Apple’s hometown mayor: firm ‘abuses us’ by not paying taxes

Getting local politicians to battle Apple in Cupertino is hard, as mayor is finding out

Apple’s headquarters on Infinity Loop is seen in Cupertino, California in this aerial photo

Apple’s headquarters on Infinity Loop is seen in Cupertino, California in this aerial photo


The last time the mayor of Cupertino walked into Apple - the largest company in his small Californian town and, it so happens, the most valuable company in the world - he hoped to have a meeting to talk about traffic congestion.

Barry Chang barely made it into the lobby when Apple’s security team surrounded and escorted him off the property.

“They said ‘you cannot come in, you’re not invited’. After that I left and have not gone back,” said an exasperated Mr Chang, who’s been mayor since December 2015 and had approached the computing firm when he was serving on the city council three years ago.

Many in Cupertino, a 60,000-person town in the heart of Silicon Valley, are beginning to organise around their overburdened city. They claim the region is struggling with aging infrastructure and booming companies whose effective tax rate is often quite low. Frustrated by traffic and noise, some in Cupertino are trying to put a stop to more development, which they argue brings more congestion on the roads, parking and train system. But Mr Chang says limiting new development would damage the regional economy and that the real solution should be higher taxes on the wealthy and companies such as Apple.

In response to his pro-development efforts, a group called Cupertino Citizens for Sensible Growth is working to recall him for failing “to fulfill his fiduciary duty to Cupertino citizens”. He says he’s “not afraid” and is running for California’s state assembly.

Getting local politicians to battle Apple is hard, Chang said. He recently proposed that Apple - which is building a massive new campus its own employees nicknamed the Death Star, or more favorably, The Spaceship- should give $100 million to improve city infrastructure. To move on the proposal, Mr Chang only needed to get a single vote ‘yes’ among the three other eligible council members. He failed to get that vote.

“This American politics. This so-called democracy,” Mr Chang said, recalling the unanimous ‘no’ vote. “Apple is such a big company here. The council members don’t want to offend them. Apple talks to them, and they won’t vote against Apple. This is the fact.”

Tax rate

Apple pays a 2.3 per cent effective tax rate on its $181billion in cash held offshore, according to Citizens for Tax Justice, a not-for-profit research group focusing on tax policy. Through a series of well-documented offshore manipulations with saucy-sounding names such as the Double Irish and the Dutch Sandwich, the industry giants shield themselves off from the theoretically 35 per cent federal corporate tax rate. Citizens for Tax Justice estimates that Apple would owe $59.2billion in US taxes if the money weren’t funneled into offshore shell accounts.

Criticism over the company’s offshore tax schemes has become more pointed in recent months, both locally in Cupertino and from Apple’s own staff. Steve Wozniak, Apple’s co-founder, said the company should pay a 50 percent tax: “Jobs started Apple Computers for money, that was his big thing and that was extremely important and critical and good. ... [BUT]we didn’t think we’d be figuring out how to go off to the Bahamas and have special accounts like people do to try to hide their money.”

Apple did not respond to requests for comment.

Public projects funding

At a recent Cupertino city council meeting, some residents protested about a lack of funding for public projects, Mr Chang said - even crumpling up meeting agendas and throwing them. “They ball up the paper and throw it, and they say ‘You’re making all the wrong decisions’,” Mr Chang said. “In the meantime Apple is not willing to pay a dime. They’re making profit, and they should share the responsibility for our city, but they won’t. They abuse us.”

Mr Chang is stuck now between Apple on one side not paying for his infrastructure proposal and the frustrated citizens who see their roads too crowded.

“I’m not going to back down,” Mr Chang said. “Raising taxes is not popular, but I’m not afraid. We are the centre of technology, and our public transit system is old and embarrassing,” Mr Chang said. “And the politicians have no backbone. They get scared.”

Matt Gardner, executive director of the Institute on Taxation and Economic Policy, said he’s optimistic but admitted trying to get Americans to really demand corporate tax reform feels Sisyphean: “There’s basically no appetite for reform,” he said. “In the case of Apple, people are so enamored with their iPhones that they can’t see the company. And year after year these companies are voted most respected, most trusted.”

“They’re all just as good at engineering their own tax rates as they are at engineering new technology,” said Ron Eckstein from advocacy group Americans for Tax Fairness.

It’s doubly upsetting for activists in Silicon Valley, who say that Apple and Google’s tax arrangements conflict with the way they present themselves as companies that are doing good. “They all have these mission statements with an overarching social component, a kind of give back aspect to their corporate image,” said Stephen Boardman of the United Service Workers West, the union that represents 40,000 service workers across California and has worked to unionize Apple’s security team. “They aren’t held accountable to it.”

Meanwhile, the mayor of Cupertino plans to keep pushing Apple to contribute more to the town. Apple paid $9.2 million in tax revenue to Cupertino in 2012 to 2013, which was about 18 per cent of the city’s general fund budget, according to an economic impact report. Coincidentally that was also exactly the same amount chief executive Tim Cook was paid in 2014.

Mr Chang is now working on proposals for a business employer tax that would make companies with more than 100 workers pay $1,000 per employee. Mr Chang argues the employer tax is less regressive than the competing program: a higher sales tax.

“You’re helping create the problems, so you have to help solve the problem,” Mr Chang said, speaking to Apple. “Look at the system we have here: the rich people get more richer and the poor cannot survive. Where’s the fairness? Nowhere.”

He said he tried to organise a rally outside Apple. “But Apple has a pretty good image,” Mr Chang said. “No one wanted to go.”

Guardian News and Media