Taxes, Corporate Taxes, Multinational Corporations, Tax Policy, US Workers, 2009 Tax Proposal, Obama Tax Proposal
May 8, 2009 and the Weekend Edition.
Today's Zinger:
A Good Rider Knows How To Get The Most Out Of Their Mount Without Using The Whip
or
Whip Me, Beat Me, Tax Me More
The Morning Briefing:
There is no question the American worker is being displaced by workers overseas. It is also true that American multinational companies take advantage of tax loopholes and their multinational status to avoid paying U.S. taxes. But, U.S. corporate taxes are second highest in the world and the American employee is losing their competitive edge. Companies are using whatever means necessary to stay competitive in a global economy. The U.S. government is proposing new taxes to encourage companies to “stay in the U.S.” and hire more American workers. The government’s idea of partnering with business to improve competitiveness is tax and punish until they get compliance. This is going to lead to more companies moving offshore.
The Facts:
The Discussion:
We have all heard how corporations are leaving the United States to incorporate in places with lower taxes. We have also heard how these same multinational companies are displacing American workers with foreign labor. Isn’t this dishonest? Shouldn’t we put an end to this kind of behavior and protect American jobs and ensure that these companies pay their fair share in taxes?
The Obama administration has taken direct aim at multinational business. It recognizes that most Americans are mad about the loss of jobs to cheap labor oversees and they are mad at “big business” acting without regard to its U.S. citizens. Many Americans feel that these companies are traitors. Why is it that the average American has to pay taxes but these big companies get to avoid taxes? The Obama administration understands American sentiment and has developed a tax proposal to deal with the corporate and employee migration while playing to American feelings.
According to the administration, the goal of the proposed tax policy is to help create new jobs in the United States and make the tax code fairer. All told, the administration said the changes would raise $210 billion in tax revenue over 10 years.
"I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens," Obama said in a White House announcement.
So how does the new tax proposal allow multinationals to be more competitive? President Obama has said that he wishes to eliminate a deduction for American companies when they invest in subsidiaries outside the United States.
American companies have hundreds of thousands of employees in wholly owned subsidiaries outside the United States. Technology has made just about any job independent of the location of the job. Therefore, a scientist can be sitting in France working on drug development with colleagues in Germany, Japan and the United States. A customer service representative can be answering the phone in India for a bank located in St. Louis, Missouri and an electrical engineer can be developing a computer chip in Thailand for a Chicago based company. In addition to access to global skills, many companies are expanding their sales, marketing and distribution capabilities to take advantage of the fast economic growth and expanding middle class in countries all around the world (such as China, India, Korea). This is the reality of the global marketplace.
Companies in a capitalist society are not governments. They exist to make a profit for their shareholders. They do not exist to wave the American flag, train Americans, employ Americans and fill the federal government's revenue coffers. If a company sees opportunity in other countries, they enter those markets in the most efficient and profitable way possible. Using local employees, keeping capital in the country where they operate, and hiring skilled workers in the most reliable and cost effective manor possible are basic tenants of good business practice. Only in a socialist or communist society does a company operate for the benefit of the citizens through the direction of the government.
Americans do not like the fact that companies are going off shore. Many Americans feel cheated and abandoned. Knowing American sentiment, the Obama administration has stepped in. The government has proposed raising taxes on job creation outside the United States. I anticipate that there will be higher taxes on earnings retained outside the United States as well. The language they use is “keep jobs in America. Help business grow. Help business be competitive”. These are all just words. The government's actions do not result in their stated objective. The government acts like a bad parent. The child does something that the parent doesn’t like so we punish the child into submission, saying this is for your own good rather than encouraging and creating the environment for the child's success.
The administration is applying a corporate chastity belt to ensure the company remains faithful to the United States. This policy is not designed to protect the American worker just as a chastity belt was not designed to protect the woman required to wear it. The chastity belt provides a sense of security to the person that locked the belt in place that the woman will not be tempted by other potential suitors. The Obama administration is looking to punish companies that turn an eye to a more desirable lover. This is another case of the administration saying what the majority wants to hear.
