A full-throated defense of corporate tax dodging management

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Vikram Bath

Vikram Bath is the pseudonym of a former business school professor living in the United States with his wife, daughter, and dog. (Dog pictured.) His current interests include amateur philosophy of science, business, and economics. Tweet at him at @vikrambath1.

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231 Responses

  1. Avatar greginak says:

    I think making donations to charities is meant as a push towards moral behavior. Charities, are by some, seen as the solution to social problems so giving Corps incentives to give is supposed to be moral. Also various tax breaks and gov help (oink oink) to get a corp to move to a certain state is always framed as good for people not as a cold calculation.

    Also part of the problem is that Corps lurve to frame their behavior as patriotic, caring and Good. If a Corp moves to a state for tax breaks and freebies you know they will sell it as we just love and want to help the wonderful people in (fill in name here). The cars companies and various other business ( Harley Davidson comes to mind) have made a massive push to suggest buying their stuff is actually patriotic. Certainly some companies present their Godliness as a reason why people should buy their chicken sandwiches there. If there is a confusion about the moral vs. calculating behavior of companies some of it needs to go to companies for the messages they send.Report

    • Avatar Kim in reply to greginak says:

      Harley moved production to Mexico, didn’t they?Report

    • Avatar Mo in reply to greginak says:

      What social problems does the Metropolitan Opera solve? Aside from “What is a bored UES resident to do on a Saturday night?”Report

      • Avatar Kim in reply to Mo says:

        Why it provides a place for the rich and toity to mingle, affirm relationships, and even, I shudder to think, cut deals! So gauche!Report

      • Avatar greginak in reply to Mo says:

        The Met keeps makers of viking costumes in business.Report

      • Avatar Glyph in reply to Mo says:

        Killing wabbits.Report

      • Avatar Creon Critic in reply to Mo says:

        @mo
        Keeping alive an artistic tradition that’s been around for centuries perhaps. Serving as a training ground for new artists. There’s also commissioning new works from composers to keep that artistic tradition alive and not frozen in aspic. And also ensuring that people beyond the UES have access to world class opera. There are plenty of seats that are more affordable than various sporting events on offer in NYC. And the whole opera & schools program serves educational purposes. If the arts matter, then the Metropolitan Opera and similar institutions matter too.

        As you can probably guess, I frown on the idea that various kinds of charities should be pit against one another and some should be found somehow unworthy of support. There’s room enough, especially in a wealthy country like this, to support an array causes, including through the tax code.Report

      • Avatar dhex in reply to Mo says:

        @creon-critic

        “Keeping alive an artistic tradition that’s been around for centuries perhaps.”

        creon makes a good point. people don’t know this, but even biggie smalls was concerned about ancient musical traditions – he rapped about this on his landmark debut with the track “gimme the lute”.

        (obviously i just really wanted to make a joke about lutes)

        #pigdestroyerkennedycenterspecialReport

      • Avatar Glyph in reply to Mo says:

        @dhex – Of course, ‘Pac quickly put out an answer track, with lyrics claiming that Smalls’ boasts of being in possession of plentiful lute were patently untrue.

        Shakur even went so so far as to call Smalls nothing more than “a low-down, dirty lyre.”

        And now you know…the rest of the story.Report

      • Avatar Mo in reply to Mo says:

        @creon-critic Who determines what art is worthy of being charity and what isn’t? Broadway can count its traditions back to the ancient Greeks, but doesn’t need the same treatment. Is it art that’s unpopular by a lot of people, but popular enough with the right crowds? Stand up comedy has a centuries old tradition, but I don’t think the local Chuckle Hut could be categorized as a non-profit.Report

      • Avatar Creon Critic in reply to Mo says:

        @mo
        Well some are nonprofits. I think Roundabout Theater Company is non-profit. Also, the playhouse affiliated with Lincoln Center is a non-profit. So, there too, high end, broadway theater, there are non-profits represented. I don’t know enough about stand-up comedy places, troupes, etc. But I’m guessing there are some non-profit performing arts places where stand-up is performed. There are certainly enough black box theaters in Alphabet City, Lower East Side areas, that I’d suspect are nonprofits. Also, I’m not making a judgement against any particular art form. the more the merrier as far as I’m concerned.

        As far as who decides, well, I guess we as a community decide. And I think there’s good reason, education, cultural, incubation of musical performers’ and composers careers’, to include both opera on the scale of the Met and the little black box theater in the non-profit sphere. To me, there’s room for public support for both in the tax code and beyond.Report

      • Avatar Murali in reply to Mo says:

        It seems that keeping alive a tradition is stuff that is at least in practice an upper middle class pre-occupation. While Americans are, generally speaking rich, they are not so rich that their aggregate willingness to donate money is sufficient to satisfy the demands of all the demands made on them. There is, I think some space for consideration and criticism of whether any given organisation is the appropriate destination for one’s marginal charitable dollar.Report

      • Avatar Creon Critic in reply to Mo says:

        @mo, @dhex
        Ok, so I do have to acknowledge the point I think dhex gets at that all kinds of performers will have ready access to all performing arts spaces, even publicly supported spaces. So I do not see certain kinds of performers on stage at the Met (though the Met stage did host the MTV something or other awards one year). Even with that bit of exclusion acknowledged, the US happens to be wealthy enough to be capable of supporting a wide range of artists and art forms. So while I’m not expecting the pigdestroyerkennedycenterspecial anytime soon, I still stand by my state support for the arts position. And who knows, maybe one day the Kennedy Center will have an open minded enough director who says, yeah why not give pig destroyer their shot (admittedly, that’s said without any familiarity with pig destroyer on my part).Report

      • Avatar Creon Critic in reply to Mo says:

        Missing a “not” there, so “all kinds of performers will not have ready access to all performing arts spaces”

        @murali
        I think these are simply incommensurable values. I can’t put a price tag on a poem, and I wouldn’t just zero out the budget for Poet Laureate of the US in favor of something with (allegedly) more utility.

        There is, I think some space for consideration and criticism of whether any given organisation is the appropriate destination for one’s marginal charitable dollar.

        I’m comfortable with a vastly larger state than the US has. So my advocacy for tax deductibility of donations to organizations like the Met Opera runs parallel to a vision of the state paying for a whole lot of things that could conceivably left to the for-profit / private sector. I’d lay my criticism at the feet of the relatively stingy US state.Report

      • Avatar Vikram Bath in reply to Mo says:

        Who determines what art is worthy of being charity and what isn’t?

        This question can be answered with three letters.Report

      • Avatar Vikram Bath in reply to Mo says:

        As you can probably guess, I frown on the idea that various kinds of charities should be pit against one another and some should be found somehow unworthy of support.

        Oooh, I smell reality-based TV show. “Enter the Care Tank!”Report

      • Avatar dhex in reply to Mo says:

        i would watch care tank.

        heck i think i could win care tank.

        “WHOSE CARE WILL REIGN SUPREME?”

        seriously though i think we all recognize that some “culture” will be preserved and supported officially and get some elbow room in the bucket of ducats, and most will certainly not. i’m pretty sure that dirtbag grind won’t be in the first category.Report

      • Avatar Vikram Bath in reply to Mo says:

        The Less Wrong folks just had an “Effective Altruism Summit” this past weekend. Here’s one of their posts on the subject that definitely falls on the Care-Tank side of things.Report

      • Avatar James Hanley in reply to Mo says:

        I frown on the idea that various kinds of charities should be pit against one another and some should be found somehow unworthy of support.

        We should fund all charities for just as much as they ask for, because there’s no such thing as scarcity (wait, why do we need charities again?).Report

      • Avatar Fnord in reply to Mo says:

        We should fund all charities for just as much as they ask for, because there’s no such thing as scarcity (wait, why do we need charities again?).

        Sure, obviously impossible. We should just let the government decide which charities deserve funding.

        If you’re arguing for individuals using their judgment, that’s not particularly relevant to a discussion of purpose of the charitable donation tax exemption.Report

      • Avatar Kim in reply to Mo says:

        James,
        Alternatively, all charities that can’t become profitable corporations at some point should be allowed to wither and die.

