How Apple Sidesteps Billions in Taxes



     Apple is one of the largest and most profitable technology company in the world today. Every year Apple sees profits in the billions of dollars on its financial sheets. While this technology giant has seen tremendous gains in profits are explained by its tax avasion strategy; location, location, location. Apple sets up its main offices in the U.S in areas where the corporate taxes are relatively low. For example its central office is located in Cupertino, California. However it collects and invests its profits in Reno, Nevada. The difference between these states is that the corporate tax in California is 8.84%; while for Reno it is 0%, according to the article. It also has small subsidiaries in low-taxed places all across the globe to avoid major taxes.
     While it is in every company's best interest to minimize costs and taxes, Apple has done so well at this task that it is predicted to earn $45.6 billion in its current fiscal year which would be a record for any American business. It is clear that Apple is undercutting the tax system and should be paying a greater amount of taxes than it currently pays. This situation has occured because the tax sytem is predominantly based on industrial industries when they were created. Apple, being a techonlogical and mainly digital firm, can avoid many taxes and cheat the system "legally." In a situation like this, the government is needed to intervene and somehow redefine the tax laws to better suite todays' growing digital firms in order to stop giants like Apple from abusing the system and hording such large profits for itself when it could be redistributed in this recovering economy.



Source: http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?ref=business



Reminders That a Cookie Goes Beyond the Fig

     NABISCO, creator of the Fig Newton, decided to take on a new marketing strategy. In recent years, the company has seen declines in the sales for four consecutive years of one of its oldest products the Fig Newton. The Fig was widely advertized with the help of actor James Harden as "Big Fig" during the 1970's. Since then there hasn't been such a craze for the now termed "Newton" due to its narrow horizontal product differentiation. It has kept the same few flavors and has kept the same bland design which has lead to it becoming an inferior good to other more popular substitute products.
     In order to combat this constant decline, NABISCO has proposed a new version of the Newton. These include various flavors of the original Newtons as well as the new "Fruit Thins" cookie product. They also have used new advertizing slogans and approaches to broadcast their new flavors and nutritional facts about their product. By using a new look and using more healthy ingredients, they give their products a better, more "adult" look to attract more customers, as well as provide small health benefits to their consumers as a positive externality. While the new marketing strategy has lead to some sales moving to their other products giving their Newton products more differentiation and making them more fruit based has proved benificial for NABISCO.

        

Microsoft to Take Stake in Nook Unit of Barnes & Noble

     In recent news, Microsoft has made a $300 million investment into Barnes and Noble; specifically the Nook division. This occurred on Monday and Microsoft will be given a 17.6 percent stake for their contribution to the Nook. In the market of e-books, the Nook is "hotly contested" by both the Amazon Kindle and the Apple products; Apple products taking the lead. So why the sudden interest in the Nook by Microsoft? This can be explained by Microsoft's future plans with Barnes and Noble and the tablet industry as a whole.
     Microsoft's investment will be used to not only fund the development of Nooks, but to differentiate the product in its style and capabilities. The new add-ons (which include a new design, a glowing screen, more apps and Windows 8 compatibility) will help increase the demand for the Nook by reaching to Windows users who have not entered the tablet phenomina as well as attract current tablet users. Thier partnership also allows Microsoft to gain profits from an untapped industry that Apple has set its sights on with its products. Another effect this colaboration has had is the rise in the price of Barnes and Noble stocks. This partnership is proving sufficiently more profitable for both parties in the near future. While it is not clear that this partnership will lead to Barnes and Nobles topping the industry over Apple and Amazon or even creating somewhat of a monopolistic power over the industry as Apple has now, it is evident that the consumer and producer surpluses of the Nook market will benefit and hurt the other two.

