eyes glaze over

I know your eyes glaze over but I want to go over our corporate tax policy and explain why Obama’s corporate tax plan is bad business.

Suppose an American company wants to make widgets in Ireland. And let’s suppose a German company has the same idea. Suppose they both build a factory and sell a bunch of widgets and each show a profit of 10 million. The German company will pay the 12.5% corporate tax that Ireland requires and then brings that money back to Germany. They can invest in more research, hire more people or just pay a dividend to their shareholders. The American company has to take another route. If they try to bring this money back, they are subject to State and Federal taxes. Federal is 35%, average State tax is 3%. They get a credit for the tax they paid Ireland but it is still substantial. So rather than bringing this money home and investing it in the U.S., they leave it overseas for additional investment in Ireland. The estimate is approximately 10-13 trillion that is held overseas.

Now Obama wants to tax corporations whether they bring these funds back to the U.S. or not. The only recourse will be for corporations to move their corporate headquarters overseas where their money remains untaxed from the 2nd highest corporate tax in the industrialized world. I would prefer to remove the tax burden and let this money funnel back here so that it can stimulate the economy.


14 Responses to “eyes glaze over”

  1. urstupidnourstupid Says:

    Hmmm…so maybe they won’t make widgets in Ireland. Maybe they’ll find that it’s better to produce them in Nebraska where they should be.

    Yes we have a high corporate tax rate. But companies also reap the benefits of doing business in America–and have lots of lawyers and loopholes to help avoid paying those taxes.

    I’m sure Obama never even thought of your idea. You should send him an email. 🙂

    Let’s look at some of the world’s highest tax rates:
    And some of the lowest:
    Slovak Republic–19
    Now let’s look at some of the world’s largest economies:

    So which do you prefer? Hmmm…it makes one wonder. Why can’t you be satisfied with living in the greatest country on earth, with the largest GDP, and the best opportunities instead of griping about corporate tax rates being too high? We are ranked number one! Obviously something is working!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  2. urstupidnourstupid Says:

    Because I am a progressive and I am open to new ideas that will make things better. I guess I’m just more flexible in looking at different ways to make our economy more efficient.

    And this move won’t have the desired effect you are looking for. Maybe some will move to Nebraska but most will either move their corporate headquarters overseas or pay the tax (and be less competitive).

  3. urstupidnourstupid Says:

    Obviously that is not the case. There are thousands more American companies in America than in Ireland or other countries.

    Makes you wonder how American companies like Google and Microsoft and Coca-Cola and Disney and Starbucks and Amazon ever stay in business. How do such companies ever make a profit with such OPPRESSIVE tax rates? And what’s that you say…they are industry leaders? Dominant internationally? And based in the US? Come on…

    Seperate question:
    If a company has sales of $1 million, is it better for the ECONOMY to have the employee earn $150,000 in salary or $100,000–thus leaving the company a profit of either $850,000 or $800,000?

  4. urstupidnourstupid Says:

    The question doesn’t make sense in a competitive, capitalistic environment. It only make sense in government controlled, socialistic environment. There are only a couple of different reasons why you would pay someone 150k versus 100k. The first one would be that if you employed this person at 100k, they could market themselves to competitors who are willing to pay more. The other reason would be that this person’s unique skill set would increase profitability so that the firm makes more money. In your example it would be someone who would increase sales greater than $1,0050,000. There is a constant supply and demand tug of war in the marketplace where corporations have to pay people enough to want to stay and where they can attract good workers. The worker on the other hand can choose to go elsewhere if higher wages exist. It is the beauty of capitalism. The wage rate is always going up and down around the natural equilibrium. It’s what makes corporations efficient and produce the best product at the least cost. That is why unions are bad and governments don’t have the same incentives for maximizing profit. For example on most government funded projects, the prevailing wage is set which contractors must pay their workers. These rates are always much higher than what is typically paid. Skill set and experience are not included in the formulation. Ask anyone in construction if they have ever been on a project that paid prevailing wage. Their eyes will light up and they will brag about how much money they made on that project.

  5. urstupidnourstupid Says:

    Let me rephrase it then–make it simpler. Is it better for the economy as a whole–on a macro level–for an employee to have cash in his account, or for the company to have that cash in its account? The CEO can give a $20,000 bonus or he can give a $10,000 bonus. Which is better?

    Or in your example:
    So the guy making prevailing wage earns an extra $5000, let’s say. And the government–in this case–is out $5000. So the worker can maybe now finally afford a new car–which leads to a bonus for the salesperson–who then takes his wife to a nice dinner and leaves a nice tip for the kid waiter who can now afford to by a new iPod, etc, etc.

    Or the gov’t keeps the $5000 and, on a macro level is able to reduce the construction worker’s taxes so that now he can finally afford a new car–which leads to a bonus for the salesperson–who then takes his wife to a nice dinner and leaves a nice tip for the kid waiter who can now afford to by a new iPod, etc, etc.

    You see my point?

  6. urstupidnourstupid Says:

    In your first question regarding the bonus, the answer would be whatever is in the best interest of the company. The money might be better spent giving the employee a bonus so that the employee is happy and does not seek other employment. On a macro level, business will determine this efficiently. They won’t pay a bonus of 100,000 if 20,000 will have the same result. So society is paid for the correct amount which is based on what they can produce. People are paid for what they are worth which is fair, just and egalitarian.