        Because if your product is a GOOD idea, it will be wanted by the people you are saving, and they will be able to afford it.Report

    • Avatar Vikram Bath in reply to greginak says:

      This formulation only occurred to me after reading your comment, greg:

      In football, safeties, extra points, field goals, and touchdowns are all awarded points. This means that these are unambiguously good things that are encouraged. In the tax code, we tax some things that are good and some things that are bad. We provide exemptions for some things that are good and some things that are bad. That is what I meant by being unable to judge someone’s morality based on their return. Donating to starving kids is tax deductible. So are gambling losses. Working at an elementary school is taxed, so is liquor. The tax code doesn’t divide things into good and bad; it divides them into taxed and not taxed.Report

      • Avatar Fnord in reply to Vikram Bath says:

        You can only deduct gambling losses to offset gambling wins. This isn’t a hypertechnical nitpicking. The reason you’re allowed to deduct gambling losses to offset gambling wins, and not otherwise, has to do with the very purpose of income tax.

        You tax income. If you win money gambling, gambling has provided you income. If you also lost some money gambling, it’s probably fair to say that your gambling didn’t provide as large an income as merely looking at your losses conveyed. You’re not deducting gambliing losses because of some arbitrary provision in the tax code, but because that provides a better measure of what your income actually is.

        If there was some loophole that allowed you to deduct unlimited gambling losses, as long as you play poker in a dog suit, that would not be providing a better picture of your income. That would be subverting the purpose of the tax code.

        Now you might that the purpose of the tax code was subverted when the dog-suit loophole was written in the first place, not when some poker player exploits it. But I’m not sure that holds water (even leaving aside that many of the linked criticisms are also calling for legal reform). Misrepresenting your income isn’t the same thing as quitting smoking or giving to charity, where behavioral change is at least part of the purpose of the purpose of the tax code.

        If there was a loophole that allowed you to outright lie about your income because of a twinkie, is that OK because the tax code is amoral?Report

      • Ah, I wasn’t aware of that restriction. (As you might guess, I’ve never tried to take that particular deduction.) Even so though, the nudges present in the tax code aren’t all nudges. The presence of the EITC doesn’t mean you are supposed to find a job that pays poorly enough to take advantage of it. You either get it or not depending on whether the law says you are supposed to get it or not.

        Do I deduct my mortgage interest expenses “because that provides a better measure of what [my] income actually is”?

        But I admit personal income tax comes much, much closer to having a morality than business taxes. If you are filing business taxes the logic behind the underlying rules becomes much more opaque in certain parts of the code. And we aren’t, after all, talking about wholly crazy loopholes or interpretations of the law that rely on punctuation errors. We are talking about companies who are following the law as it is written. The overall effect that we are seeing isn’t what was envisioned by the law’s writers, but the proper response to that is to modify the law, not to ask companies to pay the amount chosen by the editors at the Times.Report

      • Avatar Fnord in reply to Vikram Bath says:

        There IS a logic to the provisions of the tax code that are being taken advantage of, here. It would be unjust to subject a bona fide foreign company, which is subject to a bona fide foreign income tax, to double taxation. Assuming everyone is dealing honestly, that would work out best for everyone. But that logic is being subverted by the criticized companies. They’re not really foreign companies: the foreign ownership is a sham, not indicative of substantive change.

        That’s the accusation, anyway. If you want to argue that what they did actually is within the spirit of the law of the law, fine. But you can’t claim that there is no spirit of the law to violate because there’s not logic behind the rules.

        PS: Pretty sure the mortgage interest tax deduction is explicitly to encourage homeownership (which generally means taking a mortgage).Report

      • If you want to argue that what they did actually is within the spirit of the law of the law, fine.

        The way the law works now–both in letter and spirit–is that American companies pay US taxes whether they do business in America or elsewhere. That is what they have been doing. Almost all other OECD countries instead don’t really think of the types of companies we are actually talking about as distinctly theres whether they are doing business in that country or elsewhere. This is an acknowledgement of the fact that these are big multinationals, and are no longer, say, distinctly Swiss companies. So, the Swiss companies that do business in America only pay American taxes on their American business. American companies that do business in Switzerland pay American taxes on all their business.

        The spirit and letter of the law, does allow movement among countries upon the completion of certain types of mergers. That wasn’t something that got in there by accident. I think some people perhaps still have an idea that “American” companies do essentially all their business in the US and maybe 20% happens elsewhere. Those numbers are becoming inverted. The law does allow for companies that are hardly really American anymore to relocate their tax base. That’s not an accident. It’s there by design to acknowledge how multinational these industries are.Report

  2. Avatar Patrick says:

    It seems odd to me that “one of the major, critical drawbacks of public sector unions is that they participate in electing the folks who negotiate with them for contracts, which is a serious collusion problem” and “one of the major critical drawbacks of corporations is that they participate in electing the folks who establish their tax rates, which is a serious collusion problem” are two sides to the same coin, and yet they’re firm standards in two different camps.

    This response, Vikram, is illustrative of the attitude towards the drawback from both camps:

    “If you don’t want companies to drop weight, you need to write rules preventing it.”
    “If you don’t want unions to get sweetheart deals, you need to write rules preventing it.”

    Both sides argue that the solution to the drawback is stupidly trivial for their side’s drawback, but politically a nightmare for the other sides’ drawback.Report

    • Avatar Kim in reply to Patrick says:

      And what of the poor people who lobby to make ever more complex tax codes?
      What should we make of them?Report

    • Avatar ScarletNumbers in reply to Patrick says:

      The difference is that public employee unions tend to negotiate with local, county, and state governments. The more down the totem pole you go, the more influence the public employee union has in that election.Report

      • Avatar Patrick in reply to ScarletNumbers says:

        You know who else negotiates with local, county, and state governments? For profit companies.

        Yes, I realize that the “low hanging fruit” for large companies is the feds, and the “low hanging fruit” for unions and smaller corps are the smaller branches of government, but that’s an alignment difference.

        Still, the point remains. I hear a lot of griping from the libertarian crowd about public sector unions influencing elections and negotiations and a lot of griping from the liberal crowd about large corps affecting the tax code, but they both seem to think that the other guys’ gripe is not only not a big deal, but mostly irrelevant.Report

  3. Avatar Mo says:

    This is why we should drop the corporate tax rate to 0%, treat all income, such as dividends and capital gains, as income and tweak the income tax so that the change is revenue neutral. If your goal is to tax rich people, tax rich people directly.Report

    • Avatar Kim in reply to Mo says:

      Schedule K it is! For Everyone!
      (do you have ANY idea how much of a fucking mess this would be for Joe Schmo who contributes to his retirement plan? That’s filling out a form for every company he’s invested in — Holy Hecate, that’s a lot!)Report

      • Avatar Mo in reply to Kim says:

        Nothing changes about retirement plans or investments other than the tax rate.Report

      • Avatar Kim in reply to Kim says:

        Mo,
        the tax changes based on profits/losses Per Company. You need to fill out a form Per Company.Report

      • Avatar Mo in reply to Kim says:

        No, the tax charge would be on realized capital gains, just like today, but instead of a 15% rate it would be whatever your marginal tax rate is.Report

      • Avatar Kim in reply to Kim says:

        Mo,
        So PNC pays zilch for garbage collection? Or Police?
        You’re essentially turning every profit-producing company into a nonprofit, taxation wise, and giving the nonprofits nothing to show for it.Report

      • Avatar Mo in reply to Kim says:

        Well, first of all, this begs the question that non-profits should have tax exemptions. Is there a reason why a hedge fund with an educational sideline Harvard deserves to pay $0 on prime urban property?

        Second, my idea precludes income taxes not property taxes. Those would be paid by all (as they are attached to the land, not the entity, and do not discriminate based on income. And property taxes pay for local services like police.

        Third, AFAIK, companies pay for private garbage removal and if they don’t, those would also be covered under property taxes.Report

      • Avatar Kim in reply to Kim says:

        Mo,
        we give nonprofits benefits because they are governed under restrictive laws, and because they do work to the common good.
        I don’t know about Hahhvahhd, but I do know that my state keeps a bloody good eye on the sustainability of nonprofits — therefore nonprofits invest in the market in order to hedge against operating losses.Report

      • Avatar James Hanley in reply to Kim says:

        So PNC pays zilch for garbage collection?

