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Senate takes bite of Apple

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POSTED May 25, 2013 1:58 a.m.

I hate Apple. There was a time when I would look at my iPhone, and my heart would skip a beat. With its stylish white-and-gray cover, it felt like a luxury car I could hold in my hot little hand. It told me things I didn’t know. It told me how to get where I wanted to go. It was exciting. It purred cute little noises that let me know I was wanted, desirable, in demand.

Now I look at it and see hours spent in the fix-it station, dubbed the Genius Bar, the rapacious 30 percent commissions Apple charges to vendors, the demon device that has wooed so many secrets from me that it knows the name of my first dog. I see the nag that keeps bugging me about updates.

You start out thinking you own an iPhone until you realize it owns you.

I have told myself that, yes, I can leave Apple, I can be strong. I can look into the light of the seductive screen and not rush into it. But like Julia Roberts in “Sleeping with the Enemy,” I have to plan my escape. You cannot just leave Apple. There are terms.

So when Apple CEO Tim Cook was set to testify before the Senate Permanent Subcommittee on Investigations on Tuesday on the issue of tax avoidance, I didn’t see it as Sen. Rand Paul, R-Ky., did. Paul said the committee should apologize to Apple as he berated “a $4 trillion government bullying, berating and badgering one of America’s greatest success stories.”

I see the panel and the corporation as evenly matched. I figured Cook could hold his own when faced down by a gaggle of senators who try to squeeze the most out of federal campaign contribution laws as they lecture Apple about its duty to not play the tax code. And they do so in a way that you’d never guess that senators helped write that tax code.

“We pay all the taxes we owe, every single dollar,” quoth Cook. “We not only comply with the laws, we comply with the spirit of the laws.”

And: “We don’t stash our money on some Caribbean island.” He’s absolutely right. Apple doesn’t have to stash its money on the Cayman Islands because it stashes its intellectual property on a European island, Ireland.

Cook then put the ball in the Senate’s court: “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.” He even told the senators he assumed that under such a system, Apple would pay more.

To which a skeptical Sen. Claire McCaskill, D-Mo., responded, “Let’s assume that we simplify our tax code ... What keeps another country in one of these emerging markets from undercutting us once again like Ireland did back in ‘80?” Apple has a deal with Ireland that allows it to pay a tax rate of 2 percent or less.

At the end of the day, however, Apple has the more compelling argument — thanks to Washington. No U.S. senator could accuse Apple of breaking U.S. law. Apple could accuse America of having a corporate tax rate that is too high; at a combined federal/state rate of 39 percent, the Wall Street Journal pegs it as the highest in the developed world.

No other nation in the world, noted Sen. Rob Portman, R-Ohio, has such a high tax rate for repatriating money. In 2004, Sen. Barbara Boxer, D-Calif., sponsored a bill that lowered that rate temporarily. Economists might differ on how much growth her legislation prompted, but at least it brought $300 billion into the country and put $18 billion in the U.S. Treasury.

What is more, the issue before the committee concerned profits made abroad — if with the help of shell corporations enabled by U.S. tax law. When Sen. Carl Levin, D-Mich., complained that Apple exploited holes in the tax code, those were holes of Washington’s own making.

Cook boasted that Cupertino’s ZIP code, 95014, is the home of “the brightest, most creative people on the planet.” Levin should know that people who think they’re really smart usually think they’re too smart to pay retail taxes.

By the end of the exchange, it was clear that Congress and Apple have so much in common. Both are very expensive. Both are intrusive. Each insinuates itself into your life in ways you would not have imagined. They’re always making you approve things, as if you have choice. They think they’re smarter than they are, they think they’re smarter than you are, and they don’t really like competition.

I am terrified of the awesome power of the federal government, and I lose sleep over what Apple knows about me.

But I can leave Apple.

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