Apple's latest successful product, the iPad, is revealed. Photo credit: {a href="http://www.flickr.com/photos/mattbuchanan/4310699312/"}@mattbuchanan{/a}
By Suzanne Merkelson
Explosions. Suicides. Twelve-hour shifts that start at a moment’s notice. Punishingly long sessions of ergonomically-incorrect factory work. The Internet is abuzz with chatter about how Apple’s Chinese-worker-dominated supply chain is both a product of and major force in the increasingly globalized world of making our gadgets. The New York Times is running a series of articles called the iEconomy (really worth a read) detailing how Apple has taken advantage of making its products abroad to become one of the most successful companies the United States has ever seen.
The Times reports that during a dinner with Steve Jobs, Apple’s late co-founder, President Obama asked why iPhones couldn’t be made in the United States. Jobs said that those manufacturing jobs would never come back to the country:
Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Apple mastered many aspects of global operations, taking advantage of China’s factory system (and laxly-regulated safety standards). And while Apple has profited from Chinese workers, it’s also launched a lobbying fight for favorable tax policies here in the United States.
According to the Center for Responsive Politics, Apple spent $2.3 million on lobbying last year and its lobbying expenditures have been steadily increasing over the past decade – in 2000, it only spent $360,000 on lobbying.
A big chunk of this is spent lobbying on tax policy, especially repatriation legislation, which would let firms bring profits held overseas back to the United States at a cheaper tax rate. One bill in particular, the Freedom to Invest Act of 2011, would save companies like Apple, Google, and Cisco $78.7 billion, paid for by the American people.
This so-called tax holiday would let multinationals with more than $1 billion held abroad bring that cash back to the United States at a 5.25 percent tax rate, instead of the typical 35 percent top corporate rate. The idea is that those companies would pump that money into the American economy, especially through hiring workers.
Apple currently keeps about two-thirds of its $97.6 billion in profits abroad.
Bloomberg reported last fall that Apple and other companies have employed an army of over 160 lobbyists to persuade Congress to pass the Freedom to Invest Act of 2011. And these weren’t any old lobbyists. Sixty of them once worked for a sitting member of the House or Senate. And one in particular, Jeffrey Forbes, was once chief of staff to Sen. Max Baucus (D-Mont.). Baucus is the chairman of the Senate Finance Committee, which has direct jurisdiction over tax law.
This sort of chummy influence-peddling on behalf of the Freedom to Invest Act isn’t supporting good policy. How do we know that? Because Congress already passed legislation exactly like it, back in 2004. And as a recent Senate report found, it didn’t go so well:
A report from the Senate’s Governmental Affair’s Permanent Subcommittee on Investigations found that a 2004 tax break that was given to corporations repatriating profits made in foreign countries “did not produce any of the promised benefits of new jobs or increased research expenditures to spur economic growth.” In fact, the report found that the corporations receiving the break cut 20,000 net jobs and cost the U.S. Treasury $3.3 billion in lost revenue over 10 years.
While the Freedom to Invest Act of 2011 lingers in committee in the House, President Obama remains focused on bringing overseas jobs back to the United States. He even made it a centerpiece of his State of the Union address this week:
We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let’s change it.
The way the system actually works right now means that such hopes have little chance of becoming law. Meanwhile, Apple continues to make more and more money (it’s now worth more than Greece!) and create more and more jobs – most of them just aren’t in the United States.
Full disclosure: The author currently owns two MacBooks, an iPhone, and two iPods.
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