'Where's the fairness?': How one Silicon Valley mayor is fighting to make Apple pay more taxes

By Nellie Bowles, The Guardian

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

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 asked him to leave, he said.

“They said ‘you cannot come in, you’re not invited’. After that I left and have not gone back,” said an exasperated 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 people in Cupertino, a 60,000-person town in the heart of Silicon Valley, are beginning to organize 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 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 Chang’s 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.

Convincing 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, 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,” 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.”

Apple’s local efforts to avoid paying higher taxes are part of a larger pattern for the $500 billion company, which has long been a pioneer in corporate tax avoidance. Apple pays a 2.3 percent effective tax rate on its $181 billion 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 with a Dutch Sandwich, the industry giants shield themselves off from the theoretically 35 percent federal corporate tax rate. Citizens for Tax Justice estimates that Apple would owe $59.2 billion 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 denies using the ‘double Irish’ arrangement. It also says it has no record of the security incident involving Barry Chang.

At a recent Cupertino city council meeting, some residents protested about a lack of funding for public projects, 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’,” Chang said of angry residents. “They abuse us.”

“In the meantime, Apple is not willing to pay a dime,” Chang said. “They’re making profit, and they should share the responsibility for our city, but they won’t.”

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,” Chang said. “Raising taxes is not popular, but I’m not afraid. We are the center of technology, and our public transit system is old and embarrassing,” 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 2012to 2013, which was about 18% of the city’s general fund budget, according to an economic impact report. Coincidentally that was also exactly the same amount CEO Tim Cook was paid in 2014.

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. 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,” 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 organize a rally outside Apple. “But Apple has a pretty good image,” Chang said. “No one wanted to go.”

An earlier version of this article suggested Barry Chang’s complaint “they abuse us”, which was contained in the headline, was a reference to Apple. Mr Chang has since clarified he was referring to frustrated local residents. Additionally, Mr Chang did not say he was escorted from Apple’s campus, but that he was asked to leave by a security guard.