Time for an audit of Microsoft's 'Apple Tax'

Microsoft is back touting the "Apple Tax" that it says Mac buyers are paying, this time filling out a fake tax return listing all of what it claims are the extra costs of opting for Windows' leading rival. But I'd argue that this time Microsoft is in danger of being audited.

The document, posted on Microsoft's Windows Blog on Thursday, compares the cost of a PC and Mac purchase, making the case that buyers can save more than $3,000 in buying two Windows PCs as opposed to two Macs. The "tax return" is based on a Microsoft-paid-for white paper (PDF) from technology analyst Roger Kay.

While I don't take issue with Microsoft's basic point that Macs can be more expensive, the assumptions in the white paper and the blog strike me as suspect.

Kay looks at the five-year cost of buying the two machines and making a series of upgrades along the way, as well as buying certain software and services.

The paper assumes we are talking about Windows switchers who already have two licenses to Quicken and Microsoft Office, so Kay adds $70 and $149 for the Mac side and assumes zero cost on the PC side. Even if that were true, that makes the assumption that users would not want to upgrade their software.

But Kay makes a different assessment when it comes to Apple's iLife, which is included in the cost of a new Mac. In his five-year cost analysis, Kay adds a $99 upgrade of iLife in year three, something that is optional, rather than mandatory.

On the services side, Kay adds a three-year warranty to the PC and AppleCare on the Mac side. AppleCare is somewhat more than Dell's warranty. Fair enough.

Then, Kay also includes Apple's one-on-one, in-store consulting service, for which there is no PC parallel. One could even argue that the PC buyer should have to add in a cost for the Geek Squad service that removes crapware from a Windows machine.

The analysis also includes Apple's definitely pricey, but also totally optional MobileMe service. Although Microsoft has its free Windows Live services on the Windows side, cost-conscious Mac users can also use a variety of free services from Google, Yahoo, or even Microsoft itself.

I talked to Roger Kay about the analysis he did, which was commissioned by Microsoft. Kay said he had already shaved from his analysis some of the costs that were presented to him by Microsoft.

"If there's a couple more in there, I wouldn't be surprised," he said, referring to my quibbles. "If I found another $500 (in savings) it wouldn't change things much."

On the hardware side, Microsoft has its clearest case of being cheaper, but again, Kay and Microsoft overplay their hand. For a desktop on the Mac side, Kay goes with Apple's professional Mac Pro desktop. Now, to be fair, there aren't a lot of Mac models to choose from, but the far less costly iMac is really the company's only consumer desktop line.

"You could have chosen another machine," Kay said. But with PCs, he said, you get to shop around. "That particular piece of the economics seems to hold up pretty well."

Microsoft first started touting this idea of an Apple Tax in an interview last October. I'd argue, as I have, that the tax exists, but it is one that the average buyer knowingly pays for what they perceive as the differences between the PC and Mac experiences. In any case, the economic differences, while large, aren't as big as Kay and Microsoft make them out to be in this study.