The myth of Apple's low tax rate goes something like this. Let's say Apple makes $10B in profits. $5B are profits of Apple US, and $5B are profits of it's international subsidiaries. Apple pays about $450M in state income taxes on the $5B and about $1.6B in federal income taxes on the remainder (35% of the $5B minus state taxes).
It also pays income taxes in every country it has a subsidiary in on the foreign $5B (let's estimate income taxes average out to 20%, or $1B), and ships the remaining $4B to Ireland for storage until such time as US tax rates aren't so onerous.
Now someone looks at Apples financials and sees it paid "only" $1.6B in federal income taxes, even though it made $10B! OMG, they shout, Apple is only paying 16%, no one is paying 35%, our tax system is a LIE!
But in this example, Apple paid over $3B in total income taxes, or 30%. And if it repatriates the $4B, it will pay another $1.6B in state and federal income taxes for a total tax rate nearing 50%.
And this doesn't count all the other taxes Apple pays, from property taxes, sales taxes, VAT, import tariffs, etc, around the globe.
The "double dutch" strategy revolved around how much value you assigned to your IP and moving that IP to tax favorable countries. It's no longer legal or used. What costs and profits Apple assigns to subsidiaries is subject to judgement and audit. But mostly it's just a smokescreen to ignore how terrible our corporate income tax system is and it's rates are among the highest in the world.
Apple pays a ton of taxes. We'd be better off not taxing corporate income, so one can argue it pays too much.
https://www.sec.gov/Archives/edgar/data/320193/0001193125153...
Apple, which has some 6,000 workers in Ireland, says its Irish units paid the parent company a licensing fee to use the intellectual property in its products. The Irish companies didn't own the IP, so they don’t owe tax on it in Ireland, Apple says, but the units will face a U.S. tax bill when they repatriate the profits. Apple expects to pay about 26 percent of its earnings in tax for the most recent fiscal year and has set aside some $32 billion to cover taxes it says it will face should overseas income be returned to the U.S.
That day will never come.
I think it makes sense to look at outcomes. It's a fun intellectual exercise to look at the thousands of pages of tax guidance from many tax advisors on lots of different structures within a complex tax system, and analyse the tax rates, which include some high top-end marginal rates.
But at the end of the day, tax revenues as a percentage of GDP in the US are 26%. That's well below the EU (world's largest economy, biggest block of developed countries) of 35%, and well below the OECD (world's largest economies) of 34%.
It's kind of a myth that the US has some of the world's highest taxes. Perhaps it has some high tax rates, but after all the exemptions and deductions etc, the result is a relatively low tax burden, about 1/3rd lower than the average of other developed countries.
As a green card holder, I too am expected for the lifetime of the green card to pay US taxes, even if I were to move back to my home country and never set foot in the US. This is unheard of anywhere else.
If people are paying $1 for hamburgers today, and the owner gets a tax cut, will hamburgers be sold for less? Doubtful.
[1] Mirrlees et al, Tax by Design (2011), p 438, citing Hassett and Mathur (2006) and Arulampalam, Devereux, and Maffini (2007). You can get a PDF at http://www.ifs.org.uk/publications/5353.
All of that said, I strongly agree with your first point. People pay corporate taxes through: 1) higher prices for products and services, 2) less employment, 3) lower returns on investments (a lot of people have 401Ks). Corporate taxes just obscure a person's tax burden.
Apple hasn't paid a cent of tax on that $246 billion, for one.
"How Apple paid just 0.005% tax on its global profits"
http://money.cnn.com/2016/08/30/technology/apple-tax-ruling-...
> The "double dutch" strategy revolved around how much value you assigned to your IP and moving that IP to tax favorable countries. It's no longer legal or used.
It is still legal and used.
Fact: most of Apple's global income taxes, are domestic. Apple's paperwork shows immense domestic profit.
Of Apple's $15.64 billion in income taxes for fiscal 2016, $8.64 billion of that was domestic, with a further $4.9 billion domestic deferred. Foreign income taxes out of the $15.64b, was a mere $2.11 billion.
(A) "if".
(B) Not even necessarily; [0]
Apple paid a 25.4% tax rate on their income last year.
That's a relatively high effective tax rate compared to the effective tax rates in nearly all developed nations.
2) Most large corporations pay a substantial corporate tax rate. Exxon and Chevron for decades have routinely paid over 35%. Walmart pays a 30% rate. Facebook has averaged a 32% tax rate the last five years. Boeing has averaged a 25% rate the last five years. Intel routinely pays 20% or higher. Pfizer has averaged a 22% rate the last five years. 3M has averaged a 28.6% rate the last five years.
Would you like me to continue listing the tax rates of major US corporations? Because the overwhelming majority of them pay a high rate compared to the rest of the world.
So much for your theories.
The top 20.5% of returns (incomes over $100k), paid $1.27 trillion in federal income taxes out of the $1.35 trillion total for all returns. That group paid a total of $2.15 trillion in federal taxes. That's out of about $3.2 trillion in total federal tax receipts for that year. So the top 20% of tax payers, are providing around 67% of all federal taxes.
Now by comparison:
The $40k to $50k income bracket, has 14 million returns and $640 billion in income. On that income, they paid $4 billion in federal income taxes, or a 0.7% average federal income tax rate. That group paid a total combined (all federal taxes) of $75 billion, or a 11.7% average rate for all federal taxes paid by that group (eg including things like Social Security).
The $50k to $75k income bracket, has 25.5 million tax filers, with a combined income of $1.56 trillion. On that $1.56 trillion, they paid ... $59 billion in federal income taxes, or a 3.8% average federal income tax rate.
Need I say more?
I was questioning the value of analyzing it in terms of "income taxes".
The bottom 80% of tax returns have $5 trillion in income, and are paying $65 billion in federal income taxes.
Read that a few times over.
The $500k to $1 million income bracket, has 13% as much income as that bottom 80% group, but pays about ~120% more in income taxes. Personally, I think that's fine, I'm all for a progressive taxation system, especially in a country as rich as the US. However, throughout any thread on taxes, as with this one, you'll see a lot of posts claiming the rich pay little in the way of taxes, when in fact it's the exact opposite. It's not even up for debate, it's a fact easily proven. Should the rich pay even more? That's the debate.
The 80% you break out there is contributing a lot more than $65 billion to Social Security and Medicare.
I mean, those programs are explicitly designed to not be progressive, that's why there is a cap on income considered for social security (Medicare became progressive under the ACA, a little bit).