Rand Paul Upsets Senate’s Apple (AAPL) Witch-Hunt

The Senate hearings on Apple’s (NASDAQ:AAPL) alleged manipulation of corporate tax laws have taken a rather unexpected turn. The usual political grandstanding even when it makes no logical sense has taken place, to wit John McCain’s comments:

“Apple’s corporate tax strategy reflects a flawed corporate tax system that allows large multinational corporations to shift profits offshore to low-tax jurisdictions. For years, Apple has opted to forgo fully contributing to the U.S. treasury and to American society by shifting profits and circumventing U.S. taxes. In the last four years alone, Apple has avoided paying taxes on $44 billion in income.”

Note the cognitive dissonance in the statement. On the one hand Apple operates its business in accordance with a poor tax system while on the other it nefariously moves around money in order to bilk the government and US society of its just due. Do you doubt that the legal system which these same senators allow to flourish would not tear into the company with all manner of strike suits were it to voluntarily pay several billion dollars more than it owed to the government.

So things were moving along as scripted until Senator Rand Paul essentially said that the hearing was perhaps the biggest sham to hit the Hill in , say, the past week.

Here is his text in case you prefer it that way.

I am offended by the tone and tenor of this hearing. I am offended by a $4 trillion government bullying, berating and badgering one of America’s greatest success stories.

Tell me one of these politicians up here that doesn’t minimize their taxes. Tell me a chief financial officer that you would hire if he didn’t try to minimize your taxes legally. Tell me what Apple has done that is illegal.

I am offended by a government that uses the IRS to bully groups such as the Tea Party but I am also offended by a government that convenes a hearing to bully one of American’s success stories.

I am offended by the spectacle of dragging in here executives from an American company that is not doing anything illegal. If anyone should be on trial here, it should be Congress.

I frankly think the Committee should apologize to Apple. I frankly think Congress should be on trial here for creating a bizarre and byzantine tax code that runs into the tens of thousands of pages, for creating a tax code that simply doesn’t compete with the rest of the world.

This committee will admit: Apple has not broken any laws. Yet, they are forced into a show trial at the whims of politicians, when in fact; Congress should be on trial for chasing the profits of great American companies overseas. You haul before this committee one of America’s greatest success stories and you want applause?

I say, instead of Apple executives, you should have brought in a giant mirror, so we could look at the reflection of Congress because this problem is solely and completely created by the awful tax code.

If you want to assign blame, the Committee needs to look in the mirror and see who created this mess, see who created the tax code that drives American companies overseas.

Our corporate tax is more than double Canada’s. I never thought I would be complimenting Canada’s tax code our tax code is double Canada’s. Our corporate tax is over ten points higher than Europe. Instead of saying theirs is too low, why don’t we set about to work that ours is too high.

Apple has 600,000 jobs they’ve created, American jobs and we want to drag them before this committee to chastise them. I find it abominable. Just in my state, we have $700 million in sales from Dow Corning. They make Gorilla Glass.

They were virtually out of business. In the 1990s, Apple struggled if I had to guess, unfortunately, I didn’t guess enough to invest in Apple, but the thing is that in the ’90s, people were worried they might go out of business. You know they had one computer that wasn’t doing well and then all of a sudden the innovation that came about. And we want to bring them forward and chastise them for their success.

A couple years, we did repatriation of foreign capital. If we want the capital to come home, don’t double tax it. We tax it 35 percent. Let’s tax it at 5 percent.

I have a bill that would repatriate profits from foreign companies at 5 percent and put it into infrastructure. Our country is woefully short of money for infrastructure. But you’re not going to get it at 35 percent– you are getting zero. Let’s make it 5 percent and create and infrastructure fund.

There are probably 70 votes for that in Congress but nobody will bring it up. Why? They saw, “Oh it’s the sweetener for overall tax reform, which is illusive and a hill too tall to climb that it never seems to get here.”

Why not tomorrow pass it? Why do you think people are frustrated with Congress? Because we don’t do the right thing. Everybody admits, even those that want to drag Apple before this committee, they admit that the tax code is our problem.

But if we had repatriation at 5 percent, then they would bring money home. Why don’t we just pass it? Instead it has to be revenue neutral, scored by the CBO just pass it if it’s the right thing to do.

I would say what we really need to do is to apologize to Apple, compliment them for the job creation they are doing, and get about doing our job.

Look in the mirror and let’s make the tax code better, fairer, and more competitive world-wide. Money goes where it is welcome and currently our tax code makes money not welcome in our country.

Thank you, Mr. Chairman.

I’m no fan of either of the Pauls, Ron or Rand, but I will give it up to him for these remarks. The idea of offering some sort of one-off deal to lower the rate to induce repatriation of offshore funds which would be dedicated to infrastructure spending is about a third or fourth best alternative but at least it is a constructive suggestion. For more fundamentally sound reform ideas I suggest you read Megan McArdle’s column on the subject.

Senators Levin and McCain along with other members of their tribe set out to create a bit of political theater. They got upstaged badly and in the process exposed the abomination which they created.

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