Unfortunately, most Americans know nothing of how corporations work. Most Americans know nothing of the multinational tax code. Most Americans feel the symptom of bad policy but do not understand the cause and are happy that the administration is finally reacting to their pain, albeit, through bad policy.
So, to all Americans, please take note. The reason companies migrate offshore is because corporate taxes are too high in the United States and there are more qualified, cost effective and harder working employees to be found in other parts of the world. Technology has freed companies to take advantage of better opportunities. The government doesn’t want to deal with the core issues because this is not what most Americans want to hear and it is far more difficult to deal with the real issues.
A good parent understands how to shape behavior by encouraging a child and providing the environment for success. A bad parent will yell and scream and punish a child to achieve the behavior that they are looking for. Like a bad parent, the federal government doesn't seem not know how to encourage and create the environment for success nor can they face the fact that the child behaves they way they do because of bad governing.
So, rather than lower corporate taxes (which are the second highest in the world---yes, that is true) and fix the sorry state of our education system (40% drop out rate and college costs beyond the means of most Americans), and build a positive work ethic, the government has decided to force compliance on companies to create jobs in the U.S. by taxing them if they go offshore. Isn’t it ironic the administration wants the U.S. tax code to encourage companies to hire US workers yet does not to protect U.S. workers from illegal immigrants taking American jobs? I guess that's because there are 16 million illegal aliens that can become voters while there are only thousands of multinational corporations that can't vote.
Conclusion:
This proposed tax policy is naive and punitive. In the global economy, it is important that our government learns how to partner with business to enable global competitiveness. Forcing compliance (or as they say encouraging growth) of U.S. companies through restrictive tax policy will not help global competitiveness. The Constitution of the United States permits the Federal government the authority to tax and to regulate commerce. Unfortunately our government interprets regulate as a way to constrict and control and restrain. The founding fathers used the term regulate to mean to keep regular. Their intention was for government to enable business to flow smoothly. Our government sees its role as a controller and overseer as opposed to an enabler or partner.
There is an important role for government in this new global economy. Either the U.S. administration has not realized that becoming a partner to business is critical to global competitiveness and creation of jobs in the United States or they are responding to the vast majority of American that are uneducated in global competition. In this administration, business is a inanimate object that can be criticized and demonized without retribution. The government wishes to use the chastity belt rather than “showing the love”. Bad Parent, bad partner, bad lover. U.S. companies will reach a point where they will say “I want a divorce” and leave the US for greener pastures in other countries. This is exactly what many companies have done and are doing. I was a Partner in a multinational that moved offshore due to global effectiveness and U.S. tax policy.
Taxed compliance will drive companies away, not encourage them to stay. This is trade barriers in patriotic wording.
Post Script:
For all of the "I hate business readers", government policy that enables global competitiveness does not imply unregulated business. Just like Secretary of State Hilary Clinton said of our international policies, "We need smart policy". This is true for international affairs as well as international trade.
Today's Zinger:
A Good Rider Knows How To Get The Most Out Of Their Mount Without Using The Whip
or
Whip Me, Beat Me, Tax Me More
The Morning Briefing:
There is no question the American worker is being displaced by workers overseas. It is also true that American multinational companies take advantage of tax loopholes and their multinational status to avoid paying U.S. taxes. But, U.S. corporate taxes are second highest in the world and the American employee is losing their competitive edge. Companies are using whatever means necessary to stay competitive in a global economy. The U.S. government is proposing new taxes to encourage companies to “stay in the U.S.” and hire more American workers. The government’s idea of partnering with business to improve competitiveness is tax and punish until they get compliance. This is going to lead to more companies moving offshore.
The Facts:
- According to the AFL-CIO, since 2001, the nation has lost more than 2.5 million manufacturing jobs and more than 850,000 professional service and information sector jobs to overseas. Various independent estimates indicate the number of white-collar jobs lost to shipping work overseas over the past few years is in the hundreds of thousands and millions are at risk in the next five to ten years.
