Asa Mathat / AllThingsD.com

Not that Cook won’t have some good answers prepared. In the past, Apple has dispatched questions about its shifting of profits offshore by noting that it remains one of the largest taxpayers in the United States despite that practice; the company paid $6 billion in federal corporate income tax in fiscal 2012. Apple is currently sitting on about $145 billion in cash, only $45 billion of which is available in the United States, according to analysts. And that’s led plenty of critics to accuse it of dodging its U.S. liabilities.

This time, however, the company is taking a more proactive approach to the issue. It has armed Cook with some recommendations for tax reforms that might encourage companies like Apple to repatriate their offshore cash.

“If you look at it today, to repatriate cash to the U.S., you need to pay 35 percent of that cash,” Cook told the Washington Post in an interview ahead of the Tuesday hearing at which he’ll appear. “And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that. But I don’t view that. But I think it has to be reasonable.”

Cook declined to offer further detail about Apple’s proposed reforms, but the Post characterized them as a “dramatic simplification” of corporate tax laws.

Asked for comment about Apple’s tax conduct, spokesman Steve Dowling deferred to Cook’s remarks speaking directly to that issue.

“I can tell you unequivocally Apple does not funnel its domestic profits overseas,” Cook told Politico. “We don’t do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe.”

In a tense two-hour hearing, parliament’s Public Affairs Committee grilled Matt Brittin, Google’s head of sales and operations in northern and central Europe, about whether the firm completes sales of its products and services in the U.K., making it liable to pay more tax in Britain.

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But not all is as it seems in the buffet line. There is growing controversy among tax experts about how to treat these coveted freebies. The Internal Revenue Service also has been focusing on the topic, according to attorneys who practice in the area, examining whether the free food is a fringe benefit on which employees should pay additional tax.

Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules.

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The Internal Revenue Service didn’t open this year’s tax-filing season until Jan. 30, about a week later than expected. The delay was because of last-minute system adjustments made necessary after U.S. policymakers struck a deal to avert the so-called fiscal cliff of tax increases and spending cuts.

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But that kind of chatter doesn’t matter much to Wall Street, which is very happy that Time Warner CEO Jeff Bewkes has finally decided to dump his magazines. Time Warner shares closed at $53.63 today, up 2.5 percent since midday Tuesday, when the news first broke.

And that boost was enough to bring TWX to levels it hasn’t seen since the fall of 2007. Back then, Dick Parsons still ran the company, and it still owned AOL and Time Warner Cable. And Lehman Brothers wasn’t a smoking crater.

The bump reflects the certainty that even if the Meredith joint venture doesn’t happen — and my understanding is that those talks are quite far along at this point — Bewkes has now committed to dumping publishing, period.

Smart people I talk to say that if the Meredith deal falls apart, then the next step would be to pursue a public spinoff, a la Time Warner Cable and AOL. While I had originally assumed that both traditional publishers and non-strategic investors would want to take a crack at Time Inc., I’ve since become disabused of that notion: A straightforward sale would create a huge tax bill for Time Warner, because even in their declining state, some of these magazines are going to create huge capital gains. Spinning them off into a newco should solve that.

[Shutterstock/Andrew Bassett]

VMware has cut its federal tax bill in the past three years because the company conducts the majority of its international business through Ireland. In the three-year period ending in 2011, the company’s tax bill fell despite its revenue rising 86 percent and its pretax profit more than tripling. In fiscal 2011, its U.S. tax rate was 4 percent.

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The company paid a total of $1.5 billion in worldwide income taxes in 2011, avoiding an estimated $2 billion more by moving the equivalent of 80 percent of its profit to Bermuda, Bloomberg reported today.

Google’s effective global tax rate was 21 percent last year, less than half of what it might have been expected to pay in the United States.

To keep more of its money in its pocket, Google employs a roundabout strategy of attributing most of its revenue to its Ireland sales office, and then having that subsidiary pay royalties, channeled through a Dutch subsidiary to avoid holding tax, to a separate shell company that pays taxes in Bermuda.