        Tax incidence != tax burden.Report

      • Avatar Kim in reply to Kim says:

        James,
        That’s a good point, but PNC is localized, and its owners are globalized… That’s the real problem with this. Not all owners are American.Report

    • Avatar Road Scholar in reply to Mo says:

      This, absolutely.Report

    • Avatar Vikram Bath in reply to Mo says:

      For other proposals on how to reform corporate taxes, see Damodaran’s link. Tax policy probably can and should change over time to keep up with what is actually happening. I’m leery of attempts to come up with the One Best Tax Policy derived from first principles, not only because such a thing wouldn’t be implemented but because smart people disagree as to what those first principles are.Report

    • Avatar Michael Cain in reply to Mo says:

      Ooh! Ooh! And while we’re at it, can we convert the personal income tax to a personal consumption tax?

      Not a sales tax, but one based on a relatively simple extension of the current income tax. You have income — earned, odd compensation (the Park Avenue apartment your employer provides for you), sales of assets, dividends, interest, all of that stuff — and you have assets — savings accounts, stocks, bonds, tangible items like houses, etc. At the end of the year, subtract money put into assets from income, pay a progressive rate on the remainder (ie, a close estimate of what you consumed). Tax-deferred savings for everyone! Add deductions to taste — personal, charitable contributions, mortgage interest, health insurance premiums, haircuts, whatever. Tax fraud investigations look like Al Capone — your reported taxable income better resemble your life style. If you insist on hosing the rich, income in excess of a million dollars owes a modest tax even if you did put it into assets. If you have a thing about avoiding wealth dynasties, add a modest tax to inherited assets over ten million dollars.

      Most of the necessary data is already collected and reported. Almost anyone can do their own taxes on a Saturday afternoon.Report

      • Avatar Mo in reply to Michael Cain says:

        I’d love that, but it would involve a massive overhaul of the tax system. Whereas my solution would just require two changes to rates. Plus, the US becomes every company’s tax haven. Jobs!Report

      • Avatar DavidTC in reply to Michael Cain says:

        Well, the entire point of a progressive income tax with tax-deferred retirement savings is to *pretend* to do this without actually calculating it all out. I.e., we assume the poor are spending all their income, so we don’t tax them.

        I’m not exactly sure of what the point of not taxing collected assets is, through. That seems like exactly a backwards encouragement. Wouldn’t we *rather* have people spend money on purchases than put their money in the bank?

        My idea income tax setup would be almost tax all income at a fixed X%, and then knock a fixed $Y dollars, somewhere around $15,000, off the total for everyone. Which, yes, we would refund, and be a basic income for people.

        When calculating income, the only deductions should basically be things where the people no longer have the money or the results of it (aka, they donated it to charity, and maybe medical insurance under there also. Also maybe flat-out huge losses, like a house burning down.) or will have to pay taxes on it later (aka, retirement savings, of which there should be a tax-free cap of, I don’t know, five million dollars total).

        There might be a few *small* meddling deductions to try to structure society how we want, but most of deductions should go away, and the remaining ones should be short-term. Most ‘deductions’, in fact, should just be government rebates or subsidies *on that thing*, and not be linked to income taxes at all. (It’s insane we’ve got the tax code structured where we pay middle-class people to do things we’ve decided are best for society, but not poor people, because those poor people have no income to deduct from.)Report

    • Avatar Murali in reply to Mo says:

      Well, with 0% corporate taxes and limited liability, we may end up with a suboptimal number of corporations. What we should do is create a new category where you get to pay 0% corporate taxes if you are willing to waive your right to limit liability.Report

      • Avatar Mo in reply to Murali says:

        I don’t see why the waiver is necessary. I could see require a certain amount of reporting for a 0% corporate tax rate (to prevent things like creating a consulting corporation and using it to buy a “company car” for your personal use). But the limited liability thing seems like a non-sequitor. Also, as an added benefit, it gets rid of a bunch of lawyers and accountants whose existence is solely to make taxes disappear.

        If anything, I would use the opportunity for 0% corporate tax rates as a way to fix all sorts of odd quirks and loopholes in the tax code. Make 0% tax rates conditional on eliminating special tax treatment for all income and do things like eliminate sham trusts that exist to get around inheritance taxes. As we see with the Ex-Im bank, the best way to get things done is to pit powerful entities against each other.Report

      • Avatar Murali in reply to Murali says:

        Roughly, the idea is this:

        Limited liability allows owners of corporations to avoid paying off all the debts they may accrue. That is to say, it involves socialisation of losses and creates moral hazard. People are more willing to do risky stuff than is efficient. At the same time corporate taxes create incentives in the opposite direction. It is, however, unclear if the level of corporate taxes precisely compensates for the effect of limited liability. However, doing away with both, at least in principle will reveal the “true” value of the corporate asset, rather than the state subsidised/penalised oneReport

    • Avatar North in reply to Mo says:

      I can’t endorse this enough. Those blood curdling shrieks of horror you are going to hear, of course, are coming from both the anticorporate left, the wealthy and the entire corporate tax profession.Report

      • Avatar Mo in reply to North says:

        @north It would also provide the first actual sighting of an ethical quandary by a corporate lobbyist. Do they work hard for their client to reduce their tax incidence, thereby reducing demand for their services in the future, or do they throw the game in order to ensure future businesses.Report

      • Avatar North in reply to North says:

        I doubt it’s much of a quandary, the lobbyists don’t want it- it’ll kill their business and the wealthy don’t want it- it’d destroy their capital gains tax shelters. The heads of corporations and the people on their boards are generally wealthy so the corporation opposes it regardless of whether it’s good for the company.Report

  4. Avatar Damon says:

    While @greginak talks about how corporations love to talk about patriotism, caring, etc., all that is is PR. Rarely is it anything else.

    I’d figure that anyone’s who’s actually worked in Corporate or Tax accounting knows why these tax laws came about: lobbying for a tax benefit. Few are “intended to change the behavior of the company or to be a thing they are “supposed” to pay to show they are a good, patriotic company.” Nah, they paid a lobbyist to write something beneficial to them and got it passed with some political donations. I’ve worked a few tax CPA level tax problems in grad school and there was reasonable conclusion for them being written the way they were except that.Report

  5. Avatar Damon says:

    One other comment, to ride on Vikram’s comments: “There is nothing immoral with paying taxes to the UK rather than the US when the tax code allows that.” Nor is there nothing immoral to paying taxes in a cheaper location if the US code allows that.

    The code is law and you’re required to follow the law. In fact, the company is fiduciary responsible to pay the least amount of taxes they can legally get away with.Report

    • Avatar dragonfrog in reply to Damon says:

      In fact, the company is fiduciary responsible to pay the least amount of taxes they can legally get away with.

      Maybe. Usually. They’re fiduciarily responsible to do what their corporate charter says they’ll do.

      If their charter says they exist to provide employment to the disabled, then they’re responsible to their shareholders to do that, even if it would be more productive per dollar spent on payroll to hire the able-bodied.

      If their charter says they will use 10% of their profits for rehabilitation of polluted waterways, then they’re responsible to do that, even if the fiscal environment changes at some point and they don’t get much of a tax break from it anymore.Report

      • Avatar Damon in reply to dragonfrog says:

        Yeah, well MOST Corporations aren’t chartered for social good. They are chartered to make money for their stockholders…Report

      • Avatar Kim in reply to dragonfrog says:

        Damon,
        And the implausible thing about District 9 was that the CEO paused for a second before sacrificing someone to save his company. Not all CEOs — far from it, but the ones that lead multinational corporations are a particularly antisocial bunch.Report

  6. Avatar Kim says:

    Is there something wrong with using tax havens, and then repatriating your money when the government says “bring your money back, all’s free!”?

    If not, why won’t Romney release his tax returns?Report

    • Avatar Road Scholar in reply to Kim says:

      It’s not illegal and by my lights, neither is it immoral. If anything, the immoral act, if you’re looking for one, was committed by the politicians who wrote all that into the tax code. In consideration for some sweet campaign donations no doubt.

      It just looks shifty when you’re running for president.Report

      • Avatar Kim in reply to Road Scholar says:

        I don’t think the tax havens were ever legal by American law (particularly the Swiss — didja see dat guy from Wikileaks waving that around? “I have your names, and your bank account numbers.”)Report

  7. Avatar Jaybird says:

    This is the flip side of the “Somalia!” argument.