- The United States has the second highest corporate tax rate in the world.
- Multinational companies use accounting methods (like transfer pricing) and tax loopholes to avoid paying some corporate taxes in the United States.
- The American unemployment rate is now over 8.5% and the government is looking for ways to increase US employment and decrease federal deficits through improved tax collection
The Discussion:
We have all heard how corporations are leaving the United States to incorporate in places with lower taxes. We have also heard how these same multinational companies are displacing American workers with foreign labor. Isn’t this dishonest? Shouldn’t we put an end to this kind of behavior and protect American jobs and ensure that these companies pay their fair share in taxes?
The Obama administration has taken direct aim at multinational business. It recognizes that most Americans are mad about the loss of jobs to cheap labor oversees and they are mad at “big business” acting without regard to its U.S. citizens. Many Americans feel that these companies are traitors. Why is it that the average American has to pay taxes but these big companies get to avoid taxes? The Obama administration understands American sentiment and has developed a tax proposal to deal with the corporate and employee migration while playing to American feelings.
According to the administration, the goal of the proposed tax policy is to help create new jobs in the United States and make the tax code fairer. All told, the administration said the changes would raise $210 billion in tax revenue over 10 years.
"I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens," Obama said in a White House announcement.
So how does the new tax proposal allow multinationals to be more competitive? President Obama has said that he wishes to eliminate a deduction for American companies when they invest in subsidiaries outside the United States.
American companies have hundreds of thousands of employees in wholly owned subsidiaries outside the United States. Technology has made just about any job independent of the location of the job. Therefore, a scientist can be sitting in France working on drug development with colleagues in Germany, Japan and the United States. A customer service representative can be answering the phone in India for a bank located in St. Louis, Missouri and an electrical engineer can be developing a computer chip in Thailand for a Chicago based company. In addition to access to global skills, many companies are expanding their sales, marketing and distribution capabilities to take advantage of the fast economic growth and expanding middle class in countries all around the world (such as China, India, Korea). This is the reality of the global marketplace.
Companies in a capitalist society are not governments. They exist to make a profit for their shareholders. They do not exist to wave the American flag, train Americans, employ Americans and fill the federal government's revenue coffers. If a company sees opportunity in other countries, they enter those markets in the most efficient and profitable way possible. Using local employees, keeping capital in the country where they operate, and hiring skilled workers in the most reliable and cost effective manor possible are basic tenants of good business practice. Only in a socialist or communist society does a company operate for the benefit of the citizens through the direction of the government.
Americans do not like the fact that companies are going off shore. Many Americans feel cheated and abandoned. Knowing American sentiment, the Obama administration has stepped in. The government has proposed raising taxes on job creation outside the United States. I anticipate that there will be higher taxes on earnings retained outside the United States as well. The language they use is “keep jobs in America. Help business grow. Help business be competitive”. These are all just words. The government's actions do not result in their stated objective. The government acts like a bad parent. The child does something that the parent doesn’t like so we punish the child into submission, saying this is for your own good rather than encouraging and creating the environment for the child's success.
The administration is applying a corporate chastity belt to ensure the company remains faithful to the United States. This policy is not designed to protect the American worker just as a chastity belt was not designed to protect the woman required to wear it. The chastity belt provides a sense of security to the person that locked the belt in place that the woman will not be tempted by other potential suitors. The Obama administration is looking to punish companies that turn an eye to a more desirable lover. This is another case of the administration saying what the majority wants to hear.
Unfortunately, most Americans know nothing of how corporations work. Most Americans know nothing of the multinational tax code. Most Americans feel the symptom of bad policy but do not understand the cause and are happy that the administration is finally reacting to their pain, albeit, through bad policy.
So, to all Americans, please take note. The reason companies migrate offshore is because corporate taxes are too high in the United States and there are more qualified, cost effective and harder working employees to be found in other parts of the world. Technology has freed companies to take advantage of better opportunities. The government doesn’t want to deal with the core issues because this is not what most Americans want to hear and it is far more difficult to deal with the real issues.
