Apple's Tax Shelter Days May Be Numbered

On Tuesday, Apple CEO Timothy Cook testified before the Senate Permanent Investigations Subcommittee on his company’s aggressive tax avoidance strategy. Predictably, Republicans demanded that the U.S. cut its corporate tax rate and cease taxing the foreign income of multinational corporations. But even many liberals are sympathetic, believing, falsely, that this is an issue of jobs that have been exported abroad.

In fact, this problem has almost nothing to do with the location of production facilities, which is primarily a function of labor costs. The tax structure mainly affects the location of tax base; that is, where taxes are paid (or not paid) on sales and profits earned.

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