    If you want to live in a place that has fewer taxes, then move there! *WAIT! NO! WAIT! YOU’RE BEING UNPATRIOTIC!*

    That said, even I feel a twinge of irritation when I hear about a company repatriating. The US has a fairly decent environment for business. A lot of US citizens, decent bar-b-que, roads, and so on. The environment that allowed your corporation to flourish to the point where repatriation was possible is one that you’d think you’d want more of… you should do more to build up that environment. Treat others as you were treated. Treat others as you would have yourself be treated, for that matter.

    That said, if the environment for business used to be better and now it’s worse, that’s really worth looking at as well. It’s one thing to maintain a particular environment and have people leave it and quite another to keep changing things in attempts to milk the various cows and then get all huffy when the milked up and leave for a gentler hand.Report

  8. Avatar LWA says:

    It is amazing, though, how when the Poors do this same strategy, they are labeled as deadbeats.

    As I mentioned before, imagine the outrage if I offered seminars- “How To Maximize Your Federal And State Welfare Benefits While Hiding Your Assets”Report

  9. Avatar Dan Miller says:

    “If you want companies to behave in different ways, don’t be a moralizing scold; change the rules.”

    Changing the rules is extremely difficult–it requires that many, many people agree on a goal, and coordinate to achieve that goal, often in the face of determined opposition. Why shouldn’t “being a moralizing scold” be an acceptable political tactic to motivate people to change the rules?Report

    • Avatar Jaybird in reply to Dan Miller says:

      I thought that we had just finished complaining about corporations acting in accordance with their conscience (indeed, arguing that they didn’t have one and therefore couldn’t).

      Now we want them to listen to moralizing scolds?

      Perhaps we should make up our minds.Report

      • Avatar Kim in reply to Jaybird says:

        Google’s got a conscience, it’s in their charter.
        (I think, haven’t read it actually).

        I’m sick of us complaining about things that we’ve constructed, and made no effort to deconstruct. Moralizing scolds are at least trying to deconstruct some of our problematic institutions.Report

      • Avatar Vikram Bath in reply to Jaybird says:

        To be clear, I do think corporations should act morally. They shouldn’t sell leaded crayons to kids even if it’s legal and highly profitable. I just don’t think there is a “moral” way to pay taxes. If there were, I’d probably be in favor it.Report

      • Avatar Dan Miller in reply to Jaybird says:

        I think you misunderstand. My claim is that when Paul Krugman says “Hey corporate assholes, pay more in taxes!”, the actual audience isn’t only the corporate assholes, but also Democratic lawmakers, activists, etc. It’s a communication intended to advance a movement to force change in the rules, by pointing out what’s currently legal.Report

      • Avatar Kim in reply to Jaybird says:

        Vik,
        Hm. Allow me to introduce you to an immoral way of paying taxes.
        To whit:
        Pay what you like (overpay, actually), but do it in such a confusing manner that you waste the public’s money with an audit (and, indeed, cost the auditor “personal money” out of their bounty-for-the-year).

        It may be immoral, but paying your employees with chickens (and then explaining this to the IRS), is hella amusing.Report

      • Avatar Vikram Bath in reply to Jaybird says:

        I understand that’s the audience, but which do you think that audience is likely to respond with?
        1. “Let’s figure out how to change the system so companies choose to stay here, even if that means doing a couple of things that look as if we are lowering taxes on corporations.”
        2. “Let’s raise taxes on these corporations while we can even if that further incentivizes their moving.”Report

      • Avatar Dan Miller in reply to Jaybird says:

        @vikram-bath As I understand it, there are steps that could be taken that would make it harder for companies to move without lowering their tax burden directly, which is what I assume Krugman is advocating for. If this would create an immense burden for businesses and have a net negative impact overall, well, I trust the businesses to advocate for their own interests. They don’t need Krugman to do it for them, especially when there’s an entire ideological movement that’s fanatically devoted to the concept of lowering taxes.Report

      • Avatar Jaybird in reply to Jaybird says:

        As I understand it, there are steps that could be taken that would make it harder for companies to move without lowering their tax burden directly, which is what I assume Krugman is advocating for.

        What did Venezuela do? Maybe we could do something like that.Report

      • Avatar Kim in reply to Jaybird says:

        Bad Jay, no goats for you!Report

      • Avatar Dan Miller in reply to Jaybird says:

        Ah, yes, I had forgotten that any proposal to raise corporate taxes is automatically equivalent to Chavez-style socialism. How silly of me.Report

      • Avatar Jaybird in reply to Jaybird says:

        Dude, you weren’t talking about raising taxes.

        You were talking about making it more difficult for them to move.Report

      • Avatar Kim in reply to Jaybird says:

        Jay,
        What the illustrious gentleman of parsimonious loquacity undoubtedly meant was that we should change the laws about repatriation of offshored money so that our own tax law does not incentivize corps moving operations overseas.Report

      • Avatar Jaybird in reply to Jaybird says:

        So he was talking about lowering taxes? Awesome.

        What did those countries that the corporations are moving to do? We should totally do that.Report

      • Avatar Kim in reply to Jaybird says:

        Jay,
        Mexico routinely allows the Multinationals to break its laws, so… um, no idea, actually. (we routinely allow our companies to break laws as well, so…).Report

      • Avatar Dan Miller in reply to Jaybird says:

        @jaybird I think we’re using “move” in different senses here. Nothing about the physical structures or operations of the companies will change; it’s just that in a legal sense, the U.S. operation will be owned by the Swiss arm, rather than vice versa. Preventing that transaction isn’t stopping them from moving–it’s just preventing the use of a legal fiction to dodge U.S. corporate taxes (and banning that dodge is hence equivalent to a tax increase).Report

      • Avatar Jaybird in reply to Jaybird says:

        Are they moving in response to a change in the tax law?

        If they are, maybe we could look at undoing that change, rather than the whole make it harder for them to move thing.

        Because, honestly, I don’t know, at the end of the day, that we’ll be able to prevent them from moving (even using your definition).Report

      • Avatar Vikram Bath in reply to Jaybird says:

        I feel bad for saying this without providing links, but there is a large body of research that suggest banning moving is likely to be a move that is circumvented in other ways that we might not be sufficiently clever to guess at quite yet.

        You could strengthen the requirements for these repatriation moves, but those who have already repatriated won’t be enticed back by that. Those companies that are blocked will try to figure out other methods to qualify, or they might start future businesses through independent or joint ventures founded from scratch in other countries to qualify.

        I probably should do a full-blown post on this rather than asking you to take my word for it, especially when the likes of Krugman appear to disagree, but history suggests that we would be best served by creating an environment that attracts businesses to enter rather than one that punishes them for leaving. Companies as a group are very good at figuring out ways to do what they ultimately want to do even if it is not the most direct path.Report

      • Avatar Jaybird in reply to Jaybird says:

        Alan Scott has a corker of an idea down below. Just have US law be indifferent when it comes to the idea of enforcing IP from other countries. You want us to give a crap about your IP? Better be based here.Report

      • Avatar LWA in reply to Jaybird says:

        But we have created an environment in which they want to do business! That’s the point we keep saying.

        No American corporation going to move its entire operations to a tiny island in the Caribbean. They love doing business in America.

        What we have created is a bizarre and entirely artificial web of laws that allows them to do business in America, while pretending they are not.Report

      • Avatar Jaybird in reply to Jaybird says:

        But we have created an environment in which they want to do business!

        Did we? Or was this environment here when we got here and we’re taking credit for it?

        Because it seems that the argument could easily be made that they had an environment in which they wanted to do business but then we changed it and changed it again and again and again and now we’re feigning surprise that there is a tipping point.Report

      • Avatar morat20 in reply to Jaybird says:

        Jaybird,

        As an example, one proposed regulatory change deals with inversions and simply requires companies that claim to be moving overseas (and by ‘move’ I mean they move their HQ on paper, whereas they don’t move it physically, and how they do this is pretend they’ve been acquired by a foreign company that’s actually a shell set up by the original company) is simply to require that if a US company wants to claim they’re owned by a foreign company (and thus pay taxes THERE and not HERE) then they have to, you know, actually be owned by a foreign company. 50.01% or whatnot.

        A lot of these “moves” are paper moves only. Nobody is suggesting companies be literally prevented from moving overseas. They entire argument is over whether they should be allowed to pretend to do so, entirely for tax purposes.