What Google is doing is complex and effective and not new — it’s apparently known to those in accounting as a “Double Irish” combined with a “Dutch Sandwich” — and Bloomberg has done a bunch of reporting on the topic over the years that is summarized here.

The Google strategy appears to be legal, but governments around the world aren’t happy about it. France, the U.K., Italy and Australia are all looking into the matter, Bloomberg notes.

Google has not yet responded to a request for comment.

Kevork Djansezian/Getty Images News

So it’s all the more puzzling that California, home of Silicon Valley and the densest concentration of entrepreneurs in the nation (possibly the world) would pass Proposition 30 in last month’s election. Regardless of your personal views on the issues of taxing and spending, there is one thing that cannot be overlooked. Prop 30 includes a gigantic retroactive tax increase on legitimate capital gains and ordinary income that dates back to Jan. 1, 2012.

The top marginal rate jumps by 29.13 percent to a staggering 13.3 percent of income. Oddly, California doesn’t distinguish between ordinary income and capital gains in the way the federal government does. The result is that we have nearly doubled the 15 percent federal capital gains tax rate, and this applies to income earned in the past, for which taxes have already been paid.

How This Happened

As is the case with many propositions, the voters may have been fooled by the governor and his allies who aggressively pitched it as a way to “save education in our state.” In fact, the money from Prop 30 simply replaces money the governor redirected from education to other priorities in his 2013 budget. So a more honest and fair characterization of Proposition 30 is a general purpose tax hike in the state which already has the highest income tax rates in the nation.

It isn’t clear that most voters had a very good understanding of the tax increase’s magnitude or retroactive nature. Campaign workers were reportedly paid $3.00 per signature to qualify it for the ballot, and the two largest public sector unions (California Teachers Association and Service and Service Employees International Union) spent $22 million campaigning for its passage.

But even with all that campaign money, it took a very creative Official Title and Summary in the California Voter Guide prepared by the Attorney General to push the measure over the finish line. Take a look and you’ll see that there is no explicit mention of retroactivity or the new top rate of 13.3 percent in the summary!

Prop 30 Hits Entrepreneurs the Hardest

California’s entrepreneurs are hit particularly hard by Prop 30. Why? Because entrepreneurs often invest their life savings and go for years with a low or zero salary. Most start-up ventures end up failing in the end. But in those rare cases when something of great value is created and a meaningful liquidity event takes place (usually in the form of an acquisition or IPO), nearly all the money earned from the undertaking hits at one time. Instead of the income being spread evenly over the life of the company (the average time to exit for venture-backed start-ups is 7 or 8 years), a single once-in-a-lifetime event occurs such that eight years of income shows up in the single year, making entrepreneurs highly vulnerable to the top marginal tax rate.

Exhibit A of this phenomenon is Facebook, which might have been the impetus for Prop 30 in the first place. Thousands of workers toiled long hours and worked for low pay (at least in the beginning) to build one of Silicon Valley’s generational companies. When their deferred reward hit eight years later in the form of a $90 billion IPO, it proved an attractive tax target for California’s politicians. The only problem was that the IPO occurred before the tax hike, hence the need for the retroactivity in Prop 30.

What Prop 30 Will Mean for California’s Entrepreneurs

A precedent has been set with Prop 30. What would stop voters or legislators from passing a 100 percent top marginal rate extending back to 2010? You might scoff at the notion, but the state has now determined it can legally reach into individuals’ savings accounts and take money out on a whim.

This creates a feeling of fear, resentment and uncertainty — the worst possible environment for investment to take place. It discourages both angel and venture investing because it reduces the return on potential capital gains. Already, we’re seeing rumblings from investors, such as this tweet from prolific angel investor Scott Banister.

Dear Entrepreneurs: I promise that I will never again try to sell you on moving to California. Sorry.

— Scott Banister (@nist) November 7, 2012

I don’t think entrepreneurship overall will decrease — most start-up founders do it for the love of the entrepreneurial journey, or because they have a passion for a particular vision that they want to bring to fruition. But Prop 30 may just dampen enthusiasm for starting new businesses in California specifically.

