Apple and the Fruits of Tax Cuts

Republican candidates have pretty much stopped talking about their party’s only major legislative achievement under Donald Trump, the 2017 tax cut. Ads touting the tax law have largely vanished from the airwaves. But the Koch brothers — big boosters of the cut and among its biggest beneficiaries — haven’t given up.

Their latest move: spending $20 million to mobilize an army of salespeople who are going door to door trying to disabuse voters of the perception that the tax cut was a big giveaway to the wealthy, offering little to ordinary working families.

But they have a problem: Public perceptions about who benefits from the tax cut, and who doesn’t, are accurate, a point Apple just nicely demonstrated with its announcement of a huge stock buyback.

To be fair, the notion that a big tax cut for corporations — which was the main element of last year’s law — might eventually redound to the benefit of workers isn’t crazy. But the two key words here are “might” and “eventually.”

The story tax-cut boosters tell runs as follows: America is part of a global capital market in which capital flows wherever it yields the highest after-tax rate of return. By cutting taxes on corporations, Trump and his allies have given corporations an incentive to invest here. Investment will expand capacity, driving up the demand for workers and thus lead to higher wages.

And for a little while Apple seemed to be following the script: Back in January the company announced that it would be bringing most of the $252 billion in cash it was holding abroad back to America.

But what does “bringing money to America” mean? Apple didn’t have a huge, Scrooge McDuck-style pile of gold sitting in Ireland, which it loaded onto a homeward-bound ship. It has digital claims — a bunch of zeros and ones on some server somewhere — which in effect used to bear a label saying “this money is in Ireland.” Now it has changed the label to say “this money is in America.” What difference does this make?

Well, it alters the company’s tax liabilities to the U.S. and Irish governments, which was the point of the change. But otherwise it makes no difference at all.

What would make a difference would be if Apple chose to spend more on actual stuff: hiring more workers, building new structures, installing more equipment. But it isn’t doing any of these things. Instead, this week it announced that it’s buying back $100 billion of its own stock, which is good for stockholders but does nothing for workers. Lots of other companies are doing the same thing.

– New York Times

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