        Now, of course, some people say “if you close that loophole, they’ll just find others”. Well yes, of course, that’s how life works. People throw that out there all the time on taxes, like it’s a winning argument. If it was, we wouldn’t have taxes at all — people will ALWAYS try to avoid them or exploit them. Companies are just better at it, mostly because they can hire lawyers and lobbyists.Report

      • Avatar Vikram Bath in reply to Jaybird says:

        Well, they do pay taxes on the business they do in the US. It’s not like P&G pays US taxes and Unilever pays absolutely none. The current debate is about additional corporate-level taxes.Report

      • Avatar morat20 in reply to Jaybird says:

        Vikram,

        I was pretty sure the current debate was whether US companies should use loopholes (in their truest sense — letter of the law, not the spirit sort of way) to avoid paying corporate taxes. Mostly through various methods of claiming the money they should be paying US taxes on are paid in a foreign country instead.

        That’s not exactly “new taxes” — that’s the current tax regime, as intended. Perhaps it’s too high, perhaps it’s too low, but it’s not new. What’s “new” (for a small value of new) is companies are, frankly, not even trying very hard to make their dodges believable.

        I suppose you can call it a ‘new’ tax if the ‘on the books’ taxes were designed to be avoided by companies, and only the public at large was foolish enough to believe they applied.Report

      • Avatar LWA in reply to Jaybird says:

        @jaybird
        What tipping point? Again, people keep assuming that businesses are disgusted with doing business in America and are leaving.
        They aren’t leaving- they love it here.
        What is changing, is that they are finding ever more clever ways of creating these paper illusions of moving.

        And, as for “changing and changing again”- does anyone think that the biggest contributor to changes in the tax code is anyone other than corporations themselves?Report

      • Avatar Jaybird in reply to Jaybird says:

        does anyone think that the biggest contributor to changes in the tax code is anyone other than corporations themselves?

        If they’re leaving (or gone, for that matter), why bother?

        I mean, other than TurboTax, who benefits?Report

      • Avatar James Hanley in reply to Jaybird says:

        I thought that we had just finished complaining about corporations acting in accordance with their conscience (indeed, arguing that they didn’t have one and therefore couldn’t).

        Amen, Brother Jay.Report

      • Avatar greginak in reply to Jaybird says:

        Corps want to have a conscience when it is convenient for them. If they want to say they act on morals then it is a fair question to ask about their morals in other cases than when it is convenient. If they are using loopholes it is most likely because they wanted the loopholes. Once we admit the obvious that corps will do what they want and can to avoid taxes it is just a tiny step to say they will usually trash the enviro if helps them, risk workers safety, etc if it helps. Not every company but many will. Corps and their CEO’s don’t us telling them how great they are or caring about their feelings when they get blamed for the occasional giant financial crash.Report

      • Avatar Vikram Bath in reply to Jaybird says:

        @morat20 ,
        I was pretty sure the current debate was whether US companies should use loopholes (in their truest sense — letter of the law, not the spirit sort of way) to avoid paying corporate taxes. Mostly through various methods of claiming the money they should be paying US taxes on are paid in a foreign country instead.

        My argument is that there really is no such thing as a loophole when it comes to what taxes should be paid. When Ashley Judd was going to kill that guy in Double Jeopardy and get away with it because she had already been tried for the crime before, *that* was a loophole because that’s clearly not how a person is supposed to behave. (Oh, spoiler alert, BTW.)

        In contrast, it’s not that companies are *supposed* to repatriate all their overseas money at the end of each year and then pay taxes on it but figured out a way not to do so. It’s that the law says not to pay taxes on money not yet repatriated. You can say that the law is bad (as I do). You can say the law was the result of a bad process and written by corporations themselves, but that is not an example of finding an obscure Ashley-Judd-style loophole in the law.

        Similarly, when companies from different countries merge, they do actually consolidate their headquarters to some extent and need to make substantive choices about what nationality the new company will be. The tax code explicitly forces the merging companies to make a selection. You and I both probably don’t like the results, but that is actually what the current law says must happen, and it was written with that intent.Report

      • Avatar James Hanley in reply to Jaybird says:

        Corps want to have a conscience when it is convenient for them.

        Apparently that’s what their critics want, too (for a different value of “them”).Report

      • Avatar Troublesome Frog in reply to Jaybird says:

        If they’re leaving (or gone, for that matter), why bother?

        I still keep seeing the word “leaving” as though it actually means something. If I could “leave” California by filing some clever paperwork and getting a PO box in Texas, keep living and doing business in California and then pay my taxes in Texas, I’d probably do it, but I don’t think that the question, “Why did Troublesome Frog leave California? Is it no longer a good place to live and do business?” is really getting at the point of it. If we change the word “leave” to something more appropriate like “screw” then we might be getting somewhere.

        I’m onboard with the 0% corporate tax solution. But as long as the corporate income tax exists, I don’t think we should be claiming that the fact that companies are “leaving” is evidence of business unfriendliness given the low cost of “leaving.”Report

      • Avatar morat20 in reply to Jaybird says:

        My argument is that there really is no such thing as a loophole when it comes to what taxes should be paid.
        Ah, semantics.

        *shrug*. Kinda pointless arm-waving, in general.

        In specific, you have to go to legislative intent. Was it intended, for instance, that a company avoid the bulk of corporate taxes by creating a PO box in the Bahamas? Or by creating a shell company in Ireland, which then acquires 20% of the stock, and thus can claim to be ‘foreign owned’ and pay taxes in Ireland?

        If yes, that was the intent — then no, not a loophole. If not, then…well, if not loophole, what simple word are you going to use for “Utilizing laws, regulations, and tax codes in a way that was not intended by the authors of that code”?

        If not loophole, then what? Unintended tax break?

        What they’re doing is perfectly legal, as far as I know — you’d be better off making the rather obvious point that, well, like or or lump it avoiding taxes in this way is perfectly legal and obviously in the company’s best interest. Of course that’s a pretty banal point.

        And really, the argument everyone else is having is “Wow, that’s not what we intended. Should we fix it to make it more like what was intended, or do something else?”Report

      • Avatar Jaybird in reply to Jaybird says:

        Ah, semantics.

        Would you prefer to discuss syntax?Report

      • Avatar Mike Schilling in reply to Jaybird says:

        what simple word are you going to use for “Utilizing laws, regulations, and tax codes in a way that was not intended by the authors of that code”?

        Cleverness. If businesses put as much brainpower into research as they do into tax-avoidance and minimizing worker compensation, we’d all have our flying cars by now.Report

      • Avatar James Hanley in reply to Jaybird says:

        Legislative intent matters a lot when a court is reviewing how the government applies a law. It doesn’t matter much at all when a court is reviewing how a citizen acted in response to a law.Report

      • Avatar morat20 in reply to Jaybird says:

        Legislative intent matters a lot when a court is reviewing how the government applies a law
        It also matters a great deal when citizens demand — or the Legislature reviews — a law that does not appear to be working as intended.

        It’s not like reviewing the regulations (and some of them are regulations put into place to enforce laws) and laws is punitive. It’s purely common sense. If we meant ‘This tax treatment for X’ and we find that companies are routinely using it in ways opposite of what was intended, then obviously one should take another gander at the law or regulation.

        Perhaps it should be repealed, perhaps it should be updated to ensure it is more strict or accurate to it’s original intent.Report

      • Avatar j r in reply to Jaybird says:

        Considering how the sausage is made, how does one even begin to talk about legislative intent when analyzing our tax laws? With all the various drafters, sponsors, co-sponsors, riders, amendments, attachments that define any piece of legislation, I’m not sure that there is anything resembling a unitary intent or purpose. The whole process is pretty much a free-for-all.

        In many cases, the purpose of a particular provision is to grant a corporate loophole. I suppose you can yell at congress to “do better!” but in this context that would mean simplifying the tax code, which I think is what @vikram-bath is arguing for in the first place.Report

    • Avatar Vikram Bath in reply to Dan Miller says:

      Moralizing is what led to the current policy to begin with, and it is doubtful that the current moralizing will actually result in a reduction in changes that will incentivize companies to stay. (Maybe I missed it, but I didn’t see anything in those NYTimes links that proposed that.)

      I think you will get better policy if you argue for better rules for specific reasons related to what outcomes you want to generate rather than by generating sufficient hate for a group to get laws changed.Report

    • Avatar Scott Fields in reply to Dan Miller says:

      @dan-miller
      I agree when you say “Changing the rules is extremely difficult–it requires that many, many people agree on a goal, and coordinate to achieve that goal, often in the face of determined opposition.”