Contrary to popular opinion, entrepreneurs aren’t crazy cowboys. In reality, we think carefully through risk-reward tradeoffs (John Dickerson does an admirable job covering the thoughtful risk calculations we made at my last start-up, Redbeacon, in this Slate article). Given the inherent risks entrepreneurs take just to start a new company, will they want to now take on additional tax and regulatory risk? The truth is, great tech start-ups can now be built almost anywhere.

It seems California’s population exodus may have begun already with a net migration of 3.4 million people out of California since 1990. Many of the people “voting with their feet” are the wealthy and productive classes we need to stay and rebuild the Golden State to its former glory.

Entrepreneurs are job creators, risk takers and innovators who generate new wealth. We know that small businesses generate nearly two out of three new jobs in the U.S., and we also know California is suffering greatly with the second-highest unemployment rate in the nation. So why would it kill the goose that lays the golden eggs? As bank robber Willy Sutton replied, when asked why he robs banks, “because that’s where the money is.”

Ethan Anderson is a Silicon Valley entrepreneur. He is a former Google Product Manager and the founder and CEO of Redbeacon, the 2009 TechCrunch50 winner, which was acquired by the Home Depot earlier this year.

Canada? Right. Canada. Recall that Chambers has long been a vocal critic of a U.S. policy that taxes corporate profits at 35 percent. Because of this policy, and because companies have a fiduciary responsibility to their shareholders to use their cash in the least-costly manner possible, companies like Cisco, Apple, Microsoft, and others have tended to leave what cash they generate invested outside the U.S. until such time as they can repatriate it at a lower tax rate.

Chambers took this argument to mainstream American TV viewers in an interview with CBS News correspondent Lesley Stahl on “60 Minutes” last year. Chambers told Stahl that without a lower rate, Cisco would be forced to invest more resources overseas, acquire more non-U.S. companies, and so on.

And he’s done what he said. For just one example, look at NDS, the Israeli video technology company for which it paid $5 billion earlier this year.

Yesterday, Chambers made a point of singing the praises of Canada, where he says Cisco will be taking more of its $45 billion in cash for the purpose of making investments in the coming year. First he said it to Maria Bartiromo on CNBC (see video below), and then on Cisco’s earnings conference call with analysts. And then he said it to me.

Here he is saying it to Bartiromo, but with a new twist: Cisco may take some of its bankroll to Canada, which he called “the easiest place in the world to do business. … We need to learn from them.”

Later on, Chambers repeated similar sentiment on Cisco’s conference call. Answering a question from Goldman Sachs analyst Simona Jankowski about the business environment in the face of the fiscal cliff circus that has everyone in Washington all riled up, Chambers quickly pivoted to U.S. tax policy.

I personally think the fiscal cliff, we’re going to work through that probably with little bit of saber-rattling on both sides. We’re looking more towards the tax policy and if the government is able to instill the confidence in business that allows and ready to invest.

If I would look at one model, we have to look at very carefully around the world it’s Canada, the easiest place to do business. It doesn’t matter which party is in power, even their provinces, their states. When the national government, Prime Minister Harper gets it the leaders in Ottawa will get it, they drive down through and make it very easy do business there. And you’re going to see us grow our business there as well as invest overall.

I asked Chambers about his sudden love of all things Canadian in a brief interview last night. “They have a great education system, and a predictable tax system,” he said.

It’s true: Canada has lowered its federal corporate tax rate to 15 percent, soundly beating the 35 percent rate in the U.S., which is now the world’s highest. Even President Obama is on board with the idea that that rate should be cut. But Chambers has $45 billion burning a hole in his pocket. And from all indications, business is looking up after a few tough years.

So here’s the second of my quarterly song selections, the additional song I promised yesterday: “Blame Canada,” from the “South Park” movie. Naturally.

That means another big payday for the two shareholders of the mobile venture, Verizon Communications and the U.K.’s Vodafone Group. And it also means avoiding a potentially painful rise in taxes in 2013, with the company saying the dividend must be paid out on or before December 31.

