Wednesday, May 2, 2012

That's almost 10K per job.

Apple, World's most valuable company, to get $6.4 Million in Travis County Tax Breaks. Mike Cronin, Texas Watchdog.
So important is keeping Apple Inc. – the world’s most valuable company as of January – in Austin that Travis County officials have cobbled together a deal that would give the computer behemoth up to $6.4 million in tax rebates, the Austin-American Statesman reports today. A total of $36 million in state- and local-government incentives could be going to Apple, writes the Statesman’s Farzad Mashhood.
My 10K calculation is based on the $36 Million number, which would be the total amount of government subsidies for around 3500 35K/Yr jobs. That's almost 1/3rd of the salary that would be directly subsidized.

I've no problem with iApple paying lower taxes. As an accountant specializing in regulatory tax in the Oil and Gas industry I'm all for paying the tax that you owe, but trying to pay as little as is legally possible. What I do have a problem with is corporate welfare in the form of tax credits. Yes, I even mean tax credits to the oil and gas industry for gas production when prices are at historic lows. If anything, these tax incentives need to go away when the demand is not there. Yes, I know, this runs counter to what you normally hear from our elected officials on the Left when oil prices get high but, if anything, this is when incentives should kick in, to spur much-needed additional production. When natural gas is hovering around the $2/MCF level it's probably accurate to say that production does not need to be spurred.

Apple is a different story. They are currently receiving a premium price for their products due to the cool factor of iApple. The company has done a good job reducing their tax burden up to this point, and I see no reason they should stop trying now. I do have a problem with the State and County offering iApple a de-facto give-away that is going to place additional tax stress on the rest of the Country. A better plan would be to work with State and local business leaders to broaden the tax base, and lower the rate. This would allow the rising tide to raise all ships, not just the one from iApple.

A second problem that I have with this is inside the article (and headline) itself. I'm a fan of Texas Watchdog, and I appreciate their reporting mainly because it's typically presented accurately and without bias. The headline and the lead paragraph contain much of the language you see from the Occupy crowd, language that I feel is unecessary and serves only to bias the reader against the tax-break plan through the use of class warfare. In reality, it doesn't much matter how big, or how valuable, iApple is today. If this same deal was to be offered to a small-cap start up it'd still be a flawed plan.

One of the main arguments against the Federal income tax code is that it's an inconsistent, loophole-filled mess of a document. Given that Texas pols love to talk about "doing things the Texas way" wouldn't a good solution be to stop making Texas tax inconsistent and loophole-filled? Why not try to broaden the base and make the tax rates as low as possible for all?

And can we rid ourselves of the silly Occupy class warfare? It's bad for business. (i.e. jobs, and benefits, and people's well-being and society in general)

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