This subject sounds like a snoozer. But it may affect your job. Or the jobs of friends or relatives. And it turns spotlights onto some stupid thinking.
We have seen many a big company move overseas lately. To escape our taxes. The big company buys another company that is headquartered in another country. The other country taxes business at a lower rate than we do. So the American company moves its headquarters to the low-tax country. To escape our high taxes. It can do so easily because it bought the other company in the low-tax country.
Our government is crying “foul”. Candidates are blasting these companies. This is unfair, they insist. Companies are not paying their fair share. These companies are unpatriotic. And all that garbage.
I call their wailing “garbage” for a simple reason. We have the highest income tax rate on business in the industrialized world.
Please think about this. Our politicians promise new jobs by the millions. They promise to make America the perfect place to locate your company. They go into super blah blah mode. To tell us they will light a fire under American businesses. To push them to create those millions of jobs.
And yet they whack those businesses with the highest corporate income taxes in the industrialized world. Could our politicians do anything more stupid in this regard?
Well, yes, they could. And they have. They double-tax companies. They make American companies pay taxes here on income they made abroad. Income on which they already paid taxes – abroad.
This not taxing. This is plundering. It is greed. It is stupid. It gives the back of the hand to major companies, major employers. And many companies have declared they have had enough.
Now when they relocate overseas they still pay U.S. taxes. On profit they make here. But they escape the IRS’s greedy clutches with profit they make overseas. Which is how it should be.
Meanwhile, this administration is doubling down on the stupidity. It is breaking the law with tactics designed to punish these companies. The tactics are failing. Because they are stupid. Companies are leaving anyway. The administration is asking Congress to give it more authority. To stop these companies from escaping our high taxes.
This is equivalent to you raising and raising your prices on your best customers. When they tell you they are going to the competition – where prices are lower – you blame them. The customers.
So what would be a smart policy? Well, duhhh, we could lower our tax rates on these companies we want to have locate here. We could reduce the godawful regulation we impose on them. We could make this country a place where companies want – want - to locate.
Here is a question to ask yourself. Ask it the next time you hear a candidate say big American companies avoid taxes big time. The question: If this was true, why do these companies move overseas? If they pay virtually no taxes here this is Nirvana for them. Why would they move from Nirvana?
Connecticut has been awash in stupid thinking on taxes. Its tax rates are onerous. And so high earners desert the state in droves. As do many companies. GE is thinking of doing so at the moment. There is a simple lesson here. When you tax businesses and people too much you get fewer of them.
Meanwhile, when you tax people and businesses less, you gain more of them.
The plain fact is that our taxes on companies are unreasonable. So are our regulations. Both are stupid. As are the people who create them. Many companies are smart. Smart enough to escape this stupidity. This is unfortunate for us.
My wish for 2016? More intelligent thinking on this subject in Washington. When I told my wish to Santa Claus he fell off his sleigh with laughter.
From Tom...as in Morgan.