In Apple’s big tax cut, some see a looming backlash

There’s a tidal wave of economic displacement coming, writes the New York Times’ top tech columnist, and the GOP just handed voters a parachute.

From Farhad Manjoo’s What the Tax Bill Fails to Address: Technology’s Tsunami:

Though many of the economy’s structural problems predate the last decade’s rise of the tech behemoths, the innovations that Silicon Valley has been working on — things like e-commerce, cloud storage, artificial intelligence and the general digitization of everything and everyone around you — are some of the central protagonists in the economic story of our age.

Among other economic concerns, these innovations are implicated in the rise of inequality; the expanding premium on education and skills; the decimation and dislocation of retail jobs; the rising urban-rural divide, and spiking housing costs in cities; and the rise of the “gig” economy of contract workers who drive Ubers and rent out their spare bedrooms on Airbnb…

To those who study how tech is altering society and the economy, the bill looks like the wrong fix for the wrong problem. The bill (the parachute) does little to address the tech-abetted wave of economic displacement (the tsunami) that may be looming just off the horizon. And it also seems to intensify some of the structural problems in the tech business, including its increasing domination by five giants — Apple, Amazon, Microsoft, Facebook and Alphabet, Google’s parent company — which own some of the world’s most important economic platforms.

“Silicon Valley’s failure to engage in the tax reform debate was a serious failing of long-term strategy,” said Greg Ferenstein, a writer and researcher who studies economic and social issues related to the tech business. “They had a real opportunity to use tax reform as a way to address inequality — and as a result of this bill, inequality may increase, and public backlash against the tech industry may increase.”

My take: Despite repeated calls for “comprehensive” tax reform, Tim Cook told NBC’s Lester Holt last month that his primary concern was the tax on Apple’s overseas profits. “We don’t focus on the individual side,” he said.

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9 Comments

  1. Gary Morton said:
    Striking how this article and others that look to decry the corporate tax reform consistently include Amazon in the list of companies that will benefit or should be in some way vilified for not having stood up for “whatever.” Keep in mind both parties supported corporate tax reform prior to the last presidential election. Anyway, back to Amazon. There is little to no benefit for Amazon from the tax reform. Taxes are paid on pre-tax EARNINGS. Amazon has earned less in its entire history as a company than Apple will earn this quarter. Amazon pays so little in taxes, that the reform will leave them unaffected. 21% or 35% times zero is still zero.

    1
    December 21, 2017
  2. Ken Cheng said:
    Tidal wave backlash? Nonsense. Comprehensive tax reform? Not a practical reality. Shoot for the moon and you’ll wind up a dud on the launching pad, if you don’t have the political support. Trump and his cohorts have squandered whatever opportunity they had to accomplish anything comprehensive, they ended up with what they could.

    Whether there’s a backlash depends a lot on whether these tax cuts stimulate GDP growth into the 3.5% range and wages start to rise. The story will take time before we know the answers.

    1
    December 21, 2017
  3. Fred Stein said:
    Manjoo’s screed misses the point, or rather makes the wrong point..

    It’s true, and irrelevant, that GOP tax bill doesn’t address the tech-abetted disruption. Technology is going to disrupt because the fundamental economics, mainly that electrons are cheaper than atoms to move, process etc. Tech disruptions will happen with or without tax changes. We have to find ways to address the inequities, the job loss, access to better education etc.

    That said, I strongly support the notion concentration of wealth and power are dangerous. Our tax code should do more, not less, to alleviate this. Ironically many of Trump’s ardent followers are among the those left behind in this wealth concentration.

    Manjoo misses all the entry level jobs that Apple creates, such as their retail workers, which are far better than driving for Uber or Lyft or working in Amazon’s warehouse until a robot replaces you. Apple’s extended ecosystem is a massive job creator as outlined in their web site.

    3
    December 21, 2017
  4. John Kirk said:
    “Silicon Valley’s failure to engage in the tax reform debate was a serious failing of long-term strategy,” said Greg Ferenstein… “They had a real opportunity to use tax reform as a way to address inequality”

    Uh, I’m concerned about inequality. And you may or may not be. But that’s not Apple’s job or purview when it comes to taxes.

    When people criticize, they often fail to imagine what would happen if their advice were taken. Just imagine if Apple — one of the biggest beneficiaries of the new tax plan — had come out AGAINST the tax plan. All good you say? Except perhaps to the stockholders. And the employees.

    Apple has a fiduciary duty to its stockholders. That’s a legal obligation. Tim Cook may personally dislike the new tax plan — and I’m pretty certain that he does — but he cannot, as head of Apple, attack a plan that so obviously benefits Apple’s interests.

    0
    December 22, 2017

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