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In a regulatory filing today, seeking to steady its declining shares, Facebook said that its CEO and co-founder Mark Zuckerberg will not sell any of his over 500 million in shares of the social networking company, including to pay taxes related to compensation awards he receives.

The move is part of damage control by Facebook, whose stock closed today at $17.73, a new low. That’s more than 50 percent off its May IPO price of $38 a share.

In addition, the filing said that Facebook board members Marc Andreessen and Don Graham would also refrain from share sales, except to pay taxes.

Finally, the company said it would use cash or credit to pay about $1.9 billion in taxes due on the awarding of upcoming employee restricted stock units. Facebook could have sold shares to pay the bill, which might have further depressed the price of the stock. Facebook would not do anything to prevent most staffers from selling their shares.

More than 1.5 billion Facebook shares will be hitting the market over the next year, which has caused investors to shy away from the stock.

Facebook’s stock rose 1.75 percent on the news in after-hours trading, to $18.04.

Here is the full 8-K filed by Facebook:

FACEBOOK_INC_8K_20120904

The SEC’s investigation follows a suit filed against Sprint by New York’s attorney general in April, seeking $300 million for the carrier’s alleged failure to pay sales taxes due on some of its wireless plans over the past seven years.

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Conservative governors, joining their Democratic counterparts, have been making deals with online retail giant Amazon.com to collect state sales taxes. The movement picked up an important ally when New Jersey Gov. Chris Christie — widely mentioned as a potential vice-presidential candidate — recently reached an agreement under which Amazon would collect sales taxes on his state’s online purchases in exchange for locating distribution facilities there.

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Six years ago this month, I revealed in Businessweek that Apple had incorporated in Nevada where the corporate tax rate is zero. So I found the Times’ account — written by Charles Duhigg and David Kocieniewski, about the many financial tricks that Apple employs to minimize its tax exposure — to contain a lot of old news, but also some new, fascinating details. Who couldn’t love a phrase like “Double Irish With a Dutch Sandwich” to describe arcane accounting and legal tricks?

But the implication the story leaves a reader with — that Apple is somehow doing society a disservice by not paying its fair share of corporate taxes — is simply wrong on many levels. The most dubious of the lines that the Times attempts to draw is between Apple and the budget crisis at De Anza College, a Cupertino community college where Apple co-founder Steve Wozniak was once a student. The college is facing a “death spiral” because of a decline in funding from the state. This funding, the reader is led to conclude, would be more plentiful if corporations like Apple were to step up and pay, and not escape the tax bill by setting up an office in neighboring Nevada.

What the Times fails to make clear is how community colleges are funded in California. The picture is much more complicated. California community colleges draw the majority of their funding from the state’s general fund — which is drawn directly from the state’s personal and corporate income taxes — and from local property taxes collected by counties. As of the 2009-2010 budget cycle, these two buckets made up about 88 percent of the system’s funding. State lottery funds, federal funds and student fees made up the remainder.

Tax policy wonks — which I’m not — will remember that California was the birthplace of the property tax revolt movement in the 1970s. In 1978, California voters overwhelmingly approved a measure that limits the amount by which property taxes can increase each year. Since then, at least one estimate pegs the amount that the state’s taxpayers have avoided paying at north of half a trillion dollars as of 2009. In February, the property tax shortfall facing the state community-college system was $41 million. Conclusion: If there is to be blame for the shortage of taxpayer funding at De Anza College, a healthy portion of it should be laid at the door of California’s own voters and taxpayers, who in 1978 thought that property-tax limitations were a good idea.

I had a few other problems with the story. Take sales taxes. When you buy a Mac in New York, you pay a sales tax of 8.875 percent. For a base-level iMac, priced at $1,199, that works out to more than $106 in taxes. While some states charge no sales tax — Alaska, Delaware, Montana, New Hampshire and Oregon — the average sales tax in the U.S. works out to 9.6 percent.

