Apple's Attack on the Knowledge Economy

 

I have a post on my other blog under the above title, which takes off from Charles Duhigg''s recent piece on Apple Computer's global effort at maximum tax avoidance. Mine argues that Apple isn't actually supporting an innovation economy anymore, but something closer to a Bizarro innovation economy that undermines its own basic preconditions, as seen at left.

I found the article on Apple while looking for voting results on the UC Academic Senate memorial calling on the UC regents to support ballot measures increasing higher ed public funding. So far, the recorded votes are:  Berkeley: 370-37 in favor; Irvine 476-24; and Santa Barbara 431-19.  Turnout seems to have been good, recorded as 31% at Irvine and 40% at UCSB.

But of course the Regents can only receive state general fund money from a state government that is willing to raise it. Jerry Brown is presiding as an austerity governor, continuing the cuts that Schwarzenegger began.  Austerity is a policy of choice, and is not new.  The California Budget Project's recent chartbook shows that taxes as share of personal income have fallen more in California than in all but four other states (p 13) (they are 2.4% lower than in 1977), and that corporate incomes have been decoupled from corporate tax liability: from 2000-2010, California corporate income rose 204% while tax liability rose 37% (62).  An earlier CBP report showed that the share of corporate income paid in taxes is half of what it was in 1981 (California's Tax System,p 7).


The catch is other states have cut their corporate tax rates even faster, when they had them in the first place, so California's rate remains the 4th highest (p 36), so California businesses can exert constant pressure on Sacramento for further reductions, and receipts are about $13 billion per year below what they would have been without various tax rebates, many for business (p 12).  "There's no money for higher education" means that there is no willingness to raise tax revenues in the current political climate.

Part of the value of the New York Times article on Apple's tax avoidance strategies lies in showing the corporate agency supporting the current situation.  The piece brings this home with a story about the relationship between Apple and its neighboring community college, DeAnza College.

A mile and a half from Apple’s Cupertino headquarters is De Anza College, a community college that Steve Wozniak, one of Apple’s founders, attended from 1969 to 1974. Because of California’s state budget crisis, De Anza has cut more than a thousand courses and 8 percent of its faculty since 2008.

Now, De Anza faces a budget gap so large that it is confronting a “death spiral,” the school’s president, Brian Murphy, wrote to the faculty in January. Apple, of course, is not responsible for the state’s financial shortfall, which has numerous causes. But the company’s tax policies are seen by officials like Mr. Murphy as symptomatic of why the crisis exists.

“I just don’t understand it,” he said in an interview. “I’ll bet every person at Apple has a connection to De Anza. Their kids swim in our pool. Their cousins take classes here. They drive past it every day, for Pete’s sake.

“But then they do everything they can to pay as few taxes as possible.”

Tax avoidance is a starkly anti-innovation economic policy--this is the subject of my other post.  Heavyweight companies like Apple have also undermined that political authority of public higher education officials through austerity itself, which reduces these officials to dependents on corporate benevolence.  Dependence appears at the end of the piece, where De Anza College's unusually candid president says,

When it comes time for all these companies — Google and Apple and Facebook and the rest — to pay their fair share, there’s a knee-jerk resistance,” Mr. Murphy said. “They’re philosophically antitax, and it’s decimating the state.”

But then President Murphy realizes that he's reached the end of his leash.

“But I’m not complaining,” he added. “We can’t afford to upset these guys. We need every dollar we can get.” 

Well actually, not upsetting those guys has generated twenty years of massive higher education cuts. So why don't we try upsetting those guys instead - with enough equitable taxation to educate the next generation?

Relatedly, here's one of CBP's final charts: