Apple’s Other PR Problem

03/30/2012 10:00 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

Now that the company has gotten religion about the welfare of Chinese workers, perhaps US taxpayers will be next in line, writes senior editor Igor Greenwald.

Tim Cook isn’t Santa Claus. On the other hand, Apple’s (AAPL) CEO isn’t Steve Jobs, either.

Jobs lectured President Obama that he’d be a one-term president unless the US followed China’s example and slashed “regulations and unnecessary costs.”

Cook has just gone to China, in part, to look after the welfare of the Chinese workers assembling Apple products. In the wake of allegations of widespread labor abuses, now partially confirmed by a monitoring group hired by Apple, Cook presumably nudged Chinese partner Foxconn to pledge higher pay and improved working conditions.

He was also savvy enough to show up, because nothing says you care like being there.

This isn’t Cook’s first departure from his mentor’s style and policies. Jobs cared little for philanthropy, personal or corporate, and never reinstated Apple’s charitable giving program, which he’d cut during lean times. Cook, in contrast, has already doled out $100 million of Apple’s cash this year to worthy causes, and offered a generous match for donations by employees.

Jobs could get away with his quirks because he was an icon and visionary who built the company and then rebuilt it. Cook couldn’t cop the same brash attitude even if he wanted to, which he clearly doesn’t. Just as clearly, he understands that Apple’s brand can’t come to be associated with the exploitation of Asian workers.

Which is why, even though Cook isn’t Santa Claus, he should take another stand—against the exploitation of American taxpayers. Like the mistreatment of Chinese workers, it isn’t a problem that originated with Apple. But it’s another one the company can help solve by the power of its enlightened example.

Because right now, even as $97.6 billion sits on Apple’s books and billions more pour in each month, the company is in the process of nickel-and-diming Texas for more than $30 million in tax breaks. In return, Apple is planning to build an operations center in Austin that would bring 3,600 jobs to the state capital, although only 650 by 2015. Not all the locals are happy with the tradeoff.

Now, nickel-and-diming Texas is pretty easy: the Texas Enterprise Fund, which doles out tax sweeteners to corporate “job creators,” has spent $443 million over the last decade to secure 62,000 additional positions, according to Governor Rick Perry.

Although, if I’m reading the Lone Star fine print right, that includes all the jobs that are “induced”...that is, deduced by a consultant as indirectly attributable to the investment. In some sense, every US job today was induced by Henry Ford when he built the factory to crank out the Model T. Induced jobs are so easy to imagine, interested parties do it all the time to justify all manner of tax breaks.

Heck, Texas gave $20 million to Countrywide in exchange for a promise of 7,500 jobs over six years. That was in 2004. Six years later, Texas got only half of the promised jobs and less than half of its money back.

Now, Apple isn’t Countrywide, and the finance, sales, and administrative jobs it would bring to Austin would pay $64,000 annually on average. That would be pretty tempting, even without Apple’s cachet.

And targeted corporate tax breaks are the name of the game these days: they’re what brought a Boeing (BA) plant to South Carolina and drew Caterpillar (CAT) to Muncie, Indiana, though those states’ anti-union laws clearly helped.

Sports tycoons are notorious for feeding at the public trough, so that when the Securities and Exchange Commission claimed to be probing the public financing of a new Miami Marlins stadium last year, only a sportswriter could think they were serious. Such vanity projects always advertise lots of induced jobs, never owning up to the fact that the increased taxes needed to pay for the subsidy often destroy as many jobs as the investment generates.

Apple is presumably coming to Austin in part because, with the University of Texas in town, it can hire from a big pool of well-educated applicants. But higher education costs money, money Texas will have less of after Apple pockets its incentives.

If there’s one company that can afford not to demand tax breaks, Apple is it. But of course, with corporate profits as a share of the GDP at a record high, reaping such inducements is more of a lucrative hobby than a necessity for many multinationals.

So Apple could take a stand and say that it won’t demand special treatment; it will be glad to pay its fair share to support education and other essential services. It could locate its operations center wherever it wants without playing Austin off against Phoenix.

It could, but it won’t. There’s no stigma to demanding extras from American taxpayers—sought-after companies do it all the time. So Apple will add the Texas millions to its $97 billion hoard, and then wonder why American education is slipping.

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