A recent article published in the New York Times, highlights how Apple is taking advantage of Nevada’s 0% corporate tax rate.
Apple has created a subsidiary for their $100 billion in cash that invests in bonds and other low risk financial instruments. All the interest earned, $2.5 billion since 2006, has been shielded from state income tax because it is a Nevada subsidiary. By creating this Nevada subsidiary, Apple has saved $221 million by not having to pay California’s onerous 8.84% corporate tax. There are many other technology corporations headquartered in California that have billions in cash that could do the same as Apple. Cisco Systems Inc. has over $35 billion in investments, Google $34 billion, and Intel $5 billion just to name a few. These corporations could save millions of dollars each year if they would just relocate some employees to Nevada a couple hundred miles away and shield their investment income from California state tax.
I have always lamented over how Nevada doesn’t get more businesses to relocate here when there is no corporate and personal income tax as well as low property taxes compared to say Texas, another state with no income tax. More motivation should be that home prices are significantly lower in all parts of Nevada compared to California. Sure, our school systems have extremely low graduation rates, but when it comes to saving millions of dollars, money trumps all. Corporate CEOs and their employees should gladly move to our great state at the prospect of saving millions of dollars personally and for their businesses.
Just yesterday, June 27th, 2012, Apple announced they are relocating to Reno their servers for cloud computing and ITunes, and their business and purchasing center.
I’m sure tax savings, in addition to savings from cheaper land, labor and electricity, was a factor in this decision. I’m guessing Apple’s income from ITunes and portions of their business is now being sourced in Nevada, potentially saving millions a year in future taxes. Let’s hope this is the start of a trend of companies wising up to the high costs of doing business in California!