      You know what eases that difficulty? Money – lots of it. As Damon notes above, the tax code is what it is, it favors the corporations it does, because those favored corporations “paid a lobbyist to write something beneficial to them and got it passed with some political donations.”

      I have no problem agreeing with Vikram’s premise that there is nothing immoral about corporations minimizing their taxes by following the tax code as written. The immorality lies in the buying of the means to have the tax code written in a self-beneficiary way – a means that comes at a purchase price beyond the reach of all but a few.Report

      • Avatar Damon in reply to Scott Fields says:

        @scott-fields
        “The immorality lies in the buying of the means to have the tax code written in a self-beneficiary way”

        That, though, is the ESSENCE of representative goverenment and falls squarely under the “right to petition” for redress/relief.Report

      • Avatar Scott Fields in reply to Scott Fields says:

        The ESSENCE of representative government? Really?

        Does the right to petition the government for redress of grievances extend to the right to buy special access to government? How does it follow then that the right to petition is in accord with representative government?

        If lobbyists had to stand in a line with the hoi polloi waiting for an audience with their Congressman or if the inputs they used to influence their Senator were actually names of citizens on a petition, then perhaps the right to petition would align as a cornerstone of representative government. As the right to petition is practiced now, it may be what the Constitution allows, but it isn’t remotely representative.Report

      • Avatar Kim in reply to Scott Fields says:

        Scott,
        Gee, it’s obvious you don’t know many lobbyists.
        I’d personally worry more about the corrosive effects of blackmail,
        rather than worrying about people who aren’t paid enough to buy food
        (lotta free food around DC, if you know where to look).Report

      • Avatar Kim in reply to Scott Fields says:

        Damon,
        you really think that it’s a Good thing to have a massively more complicated tax scheme simply because Someone Asked For A Handout?Report

      • Avatar Scott Fields in reply to Scott Fields says:

        @kim

        I know exactly zero lobbyists, so I’ll grant I don’t know what you are talking about. Some individual lobbyists may subsist on catered food, but 3 billion plus was spent lobbying the government last year alone, so I don’t buy the idea that lobbying doesn’t pay the bills and some.

        If you want to amend my comment to “stand in a line with the hoi polloi and other less affluent lobbyists waiting for an audience with their Congressman” that’s fine by me. But otherwise, my point still stands.Report

      • Avatar Kim in reply to Scott Fields says:

        Scott,
        I think we’re all against the recent rule change which allows Congress to hide “free trips” from lobbyists.

        But the whole idea of banning lobbyists is kinda incoherent.

        Is EFF’s lobbyist okay?
        How about a scientist lobbying for more science funding?
        When a corporation shows up, at some point they’re lobbying for jobs — just the way folks lobby to keep the military base the military thinks we don’t need.

        Unless you’re in favor of dramatically increasing the number of representatives, someone is going to need to represent people, in order to Save Time, if nothing else.Report

      • Avatar Damon in reply to Scott Fields says:

        @scott-fields @kim

        “The ESSENCE of representative government? Really?” Yep. The right to petition is indeed one of the founding concepts of our country. What is this, if not “special access” to our rulers? Don’t confuse my coments as an endorsement, but, trying to limit this right will lead us down the same path to problems as we’ve met on the “campaign funds” issues. I’m not saying the system isn’t screwed up, but I am saying it’s a foundational part of our society. You may rely on gov’t to create a billion dollar program to distribute 500m dollars.Report

      • Avatar Scott Fields in reply to Scott Fields says:

        @damon, you’ll note I’m not arguing for any limits to the right to petition. I’ve been convinced by the libertarian contingent here that curbs on the first amendment are wrought with peril and fundamentally doomed to fail (money will find a way, as @james-hanley has convinced me).

        I just ask that we don’t pretend this reality is somehow “representative” government and that monied interests buying unique access (“special” in that this access that is only available to thems with deep pockets) isn’t fundamentally immoral. It’s impractical to legislate away all immorality, but we should be clear-eyed about who is calling the shots in this country and some outcry of disgust is not only appropriate, but vital.Report

      • Avatar Damon in reply to Scott Fields says:

        @scott-fields

        Yes, I used to agree with you, but that felt like banging my head against the wall. It didn’t change anything, and it never will change, and I grew tired of being outraged. It’ll end, sooner or later, when the whole thing falls apart. Yah, I’m cynical.Report

  10. Avatar LWA says:

    Well, no one is actually moving.
    Corporations aren’t fleeing America, to find a more business-friendly venue somewhere else.
    They love to do business in America. They just don’t want to pay the rent.

    Its not any different than if I moved into a Rodeo Drive shop, but protested that my real “place of business” was in a Class C strip mall across town so I should pay the rent over there.

    And the idea of us re-writing the rules is pretty amusing; Much of the Tax Code is written by the corporations themselves. Its pretty easy to comply with a law you get to write.Report

    • Avatar Vikram Bath in reply to LWA says:

      If the idea of modifying the rules (which has been done several times before) is amusing, what do you think of the idea of getting companies to pay additional taxes by making them feel bad?Report

      • Avatar LWA in reply to Vikram Bath says:

        I don’t think anyone expects a corporation to change on their own.

        Moral outrage is Step 1 in forming a political coalition strong enough to change the rules.
        It always has been.Report

      • Avatar morat20 in reply to Vikram Bath says:

        Who is trying to make them feel bad? I thought the recent spate of news was due to several companies either using or looking at transparent tax dodges (inversion’s the new big one, I hear) and the response isn’t “moralizing” aimed at companies — it’s aimed at voters.

        I don’t think anyone feels you can shame a company into not exploiting a loophole (although you can, I imagine, make doing so unpopular enough that prospective customers shop elsewhere) — I think people are casting it in moral terms for voters and politicians.

        Moral or social norms are the ones the people enforce. If we, the people, decide a given company’s actions are immoral to the point where it shouldn’t be legal, we pass a law — we don’t argue philosophy with the Board.Report

      • what do you think of the idea of getting companies to pay additional taxes by making them feel bad?

        Well it can sometimes work. Particularly with consumer-facing companies and sufficient public outrage, companies can be shamed into changing course. There was a big controversy in the UK about Starbucks not paying sufficient taxes, and as a consequence, Starbucks paid more than they would have otherwise. Probably not their fair share, as I and UK protesters would have it, but more than nothing. Naming and shaming companies is a viable strategy for changing companies’ behavior. The lede,

        Starbucks has caved in to public pressure and pledged to pay £10m in UK corporate tax in each of the next two years even if it makes a loss following calls to boycott the coffee chain over its “immoral” tax practices.

        The decision sets the Seattle-based chain on a potential collision course with investors as the tax payment will come from its parent group. Its plan is yet to be accepted by the UK tax authorities, which were not consulted in advance, and it sends a troubling signal to other companies under attack over their UK taxes, including Amazon and Google….

        http://www.ft.com/cms/s/0/ac97bb1e-3fa5-11e2-b0ce-00144feabdc0.htmlReport

      • LWA and morat,
        I hear you. I just don’t share the moral outrage. I’m supposed to hate otherwise American companies who have done what the tax code allowed them to do to minimize their bill? What about companies that were domiciled in the other country to begin with? Shouldn’t I hate them too? They also are not paying corporate taxes to the US. Or should I not hate them since they weren’t American to begin with? Should I direct my outrage only at American companies domiciled elsewhere or all companies not domiciled in America?Report

      • Avatar LWA (Liberal With Attitude) in reply to Vikram Bath says:

        Can you muster moral outrage at corporations that lobby for tax codes to be written in ways convenient to them, and the political parties that oblige? Or at pundits and bloggers who cheerfully find excuses for them?

        I mean, look at what you are saying here-
        You defend the corporations as merely following the law, and urge us to instead focus our efforts on changing the law- But lets not get angry, you suggest, lets not work up any moral outrage.
        No, lets simply, calmly, and with a minimum of rancor re-write corporate tax laws that are zealously guarded to the death by the most powerful collection of interests the world has ever known.

