Would an $8 billion tax break on overseas capital gains do the trick?
Rick Santorum has a plan to save Apple (AAPL) from itself.
It came up during Thursday night’s Republican presidential debate when CNN host John King — a self-confessed Apple aficionado — put this question to the former Senator from Pennsylvania:
“Let’s talk about something: Apple Computer is a breathtakingly important American company. It’s one of the most respected companies in the country. I carry Apple products to do my work every day. It employs about 500,000 people … in China. It is based in the United States. Has some employees here — about 46,000 — most of them in retail stores and at the headquarters. 500,000 of them are in China. As a President of the United States, what do you do about that?”
Santorum didn’t quibble — and we won’t either — about whether Apple’s U.S. headcount is 46,000 or 60,400, or whether the kids on Foxconn’s payroll are really Apple employees.
Instead. the candidate launched into an answer that tied together two of 2012’s hottest issues: unemployment and taxes. This, he told King, is the signal he’d send to Apple:
“Apple, you have all those employees over there, you make all those profits over there. If you want to bring that money back, right now you pay a 35% tax. Under our plan, if you bring it back and invest it in plant and equipment here in Charleston – you pay nothing. You put that money to work, if you invest it, you pay nothing – it’s a powerful incentive.”
As it happens, about $54 billion of Apple’s $82 billion in cash and marketable securities is parked in offshore accounts. Of that $54 billion, Apple owes taxes on $23.4 billion, according to its latest SEC filing (thanks reader ChKen!). At the 35% repatriation tax rate, what Santorum is offering Apple is a tax break of nearly $8.2 billion. That’s a lot of lettuce.
But whether $8 billion would be enough to offset the considerably higher cost of making iPhones in South Carolina — or anywhere else in the U.S. — is something only Apple can say.
And as reader montyspython points out, it’s not at all clear that high added-value companies like Apple, which create thousands of high-paying jobs for U.S. workers, should be trying to bring back to a developed country the kind of $1-per-hour assembly work that gets done in Foxconn’s Chinese factories.
But it made a good sound bite.
According to Santorum’s financial disclosures, Bloomberg Businessweek reports, he owns more than $15,000 but less than $50,000 worth of Apple stock.
UPDATE: For a deep dive into why Apple — and nearly every other U.S. high-tech company — builds its devices in Asia, see the long article by Charles Duhigg and Keith Bradsher in Sunday’s
New York Times
. “It is hard to estimate how much more it would cost to build iPhones in the United States,” they write. “But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility.”
Below: The Santorum solution in 2 minutes via YouTube.
http://youtu.be/KjEQb2Nokr0
Thanks to 9to5Mac for the tip.