Source: http://dealbook.nytimes.com/2012/04/30/microsoft-to-take-stake-in-barnes-nobles-nook-unit/?ref=business



The Nurture of Nuclear Power



 In a recent article in the New York Times, Nancy Folbre addresses the development and usage of nuclear power plants in the United States. Alternative power sources like solar, water and wind power are cheaper than nuclear power. However a utility giant, Southern Company, has recently received a $8.3 billion Energy Department guarantee to build reactors in Georgia. Folbre states "Buying power on the open market and giving it away for free would have been less costly." On a similar note, $563 million loan guarantees to the solar panel manufacturer Solyndra by the Obama administration did not go through.

     Another point she makes is the possible threat these reactors place on our country. Out of all the possible ways of producing energy, nuclear power is by far the riskiest. A recent example of this would be the Fukushima Daiichi disaster in Japan that led to the evacuation of 90,000 residents who have yet to return home.  The event also led to the resignation of the prime minister and the German government process of phasing out all nuclear generation of electricity by 2022. Even in the U.S., the demand for safer and more efficient power sources has risen while the public demands and private supply of nuclear power has fallen. Currently there are 23 aging nuclear power plants operational in our country today. The Vermont Yankee and Indian Point nuclear plants have reached the end of its projected lifetime operation, but the Nuclear Regulatory Commission favors extending its license, despite local opposition and past catastrophes.

     For a market that is loosing popularity and is extremely costly, it doesn't seem ethical to continue its progression for it violates the cost-benefit principal. Travis Hoium, an analyst who has written extensively about the industry on the investment Website The Motley Fool, calls nuclear power a "dying business". With some push from the recent recession, many producers are pushing for a cheaper means of producing power, which has caused the demand for shale gas and other alternatives to rise greatly. So with a market that is clearly unprofitable and has lost public and private interest, the benefits from the subsidy of nuclear power plant productions, the actual power, must be conceived by its investors to have a greater utility than the costs incurred by its creation, production and externalities to the nearby residences living near the reactors.

Source: http://economix.blogs.nytimes.com/2012/03/26/the-nurture-of-nuclear-power/?ref=economy

As Bank Profits Plunge, Wall Street Bonuses Fall Modestly

    This article is from NY Times called "As Bank Profits Plunge, Wall Street Bonuses Fall Modestly." In the article, it discusses the payroll and annual bonuses of Wall Street employees and executives during this recovery period. In comparison, the profits for this year will be estimated to be about 51 percent less than 2011 in the finance industry. But what this article notes explicitly is that the total payouts to these employees will drop approximately 14 percent during this bonus season. The article states, "Stymied by regulatory requirements, the European debt crisis and a sluggish economic environment at home, the nation’s largest banks suffered in 2011."Despite this economic hardship large firms, such as Goldman Sachs, Bank of America and JPMorgan Chase, continue to keep their payroll at high levels.

     At first glance, any economist would say this is not the wisest decision. When a company or individual is facing huge losses in profit, there is less incentive to spend money. However, many of these firms defend their decision making to pay out relatively the same amounts of money to their employees because they feel it is crucial to drawing in new experienced workers and rewarding the ones they already have. This is true because if the wages a firm pays is high enough, then more people enter the labor force due to that incentive; thus allowing the firms to attract more potential employees. As Jamie Dimon, the CEO of JPMorgan Chase stated, “We need top talent. You cannot run these businesses with second-rate talent.”

     While this explanation is somewhat self explanatory, it does not outweigh the cons of this decision. While attracting potential employees will bring the company future benefits, the current situation these firms are in will only worsen by spending relatively the same amount on payroll while profits are diminishing greatly. Keeping in mind these are multi-billion dollar industries, 50 percent of their profits are relatively still large amounts of money. However, when the amount of money you generate is cutting in half for the second consecutive year, then it gives the decision makers of these Wall Street firms incentive to try and cut spending. These firms should be cutting their payroll slightly more to cover some of these losses; for if these losses are not paid for internally by the suppliers, some of the expense will fall on the consumers.


Source: http://dealbook.nytimes.com/2012/02/29/as-bank-profits-plunge-wall-street-bonuses-fall-modestly/?ref=business