        You’ve heard of High Broderism? This is High Brooksianism, lacking only the suggestion that it be discussed quietly by patricians in private rooms.Report

      • Avatar Damon in reply to Vikram Bath says:

        @creon-critic
        If I owed Startbucks shares I’d be considering a lawsuit over that tax payment decision. I’d expect that that’s a full on, black letter law, violoation of the company’s fiduciary responsibility.Report

      • Avatar Dan Miller in reply to Vikram Bath says:

        @lwa-liberal-with-attitude +1 to that. This article seems blind to political reality in some of the same ways that Dawkins’ statements were.Report

    • Avatar Damon in reply to LWA says:

      @LWA
      They aren’t leaving America, but they ARE moving to lower tax burden states. I have relatives in the SE and there is weekly news that companies are relocating there from the North, moving corporate headquarters, moving production lines down from the North, or expanding production lines.

      Just as I am considering moving to a lower tax/cost of living county in my state, companies do the same. They just get incentives to do so while I don’t.Report

      • Avatar morat20 in reply to Damon says:

        California, failed American state indeed.Report

      • Avatar LWA in reply to Damon says:

        Businesses are seeking to relocate to lower tax venues?
        Really?
        For instance, all the financial firms and banks located in New York City.
        Are these financial geniuses leaving for, say, Mississippi?
        The tech firms in Silicon Valley are all emigrating to Alabama?

        This common notion, that high taxes drive away business, is, like all urban legends, based on a kernel of truth.
        (Allow a liberal to splain you how bidness works)

        When a business thinks about where to locate, it looks at a host of factors- Material suppliers, customer base, infrastructure, labor availability, rent, and taxes, among other things.
        For most businesses, taxes is a rather small component. For example, most businesses pay far more in rent and payroll than taxes. Even a small variance in labor rates and rent between say, New York and Texas makes a huge difference in profitability; And the proximity to client base is usually the most determining factor.

        Its vanishingly rare for taxes to be the sole deciding factor- in order for that to be true, we have to assume all other things are equal, which they never are. But on rare occasion, taxes can be a deciding factor- just not very often.Report

      • Avatar James Hanley in reply to Damon says:

        Not that Damon ever said taxes were the sole reason, but don’t let that stop you.Report

      • Avatar Citizen in reply to Damon says:

        When taxes start chewing 1/2 the profit margin, and the other factors don’t anchor, stones roll right nicely.Report

      • Avatar Kim in reply to Damon says:

        Citizen,
        the difference between a scam (taking advantage of tax breaks) and a business is the profit margin, isn’t it?Report

      • Avatar morat20 in reply to Damon says:

        When taxes start chewing 1/2 the profit margin, and the other factors don’t anchor, stones roll right nicely.

        California AND New York, failed states….Report

      • Avatar Dave in reply to Damon says:

        @james-hanley

        Let him keep going. I learn so much about the business world reading these pages. 😉Report

      • Avatar Dave in reply to Damon says:

        @kim

        Citizen,
        the difference between a scam (taking advantage of tax breaks) and a business is the profit margin, isn’t it?

        It’s hardly a scam when state governments are more than willing to offer them to companies looking to relocate.Report

      • Avatar James Hanley in reply to Damon says:

        @dave,

        It’s a good view from your high rise cloister out onto a real world you rarely interact with, right?Report

      • Avatar Dave in reply to Damon says:

        @james-hanley

        It was a good view until our office relocated because we thought our taxes were too high.Report

      • Avatar Kim in reply to Damon says:

        Dave,
        it’s a scam if they never make a profit. ever. Then you’ve got a state that’s rolled out the red carpet (possibly even given them free lodging or seed money), and at the end has nothing to show for it.

        Is the state still partially culpable? Sure thing, sir.Report

      • Avatar Dave in reply to Damon says:

        @lwa

        While I wouldn’t expect financial companies to relocate out of New York City nor tech firms out of Silicon Valley, even if your “bidness splaining” is correct on some theoretical level, it still doesn’t address a multitude of situations where taxes do come into play and taxes include not only state income taxes but real estate taxes as well.

        It becomes very noticeable when companies are looking to either relocate or open a new plant or manufacturing facility somewhere in the US. As a general rule, I’m assuming that the strategic location of these facilities aren’t as critical (meaning while it may be good to have a facility in a certain area, there are plenty of choices within those areas).

        For example:

        Even a small variance in labor rates and rent between say, New York and Texas makes a huge difference in profitability

        True, but what is more likely to happen is that the decision to put a new facility somewhere is going to be narrowed down to locations with similar characteristics. New York and Texas have substantial differences in costs. Alabama and Mississippi may be similar in almost every respect you mention. Labor rates could be similar. Real estate tax rates could be similar. The strategic nature of the location could be similar.

        This is where the tax breaks and economic incentives you seem to be dismissing matter greatly. If Alabama puts forth an economic incentives package (typically tax breaks, credits, etc.) that total $200 million and Mississippi offers nothing, then the choice becomes a lot more clear.

        Its vanishingly rare for taxes to be the sole deciding factor- in order for that to be true, we have to assume all other things are equal, which they never are. But on rare occasion, taxes can be a deciding factor- just not very often.

        No one was talking about taxes being the sole factor, but it can play a more significant factor than I think you are allowing it to play. Yes, I agree that not everything is equal, but if they’re close enough, an economic incentives package can swing a deal one way or the other.

        My guess is that incentives and tax breaks will weigh very heavily in the decision regarding this very high profile deal:

        http://www.greentechmedia.com/articles/read/Teslas-5B-Giga-Battery-Factory-and-Deep-Politics-in-AZ-TX-NV-and-NM

        You can say it’s rare. I will say that it’s common place in certain kinds of transactions, a kind that may not come up as often as others but do come up rather frequently. I guess that’s where we can disagree.

        When a business thinks about where to locate, it looks at a host of factors- Material suppliers, customer base, infrastructure, labor availability, rent, and taxes, among other things.
        For most businesses, taxes is a rather small component. For example, most businesses pay far more in rent and payroll than taxes. Even a small variance in labor rates and rent between say, New York and Texas makes a huge difference in profitability; And the proximity to client base is usually the most determining factor.Report

      • Avatar Mad Rocket Scientist in reply to Damon says:

        Not to mention a $200M tax deal sure does make a company feel wanted.Report

      • Avatar James Hanley in reply to Damon says:

        States and municipalities seem to believe it matters. Or else they just stupidly throw away money when they don’t need to. Maybe LWA’s a little more libertarian than we thought?Report

      • Avatar LWA (Liberal With Attitude) in reply to Damon says:

        Municipalities also throw gobs of money at sports stadiums. THey also spend tons more money lobbying Congress to locate a new defense contract or bridge to nowhere in thier location.

        Yes, Municipalities act stupidly, all the damn time.You guys are the first to point that out.Report

      • Avatar James Hanley in reply to Damon says:

        Yes, @lwa, but we also point out that tax breaks do work in luring businesses, but that it’s collectively a losing game (which is different from it being individually a losing game). Libertarians oppose tax breaks for corporations not because it’s ineffective in drawing them, but because it is effective, and therefore is a prime example of rent-seeking.

        My amendment would eliminate that, of course, but you didn’t like it.

        As to bridges, etc., municipalities don’t really spend much money lobbying for those. Their representatives are more than happy to slip that money into the budget so they can boast about jobs, etc., when they run for re-election.

        My favorite example was when Pete DeFazio got money for a multi-million dollar bike bridge across the Willamette River in Eugene, OR. Nobody really wanted it, since there was a road bridge just upstream whose sidewalks were being expanded as part of the same project fund, and two other bike bridges across the river. But it got built anyway, because “if we don’t spend the money, we’ll lose it.”

        So they have it, and of course it got named after him. It even has its own Wiki page.Report

      • Avatar James Pearce in reply to Damon says:

        “Libertarians oppose tax breaks for corporations not because it’s ineffective in drawing them, but because it is effective, and therefore is a prime example of rent-seeking.”

        Do they now? I mean, I’m sure that’s how it is in principle. In practice, though, I think most libertarians can be easily tricked into not only supporting such rent-seeking, but defending it vociferously.

        Ever hear of Magpul Industries?Report

      • Avatar Dave in reply to Damon says:

        @mad-rocket-scientist

        Not to mention a $200M tax deal sure does make a company feel wanted.

