeing’s downfall started when engineers demoted

Boeing used to be run by engineers who made money to build… Continue reading

Learn swimming safety to protect kids at beach, pool

Don’t forget to dive into water safety before hitting the pool or… Continue reading

Comment: Why shootings have decreased but gun deaths haven’t

High-capacity magazines and ‘Glock switches’ that allow automatic fire have increased lethality.

Washington state senators and representatives along with Governor Inslee and FTA Administrator Nuria Fernandez break ground at the Swift Orange Line on Tuesday, April 19, 2022 in Lynnwood, Washington. (Olivia Vanni / The Herald)
Editorial: Community Transit making most of Link’s arrival

The Lynnwood light rail station will allow the transit agency to improve routes and frequency of buses.

An image of Everett Mayor Cassie Franklin is reflected in a storefront window during the State of the City Address on Thursday, March 21, 2024, at thee Everett Mall in Everett, Washington. (Ryan Berry / The Herald)
Editorial: State of city address makes case for Everett’s future

Mayor Franklin outlines challenges and responses as the city approaches significant decisions.

FILE - The massive mudslide that killed 43 people in the community of Oso, Wash., is viewed from the air on March 24, 2014. (AP Photo/Ted S. Warren, File)
Editorial: Mapping landslide risks honors those lost in Oso

Efforts continue in the state to map areas prone to landslides and prevent losses of life and property.

toon
Editorial cartoons for Wednesday, March 27

A sketchy look at the news of the day.… Continue reading

Burke: ‘Why not write about Biden, for once?’ Don’t mind if I do.

They asked; I’ll oblige. Let’s consider what the president has accomplished since the 2020 election.

Comment: Catherine missed chance to dispel shame of cancer

She wasn’t obligated to do so, but she might have used her diagnosis to educate a sympathetic public.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.