Inequality on Apple’s doorstep – How the GOP Tax Bill Could Worsen the Divide

In Cupertino, the world’s most valuable company could reap enormous benefits from Republicans’ plan – even as the measure threatens sorely needed affordable housing and healthcare benefits for local residents


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 Hector Chavez and Yvonne Scott: ‘Money has not trickled down to us.’ Photograph: Sam Levin for the Guardian
Hector Chavez and Yvonne Scott: ‘Money has not trickled down to us.’ Photograph: Sam Levin for the Guardian

This article titled “Inequality on Apple’s doorstep: how the GOP tax bill could worsen the divide” was written by Sam Levin in Cupertino, California, for theguardian.com on Friday 15th December 2017 12.00 UTC

Yvonne Scott feels like she’s trapped in a cell. The 65-year-old and her husband, Hector Chavez, 60, have been living in their car for nearly a year since they were evicted, parking each night in church and grocery store lots in the shadows of Silicon Valley.

“It’s like being incarcerated, being enclosed. You can’t move freely. No bathroom,” Scott said. “It’s dangerous. We don’t belong in a vehicle.”

The couple’s financial struggles could soon get even worse, thanks to the Republicans’ proposal to overhaul the US tax system. The GOP tax bill, which is headed to a final vote, could devastate funding for affordable housing and increase healthcare costs for low-income people.

The pair discussed their anxieties on a recent morning while waiting to pick up food inside West Valley Community Services, a not-for-profit organization in Cupertino. They sat just a mile south of the headquarters of Apple, the world’s most valuable company, which is slated to be one of the biggest beneficiaries of Donald Trump’s tax reform initiative, potentially saving billions.

Experts say the hastily written $1.5tn tax cut proposal – which would most benefit corporations and the rich and could leave millions without health insurance – will further exacerbate income inequality in the US. It’s a reality that is particularly glaring in Cupertino and the broader region, home to some of the wealthiest individuals and tech companies in the world, surrounded by intensifying crises of poverty and homelessness.

Told of potential tax benefits to Apple, Chavez said: “It’s fine for them, but that money has not trickled down to us … Apple can afford to house the homeless.”

The tax proposal, a signature policy effort of the Trump administration, could lead to a “windfall” for Apple, according to a recent Financial Times (FT) analysis.

Like many large corporations, Apple has taken advantage of tax havens overseas, establishing complex arrangements to keep its taxes at an ultra-low rate. Instead of paying the current US corporate rate of 35%, Apple has billions of dollars in overseas earnings abroad. If Republicans slashed the corporate rates as proposed, the FT found, it would translate to a huge difference between what Apple would pay if it currently brought its overseas money back to the US and what it would pay under the GOP tax bill – a savings of $47bn.

“It’s a sweet, sweet deal for them,” said Don Williamson, a taxation professor at American University.

An Apple spokesperson declined to comment on the windfall calculation, though the Wall Street Journal and conservative pundits have called the FT’s conclusions “false”, saying it was a misleading comparison given that the company under existing law doesn’t pay any taxes in the US on its billions overseas.

While the Apple CEO, Tim Cook, recently expressed support for this kind of corporate tax reform, arguing it spurred further investments in the US, some reports have suggested that corporations mostly reap the benefits.

The Apple Campus 2 is seen under construction in Cupertino in January.
The Apple Campus 2 is seen under construction in Cupertino in January. Photograph: Noah Berger/Reuters

“It leads to shareholder gains in the form of dividends and share repurchases, but doesn’t create new investments, jobs or wages,” said Kimberly Clausing, a Reed College economics professor. “Rich people end up with the vast majority of the gains.”

Tech giants like Apple, Facebook and Google have repeatedly chosen to avoid paying billions in taxes in the US while simultaneously expanding corporate headquarters at rapid rates in northern California, putting huge strains on regional housing, transportation and other public services.

“These companies have built their businesses around dodging taxes,” said Jeffrey Buchanan, public policy director for Working Partnerships USA, which advocates for subcontractors and low-wage workers in Silicon Valley. Under the tax bill, he said, “low-income service workers … are going to be paying more in taxes at a time when these companies are going to be receiving these huge benefits”.

‘We deserve a roof over our head’

Signs of existing inequality in the region are already widespread. The Facebook CEO, Mark Zuckerberg, bought four properties around his house to protect his privacy while homeless people languish under tarps across the street from his company’s headquarters. One in four people in Silicon Valley are at risk of hunger while local foodies enjoy $500 tasting menus.

In addition to tax cuts for the wealthy and increases for working-class families, the GOP has proposed eliminating a tax credit that helps developers fund affordable housing. In San Jose, officials said this part of the bill could prevent the construction of more than 1,300 affordable housing units currently in the works.

“It’s the most important tool we have to address the state’s affordable housing crisis,” said Ray Bramson, interim deputy director of San Jose’s housing department.

Scott and Chavez have been stuck on numerous housing waitlists for months and struggle to even get spots in temporary homeless shelters, because the facilities would force them to separate.

“It’s a tragedy,” said Scott, saying she misses cooking and lamenting that they can’t take perishables from the food pantry, because they don’t have a fridge. “We deserve a roof over our head.”

Chavez, who has diabetes, said he feared his health was suffering as a result of living out of their Nissan Versa. Even keeping up with car payments had become difficult, he added.

Sujatha Venkatraman, associate executive director at West Valley, said Apple had previously helped with individual charity and volunteering initiatives, but had not provided any sustained financial support. She said it would make a huge difference if Apple helped fund childcare services and housing for low-income people.

The latest government count of the homeless population in Cupertino found a 74% increase in just two years, she noted.

Sharon Miller, a 61-year-old woman who is disabled and has lived in Cupertino for decades, said she was fed up with both Trump and Apple for pushing corporate tax cuts while letting the poor languish.

Miller, who uses a wheelchair, also gets weekly food supplies from West Valley, down the street from Apple, and said she fears losing her home or facing further cuts to government aid or health care as Republicans have proposed reversing a key mandate of Obamacare as part of the tax overhaul.

“If they increase the taxes and health premiums go up, the seniors and the disabled and the low-income people are not going to have quality healthcare,” she said. “They are going to get really sick and end up in the hospital.”

 

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