A good parent understands how to shape behavior by encouraging a child and providing the environment for success. A bad parent will yell and scream and punish a child to achieve the behavior that they are looking for. Like a bad parent, the federal government doesn't seem not know how to encourage and create the environment for success nor can they face the fact that the child behaves they way they do because of bad governing.
So, rather than lower corporate taxes (which are the second highest in the world---yes, that is true) and fix the sorry state of our education system (40% drop out rate and college costs beyond the means of most Americans), and build a positive work ethic, the government has decided to force compliance on companies to create jobs in the U.S. by taxing them if they go offshore. Isn’t it ironic the administration wants the U.S. tax code to encourage companies to hire US workers yet does not to protect U.S. workers from illegal immigrants taking American jobs? I guess that's because there are 16 million illegal aliens that can become voters while there are only thousands of multinational corporations that can't vote.
Conclusion:
This proposed tax policy is naive and punitive. In the global economy, it is important that our government learns how to partner with business to enable global competitiveness. Forcing compliance (or as they say encouraging growth) of U.S. companies through restrictive tax policy will not help global competitiveness. The Constitution of the United States permits the Federal government the authority to tax and to regulate commerce. Unfortunately our government interprets regulate as a way to constrict and control and restrain. The founding fathers used the term regulate to mean to keep regular. Their intention was for government to enable business to flow smoothly. Our government sees its role as a controller and overseer as opposed to an enabler or partner.
There is an important role for government in this new global economy. Either the U.S. administration has not realized that becoming a partner to business is critical to global competitiveness and creation of jobs in the United States or they are responding to the vast majority of American that are uneducated in global competition. In this administration, business is a inanimate object that can be criticized and demonized without retribution. The government wishes to use the chastity belt rather than “showing the love”. Bad Parent, bad partner, bad lover. U.S. companies will reach a point where they will say “I want a divorce” and leave the US for greener pastures in other countries. This is exactly what many companies have done and are doing. I was a Partner in a multinational that moved offshore due to global effectiveness and U.S. tax policy.
Taxed compliance will drive companies away, not encourage them to stay. This is trade barriers in patriotic wording.
Post Script:
For all of the "I hate business readers", government policy that enables global competitiveness does not imply unregulated business. Just like Secretary of State Hilary Clinton said of our international policies, "We need smart policy". This is true for international affairs as well as international trade.
Posted by ZK at 5/8/2009 6:59 AM 
Categories: Business, Taxes, Multinational Corporations
Tags: Obama Tax Proposal Multibnational Tax Proposal
Categories: Business, Taxes, Multinational Corporations
Tags: Obama Tax Proposal Multibnational Tax Proposal
Well said. However if this country is to move forward in economic terms in the future we are going to have to "re-industrialize" our economy. Our population growth rates require that we create some 2,000,000 new jobs each and every year. Our exporting of jobs has not permitted this to happen since the Clinton years and it is contributing to our unemployment rate and wage reduction, which compounds the economic woes that we are facing. If you agree that we need to "re-industrialize" America then how do we encourage this to happen?
1. Use tax policy to shape response?
2. Use government subsidies to keep our manufactured product competitive in foreign markets ( virtually all other countries use such a practice )?
3. Nationalize our key industries to keep the doors open and the jobs around ( see our current action regarding the big 2 autos. Can Ford be that far behind?
4. Or should we find the answer in a combination of all of the above?
Surprisingly, the answer may not lie in any of the above actions, but rather in NAFTA, where we bind together and establish a "best and distinct competency" policy that allows for the country that does the very best in an area to have a monopoly on that sector and free trade exists within the American group, and virtually eliminate trade beyond American borders. For instance Brazil would grow all the oranges, the USA would provide for all the college level programs, Mexico would build all the cars, Canada would do all the urban planning, and on and on and on. Get it? A self- American style EEC may well be the answer to our woes.
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that is all very well and good, but what I don't understand is why I can't buy a tee shirt. you do, after all, sound like a capitalist.
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