Putting aside the fact that the average sales tax in Canada is higher, let’s assume that Apple’s North American sales of $38.3 billion in its fiscal 2011 were taxed at that rate, and do the math: We get $3.7 billion in sales taxes paid into the coffers of states and municipalities, except in those five states that have no such tax. That amounts to more than 1.5 times the $2.4 billion the Times says Apple would have owed the federal government. Factor in VAT and other similar taxes in the U.K. and throughout Europe, and you get the idea that Apple is generating tax revenue aplenty on the sale of its goods. Yes, those taxes are passed on to customers. But isn’t that the case with every tax a corporation making consumer products pays?

Finally, you may remember that earlier this year Apple released an extensive report on the number of jobs it had created and supported both through direct employment and in the orbit of the products it creates. It seemed an odd thing for Apple to release at the time, and now we know why: It reads almost like it was prepared by Apple in advance, knowing this story was in the pipeline at the Times. The final number, by its reckoning: 514,000 U.S. jobs are created by the Apple universe, including 47,000 employees; 210,000 jobs were created as part of the app economy, which didn’t even exist until 2008.

Assuming that each of those jobs pays a salary north of $35,350 a year, taxes collected on that income could range anywhere from 25 percent to 35 percent, depending on the income bracket. And that’s before accounting for any stock-based compensation.

At this point, the discussion turns to a deeper question: Is it better for society to have a company pay more in taxes, or to create more jobs? You can argue that had Apple not taken advantage of the various strategies it employed to pay less taxes, it might not have flourished as well as it has, and thus created fewer jobs. But people smarter than I will likely hash out the finer points of this argument in the coming days.

(Image is a screen grab from this silly Beatles cartoon built around the group’s song “Taxman.”)

With the deal, the Seattle-based company is on track to collect sales taxes in 12 states, which make up about 40% of the U.S. population, by 2016. Amazon currently collects taxes in five states. Since 2011, it has reached agreements with seven other states, including Texas, to begin tax collection over the next four years.

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Cisco appears to have continued its recovery following a painful restructuring. Sales are up and setting records, earnings beat the consensus of analysts, and Cisco’s outlook for the coming quarter is positive, too. Cisco’s even reached a point where it’s at least close to fitting into its old skinny jeans. What a difference a year makes. Last year it was all about gloom and doom and some irritable investors were calling for Chambers to lose his job.

Since then the company has undergone a painful but necessary restructuring, shed thousands of jobs, shut down marginal business units and refocused on its core businesses, and as yesterday’s quarterly earnings report proved, the results are not only starting to show, but starting to stick.

So is the work done? Definitely not. Yes, Cisco is showing some return to its strengths, but there’s still a long way to go. We talked about that, the troubles Cisco’s competitors are facing, his long-held view that companies like Cisco should get a tax holiday to repatriate their cash held outside the U.S. and many other things.

Also Chambers, remembering that I dedicated “How Ya Like Me Now” to Cisco last quarter as it turned the corner on its troubles, asked me what song I might use to characterize its results this quarter. Taking inspiration from the headline of my first story and from his cautiously optimistic tone, I settled on “It’s Getting Better All The Time,” the Beatles track, performed by Paul McCartney and embedded after the Q&A. Enjoy.

AllThingsD: John, I don’t know if you saw the headline I wrote earlier, but I said you fit into your skinny jeans again. Is that fair?

John Chambers: [Laughs] I think it’s fair. We were up about four or five inches there so I think we have an inch or two to go, but we’re getting close.

So let me ask about the quarter. It looks like a solid quarter where a lot of the troubles were starting to get behind you. In broad brush strokes, where were Cisco’s strengths? I know some of your competitors were having their own troubles, but where were you strong in particular?