    In the prevailing wage example, this worker is making an extra $5000 because he is fortunate enough to be on a federal project and someone else is not. So the worker building tract homes is being paid exactly what they are worth (on a macro level). This will be determined by assessment of skill, experience, demand, supply, etc….

    So the next two questions are who is paying for this income redistribution and how can you trust that this is being properly set and not based on political favors, etc….

    Well you and I are paying for it and/or the next several generations. We are being paid properly for what we produce but must shoulder the increase in wage to the worker on the federal project.

    The “invisible hand” of capitalism will always make the correct decision in wage expenses and any other business decisions unless the government is involved (on a macro level). A big government philosophy is a belief that they can make better decisions than capitalism. It’s just not even remotely possible. So lowering taxes and letting federal contractors pay market rate would be the fairest way to distribute that 5000 and most efficient.

  7. urstupidnourstupid Says:

    Income redistribution? Man you are dyed in the wool. I’m not a union fan, mostly because of the way they protect lazy and/or bad workers, but as a capitalist you should think that a person should be able to get as much money as possible, be it through an agent, a union, negotiations, whatever. Don’t you think big military contractors should make as much as possible, even if it is the gov’t that is paying? They are private businesses after all. Why should they not get as much as they can–the more they get, the more they can invest, the better off their workers are. I think your philosophy is a little skewed. If the gov’t–or anyone–accepts the proffered bid, then that is capitalism. If Boeing says it needs 2 billion to build a war plane, and they have union workers, and the gov’t says ok, that is capitalism. You make it seem as if capitalism is a “true, pure” entity and organization is a “false, unnatural” entity. Again, I’m playing devils advocate because I’m not a big union supporter, but who am I to say people can’t negotiate from a position of strength through numbers? You’d negotiate your salary I assume.

  8. urstupidnourstupid Says:

    Well I think the demise of the U.S. car companies pretty much cover that. And unions are profoundly bureacratic in nature which make doing business with them anti-competitive. It’s not just wages and benefits. Its how you do business. There are hundreds of crazy rules that make it very difficult and expensive to produce and provide services.

    As far as the term income redistribution. What else would you call taxing one person and paying someone else above and beyond what they are worth? Do you have a less offensive term that clarifies this?

    I’m not sure what your question regarding big military contractors has to do with this. Assuming that it is a competitive environment then they will compete for that contract and make as much money as possible. The better they do containing costs while producing the product, the more money they make. If they didn’t have union workers then the bids would be lower.

    As far as a true entity versus a false entity I’ll say this. Companies that compete for goods and services will always provide the best product at the lowest cost (on a macro level). Government cannot do that because there is no competition and no profit motive. It doesn’t mean that government can’t provide good services but it can’t compete in the open market.

  9. urstupidnourstupid Says:

    I don’t care that you call it income redistribution–makes no difference to me. But a capitalist such as yourself should call it getting as much as you can. If someone gets paid “above and beyond what they are worth” then you are undermining your arguement totally, because what the market will bear, by definition of capitalism, is what a person is worth. Do you think NFL rookies are worth $3.2 million, or is that “above and beyond what they are worth”? Obviously not–because somebody paid him that much so he must be worth it to that particular team’s owner!! You always defend huge bonuses for executives, saying “well he’s worth it because he brings in a profit” so you can’t have it both ways. I think I got you on this one.

  10. urstupidnourstupid Says:

    You are completely missing the point. Getting as much as you can means getting as much as you possibly can based on capitalism, not a government mandate to overpay. When I say capitalism I mean based on the supply of your skillset and the demand of your skill set. Not by government setting wages too high. Using the NFL is a terrible example of the overall marketplace. It is a very unique business model.

    An executive bonus for doing a good job or just to keep good people from leaving has nothing to do with a prevailing wage rate. If you don’t see that then there is no way that you can understand how the free market works.

  11. urstupidnourstupid Says:

    I know how the free market works–you just get mad when I start punching holes in your pefect theory. The NFL is one business model. Government contracting is another business model. Mortgages are a business model. Medical insurance is a business model. It’s all capitalism. Not just when it matches your idealogy. That’s what happens when you are too idealistic. Labor organization is part of the equation. It’s the same thing with group insurance policies effecting prices. Or is that not a “good” model?

    If government “overpays” then it is not true capitalism–it is an aberration. If private business overpays…well…private business can’t overpay because it is pure and adheres to supply/demand and what the market bears. That’s ridiculous.

    Whoever ends up with more money (employee or employer), is going to spend or invest that money. The important thing is that the money flows; circulates to all sectors, people, and businesses.

  12. urstupidnourstupid Says:

    Circulation has nothing to do with this conversation. Am I really doing that bad of a job explaining this or are you just messing with me?

  13. urstupidnourstupid Says:

    The original question was, what difference does it make to the economy who (employer or employee) ends up with a specific portion of the pie. And I’m trying to say that it doesn’t matter because both will spend, save, or invest the money (it will circulate). Got it?

    Then you got into some crap about prevailing wages and unions not beiong part of capitalism…blah…blah…blah…

  14. urstupidnourstupid Says:

    I guess we will agree to disagree but what I’m saying is that it has everything to do with it. You have pulled out the beating heart and you are looking at it like a galstone.

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