by Mitch Kokai
Senior Political Analyst, John Locke Foundation
It’s not clear that Joel Stein‘s latest “Awesome Column” in TIME magazine was designed to highlight the need for federal tax reform, but Stein certainly makes a good case for reform — regardless of his intent. Stein pokes fun at the process he followed in searching for ways to reduce his own tax bill.
All my income is paid to a C corporation called Steinacopia Inc., which is part of this country’s backbone of small businesses that employ millions of people and create the products that make this the greatest nation on earth, only in Steinacopia’s case it’s just me and I don’t make anything. Apple might have set up shell subsidiaries, but Steinacopia is already a shell corporation. Steinacopia’s only business is taking me to dinner, taking me on vacation and buying me Apple products. It is, perhaps, the most American company ever.
A company that is contributing so much to the economy shouldn’t have to pay taxes, so I sought the advice of several of the nation’s top tax attorneys–people so smart, they would not let me use their names in this column. At first, I thought Steinacopia was doing even better than Apple, which pays some U.S. tax. Steinacopia pays no corporate tax whatsoever. After deductions for all those important dinners that make Steinacopia the kind of place that can attract employees like Steinacopia, and paying for Steinacopia’s retirement account, which hopefully will allow Steinacopia to keep eating just as well for the rest of its life, Steinacopia pays me everything left over as a salary and declares zero profit.
But, the lawyers pointed out, I pay a large percentage of that salary in personal taxes. It would be far better if I never got paid and Steinacopia kept its income, untaxed. And yes, they could do that for me. The best plan would have Steinacopia set up a company in Ireland, just as Apple did, since it has a low corporate tax rate and, unlike countries with no tax at all, has a tax treaty with the U.S. My company would be called O’Steinacopia and, unbelievably, would do even less than Steinacopia.
Apple actually has two Irish companies, in a classic “double Irish.” Many companies, like Google, have one Irish company officially headquartered in a country without a corporate-income tax, like Bermuda, and then send the money there through the Netherlands to avoid Irish withholding tax in a “Dutch sandwich.” Tax lawyers, I was learning, work really hard to make their boring crap sound interesting. My particular scheme, judging from whom I was talking to, would be called a “quadruple Jew.”