The strengths were that we appear to be executing on the market transitions that are going on, and we appear to be reinventing ourselves, not just in terms of how we control our costs, but in terms of the productivity we’re getting out of our employees. So if you look at the major transitions going on in the industry from an economic point of view, to how customers buy, to where the high tech industry is going, which I would argue is all connected to intelligent networks, that all appears to be playing out as we had hoped. The other transitions that you think about, like data centers and the cloud, we saw 90 percent growth in an industry that is growing at best in the teens. Our ability to move in collaboration, where we grew 10 percent though I think we could do better — it remained solid for us. In video with set-top boxes up 23 percent to new video technologies growing well and seeing improvement in the margins. There are things we need to do to reinvent Cisco. I think I said this at your own conference a decade ago [Chambers spoke at D5 in 2007, but that is not where he made this comment. -Ed.] that voice will be free. It’s almost there. You could see the trend, and what it meant is that once voice would become a smaller part of the network load, that would be given away in order to make way for the video and the entertainment. The same trends are taking place all over again at multiple speeds and multiple gears, which if we’re right, they all play together. Everything from mobility to cloud to the intelligent network, to wireless to security, to video being pervasive, all of those are coming together at tremendous speed. And we’re pulling them all together pretty well for our customers. Now, this is just the beginning if we execute right, and we have plenty of hurdles in front of us, but this may be the voice-will-be-free trend times 10 in terms of the impact of the transitions going on. We appear to have managed them well; we did what we said we would do, turned in record earnings and record revenues, and earnings per share were up 48 percent. We’ve realigned ourselves and reinvented the company, which I think you have to do every five years. Sometimes it takes a crisis to reinvent. … It’s a journey and we’re just getting started.

What’s the number one hurdle that you want to get over this year, that’s in front of you right now and keeping you up at night?

I want to build deeply into our capabilities, a continued focus on gross margins and effectiveness, from product design to sales all integrated together. You probably know this, but we’re the only company who’s anywhere near this profitable with $45 billion in sales with open standards. It isn’t a mainframe business where everything is proprietary or like in Apple’s situation where it’s a wonderful company but it has an architecture. We do it entirely with open IP, so we can be challenged by a 10-person start-up or a by the biggest giants like Dell or IBM or Hewlett-Packard to come at us. With this type of margin but so low a barrier to entry, we’re doing relatively well. But we still have to reinvent ourselves at a faster pace. We have to do what I call the basic blocking and tackling to participate in the new capitalism that we’re heading into. That’s the attention to gross margins, getting the market transitions right, tying the products together so you can get the price premium on them. But what really keeps me up at night this last year was the realization that this has to be constant reinvention. Average is over. An average high-tech company is headed down. Those above-average companies are going to head down in 3 to 5 years. If as a company you can’t reinvent yourself every 3 to 5 years, you have a problem coming at you.

Does that then imply that Cisco had become complacent or even average? It was and is the biggest networking player, but did Cisco lose its way and try to do too much?

Well, I could give you a long list of things we have to do better. We’re a healthily paranoid company so we always have things we could do better. I do think we were fat. Four to five inches, not just one or two. We’re not back in our skinny jeans yet, as you put it, but we’re within an inch or so of getting there. We missed market transitions at the speed at which they occurred. We should have seen the drop-off in public spending coming at us sooner. Everyone else has still run off the turn, even though they saw what happened to us two to four quarters ago. We should have seen it sooner and reinvented ourselves before it hit us, and made the turn much more effectively, and I’m committed to doing that, and the leadership team is, too. It would have been easy to just cut a billion dollars in expenses, reorganize sales and how customers buy. We realized that gross margins can deteriorate not just because of what competitors do but what we do to ourselves, like what we did on switching. We should have been smarter there.

On the conference call you mentioned the possibility of getting back into the mergers and acquisitions game. Any hints on where you might go or whom you might buy?

I think it’s a fair question. Part of the reason we said that was to explain why we’re building up cash in the U.S. Part of it was for share buybacks because the price was attractive. A lot of people don’t realize that we use M&A deals to gain leadership. We were a routing company, we acquired three switching companies. We were an enterprise and commercial company, we acquired a service provider company in Stratacom. If you look at where it’s going to be, it’s probably in data center, collaboration and video, and combining those with security, bring your own device and mobility. A large part has to do with our government allowing us to bring money back to our country.

That’s always been a big issue of yours. You made some comments about it on the conference call as well. Care to elaborate?

I think that it’s going to happen in the next presidential administration whether the president is re-elected or someone else is. I’ve been disappointed that we haven’t been able to get our message out about this more effectively. Ironically, I was in Europe, the government leaders there look you right in the eye and ask what they need to do to bring jobs to their country and keep the ones they have. They are partnering with business. I think we’re following Europe in the wrong way and following more of what they did to get them in trouble in the first place.

There’s a bit of a disconnect, however, to anyone who sees on one hand a company that wants to bring cash back in a tax-advantageous manner in the name of creating jobs, while the same company just fired so many people in the restructuring. Can you connect those dots for the person who sees the apparent logical disconnect? If it’s about jobs, then why are you firing people in the first place? If you were having lunch with President Obama or any other political leader, they might be confused, so how do you explain it?

They’re related. The first thing you’ve got to do when you hit bumps in the market is find out how much of the damage was self-inflicted and how much was the result of the conditions of the market. It would be a cop-out to say it was all the general market. We had to look at what we were doing internally. Every government leader in the world who’s adding to government payrolls and adding government debt is going in the wrong direction. We have to use technology to deliver services better. You do see most government leaders saying they want to get their own houses in order. The second thing they do is look at ways to generate private sector jobs. I’m a strong Republican, but I think President Clinton got it right with business and knocked the ball out of the park. He partnered with business, he was critical where appropriate, but in six years he generated 22 million jobs, grew GDP on average by 4 percent per year, and he was America’s champion on the Internet. I think that’s a more practical example. He grew private sector employment versus government employment by a ratio of 9 to 1, and created a positive climate for business, and when business got out of line he’d whack ’em. I think it would be a major mistake not to let companies repatriate their cash because whoever is in the Oval Office next year is going to want to get private sector jobs growing again, and there really aren’t very many levers left to pull. We’ve never had this slow a recovery after this deep a recession.
–

Getting Better – Paul McCartney

The Internet pioneer has been exploring a potentially tax-free way to dispose of its roughly 40 percent stake in the Chinese e-commerce company Alibaba Group Holding Ltd., according to people familiar with the matter.

The strategy, known as a “cash-rich split-off,” could let Yahoo shed its stake in Alibaba, recently valued by Yahoo at about $14 billion, without paying taxes on the profit from a sale. The tax savings could amount to about $5 billion.

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Oracle instead used foreign profits it brought back to the U.S. at a lower tax rate to acquire two companies and halve the work force at one of those firms, Mr. Levin told reporters Tuesday, one day after the Democratic staff of the Senate Permanent Subcommittee on Investigations released a critical investigation of the 2004 repatriation tax holiday. Mr. Levin is the chairman of the subcommittee.

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The 79-year-old founder of the ComputerLand Corp. retail chain was last seen by tax authorities on the remote Pacific Island of Saipan, where he lived, in August 1990. A few years after selling his company, the man once listed as one of the richest people in America suddenly vanished.

Until now. The U.S. Commonwealth of the Northern Mariana Islands, of which Saipan is a part, has tracked Mr. Millard and his wife to a yellow mansion on Grand Cayman Island in the western Caribbean, according to court filings and attorneys working on the case.

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The bill requires that online retailers charge sales taxes on purchases even where their “presence” is not physical but through affiliates. Amazon had warned participants yesterday that it would have to turn off the program later this year if the bill was signed, and Gov. Jerry Brown made it official later in the day.

There’s some question as to whether the law will be challenged in court on the grounds that it violates federal law, because it is broader than similar laws that have led to Amazon cutting affiliate programs in Connecticut, Arkansas and other states. In states where it has a physical presence, such as its Washington home base, Amazon does charge sales taxes.

In a statement, Paul Misener, Amazon VP of Global Public Policy, said, “This legislation is counterproductive and will not cause our retail business to collect sales tax for the state.”

The big-box stores are backing a coalition called the Alliance for Main Street Fairness, which is leading efforts to change sales-tax laws in more than a dozen states including Texas and California.

Until now, the group has been largely associated with mom-and-pop stores, spotlighting stories of small toy shops and booksellers who argue Internet merchants that aren’t legally required to collect sales taxes enjoy an unfair advantage with shoppers.

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In video released by The White House today, he talks about the IT spending by the federal government. Naturally, lots of projects are behind schedule and over budget. In 2009, the government launched an IT Dashboard that was meant to expose all the government’s bit IT projects to the light of day and review them. Kundra tells us that out of 38 projects reviewed, four were canceled and 11 were reduced in scope for a total savings of $3 billion.

Clearly the government has a bit of a problem spending its IT funds effectively. The dashboard is the public face of a review process that helped get some of that spending under control. It brings some accountability to the federal IT process, adding the name and photo of the agency CIO responsible.

Using this dashboard tool, The Obama Administration says it has identified under-performing high priority IT projects, which in turn brought them under intensive review. Projects that had run too far off the rails were cut off, others were re-jiggered. The result, the government says, has cut in half the time it takes to finish projects like new biometric technologies for law enforcement and easy access to cargo inspection systems for Border Control agents.

I certainly sympathize, having seen IT projects in the private sector spin out of control relatively easily, but yikes. The taxpayer in me doesn’t like the size of the amounts being thrown around. One thing I have to wonder about, since Kundra doesn’t address it, is personnel ramifications. In the private sector, when you can’t manage your projects and budgets effectively, you lose your job. Did that happen here? Or are the same people responsible for running massive IT projects that weren’t delivered on time or on budget going to be in charge of the next one?

Kundra said in a panel discussion in Washington DC yesterday that the government plans to give detailed reports on the state of its IT spending every six months as part of a 25-point IT reform plan he put forth last year. The plan includes extra flexibility in spending decisions for federal CIOs, and a strategy to shift about $20 billion in federal IT spending to cloud services.

They’ve been working on this particular scam for many months. Jeff Horne, director of threat research for anti-virus vendor Webroot, says an email account he set up to attract and study these types of email has received over one million phony tax-related messages since November.

These cyber-crooks also begin publishing malicious sites early in the tax season, with pages that allow people to download IRS forms for filing. “They automatically deliver the malware without you even realizing it,” said Horne. Whether delivered via email or a visit to a malicious site, the viruses lurk on your hard drive looking for keywords related to tax filing, such as social security numbers, street addresses, employer names and income, and then sends it back to the cyber-crooks.

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“TurboTax is the first and only app that lets taxpayers prepare and e-file their federal and state tax returns using only an iPad,” Intuit said in a blog post. “So now you can tap, tap, tap your way to a refund.”

No word on what happens if you swipe.

TurboTax for iPad hopes to follow in the footsteps of Intuit’s SnapTax for iPhone which had more than 350,000 downloads in its first two weeks on the market.

Separately, H&R Block announced a deal with online finance service Pageonce on Monday that will allow its do-it-yourself tax filers to check the status of their refunds from within the Pageonce mobile app. The company noted that the IRS offers similar data on its Web site, but said that site is updated less frequently and that it takes at least 72 hours before that info shows up on the government site. Intuit also has a refund-tracking app called MyTaxRefund.

The IRS even has an app of its own. IRS2Go, for both Android and iPhone, lets users track refund status and get other information straight from Uncle Sam.

Despite the proliferation of tax apps, the Mobilized household is headed to a real-life accountant this week to prepare our taxes. But if we get a refund, we just might spend it on an iPad 2.

Walmart.com said Wednesday that it “welcomes Amazon and Overstock California affiliates,” or websites that direct traffic to the online retailers. The move comes after Amazon said late last month that it would cut ties with California affiliates if legislators passed a law that would require Amazon to collect state sales tax because of its relationship with the affiliates.

The Seattle-based online retailer has already battled other state governments over the issue. Amazon has already ended affiliate programs in Hawaii, North Carolina and Rhode Island, after those states passed similar legislation. It is also fighting a court battle over the issue in New York.

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