        Goldman Sachs received that much in tax benefits for keeping its HQ in NYC.Report

      • Avatar Dave in reply to Damon says:

        @james-hanley

        Libertarians oppose tax breaks for corporations not because it’s ineffective in drawing them, but because it is effective, and therefore is a prime example of rent-seeking.

        In some cases, the states and local municipalities trip over themselves to offer as much as they can to attract businesses to their state. I don’t necessarily see those instances as corporate rent seeking as much as I see it as competition among the states.Report

      • Avatar Dave in reply to Damon says:

        Ever hear of Magpul Industries?

        I’m a sucker for “gotcha” moments. What’s the punch line?Report

      • Avatar James Hanley in reply to Damon says:

        @james-pearce

        Gee, people can be tricked? You mean kind of like how liberals have been tricked into thinking corporations bear the burden of corporate income tax?

        Shocking.Report

      • Avatar Michael Cain in reply to Damon says:

        Ever hear of Magpul Industries?

        The gun outfit here in Colorado relocating production 60 miles up the road to Wyoming, where they were offered $13M in grants and loans? Who called the Colorado Office of Economic Development and said, “Wyoming is offering us $13M; what can you do?”Report

      • Avatar James Pearce in reply to Damon says:

        @james-hanley

        Are you capable of addressing a criticism of libertarianism without trying to make the conversation about how liberals are worse? I’m thinking no.

        @dave
        “What’s the punch line?”
        The punchline is this: “Libertarians oppose tax breaks for corporations not because it’s ineffective in drawing them, but because it is effective, and therefore is a prime example of rent-seeking.”

        Libertarians were so busy high-fiving Magpul for leaving the state (Colorado) over newly signed gun control laws that they didn’t notice the state of Wyoming gave the company $13 million to relocate.

        I mean, what I’m trying to say is that IF libertarians oppose tax breaks for corporations, they care about other things WAY more, even to the extent where it doesn’t appear they care about tax breaks for corporations at all.Report

      • Avatar j r in reply to Damon says:

        Libertarians were so busy high-fiving Magpul for leaving the state (Colorado) over newly signed gun control laws that they didn’t notice the state of Wyoming gave the company $13 million to relocate.

        Do you have any examples of this high-fiving?Report

      • Avatar Dave in reply to Damon says:

        @james-pearce

        I mean, what I’m trying to say is that IF libertarians oppose tax breaks for corporations, they care about other things WAY more, even to the extent where it doesn’t appear they care about tax breaks for corporations at all…

        I suppose it depends on the kind of tax breaks we’re talking about here. To the extent Magpul got them because the State of Wyoming offered it to them, I don’t see a problem with that at all as a general principle. I would have a problem with it if I thought it was a very bad deal for the State of Wyoming, but that level of opposition is driven by the economics as opposed to any ideological considerations.Report

      • Avatar James Pearce in reply to Damon says:

        @j-r

        “Do you have any examples of this high-fiving?”

        Sure, those are easy to find. It’s almost as easy to find as all the high-fiving over the recall of a couple of Dems in the state congress or all the high-fiving over the “51st State” nonsense. In that narrative, Magpul moved because those gun-grabbing liberals passed freedom-killing gun restrictions and they just couldn’t bear operating in a state that didn’t support their business. So they left.

        Harder to find: A libertarian opposing the move as “rent-seeking.”Report

      • Avatar Mad Rocket Scientist in reply to Damon says:

        @james-pearce

        IIRC, When CO was making noise about pushing gun control, MagPul publicly announced if it went through, they were moving to a state that wanted their jobs.

        CO went ahead with the laws, MagPul started looking for new digs.

        The important question then becomes, when did WY offer MagPul the incentives? Was WY courting MagPul prior to the announcement that they would leave if the laws passed, and the laws just became a useful PR dodge? Or was it after they said they were looking for new digs? Was any other state making offers to MagPul?

        In one case, it’s clearly rent seeking; in another, it’s more alone the lines of competition; in the third, it’s both.Report

      • Avatar James Pearce in reply to Damon says:

        “In one case, it’s clearly rent seeking; in another, it’s more alone the lines of competition; in the third, it’s both.”

        Well, to be fair…..it’s rent seeking no matter how you cut it.

        “a state that wanted their jobs.”

        Oh, I would say Colorado wanted the jobs, but at what price? Wyoming was willing to pay $13 million to lure a company that will bring their state about 90 manufacturing jobs. Why would Colorado, which is creating plenty of jobs in more profitable sectors with no help, lift a finger trying to keep them here?

        As to whether Magpul was looking to relocate before the law was passed….I dunno. They didn’t leave after the law was passed. They left after Wyoming gave them a tax break. To me….that’s clue #1 that the mag limit law was not the prime motivator for the decision.Report

      • Avatar Mad Rocket Scientist in reply to Damon says:

        @james-pearce

        I recall MagPul actively looking before they got the offer. I mean, it does take time to identify a good new location & then organize all the logistics of the move, so I wasn’t expecting them to pull up stakes 2 weeks after the law passed.

        As for rent-seeking, IMHO it matters with regard to who was offering & who was asking, etc. If MagPul went to WY & said “give us a sweetheart deal and we relocate to you”, that is rent seeking. If WY decided to offer $13M, that’s probably not wise, but I don’t think it meets the definition of rent seeking.

        @james-hanley Ref, what say you?Report

      • Avatar James Pearce in reply to Damon says:

        @mad-rocket-scientist

        “If MagPul went to WY & said “give us a sweetheart deal and we relocate to you”, that is rent seeking.”

        That’s pretty much what happened. Prior to the gun laws being passed, Magpul was planning on moving to Broomfield, CO. They came to the state’s Office of Economic Development, hat in hand, asking for handouts and singing songs about jobs. The state reviewed their plan, said, “We’re a state government, not an investment bank,” and turned them down.

        Magpul started shopping around. They went to Texas. They went to Wyoming. Both states said, “We’re a state government, but sure, we’ll finance your corporate relocate. Here’s a big pile of money.” So the company is moving to both states, corporate HQ to TX, and manufacturing to WY.Report

      • Avatar James Hanley in reply to Damon says:

        @james-pearce

        Try a critique that’s not a substanceless cheap shot, and you’ll find I’m quite reasonsable.Report

      • Avatar Michael Cain in reply to Damon says:

        James Pearce has the timing right: Magpul was already planning to relocate, but the magazine limit law gave them a great publicity opportunity. Magpul does a lot of plastics fabrication. As I understand it, Wyoming thinks they are investing in a company that can be the foundation for attracting other companies that do modest-scale plastics to the state. If I have it right, being able to say, “Yeah, you’ll be able to poach experienced employees from Magpul.” I suspect that Wyoming had an advantage over other states for the production end of things because for employees who lived to the north, the commute doesn’t change that much. For someone who lives in Fort Collins, the drive to Cheyenne will be shorter and the traffic lighter.Report

      • Avatar James Hanley in reply to Damon says:

        I mean, what I’m trying to say is that IF libertarians oppose tax breaks for corporations, they care about other things WAY more, even to the extent where it doesn’t appear they care about tax breaks for corporations at all.

        This doesn’t really hold up well to analysis. First, if a lot of libertarians dislike tax breaks for corps, so what? Everyone has multiple issues they care about, and rank ordering issues in a preference order is what humans do. Liberals do it, so do conservatives. That particular preference order isn’t mine, but it’s certainly legitimate.

        Second, libertarians applauding Magpul for demonstrating opposition to Colorado’s gun laws by taking a tax break to move to Wyoming in no way indicates they don’t oppose tax breaks to get corps to move. Libertarians generally assume people will respond to incentives, and don’t blame the people who do so, but the people who create the incentives. The critique of special tax breaks is a critique of the governments who offer them, not of the businesses who accept them.

        You seem to perceive some sort of hypocrisy or foolishness of libertarians here, but there’s really no there there.Report

      • Avatar James Hanley in reply to Damon says:

        Following Michael Caine’s comment, I’ll add that it looks like those* who cheered the move either fell for the hype or conveniently ignored the reality for purposes of sloganeering. Which isn’t admirable, but also is pretty normal human behavior, not really appropriately identified with a particular ideology.

        ________
        *Operating under the assumption they’re libertarian, as has been asserted. I’d assume, given distributions of ideologies, quite a few were conservative as well.Report

      • Avatar Mad Rocket Scientist in reply to Damon says:

        @james-pearce @michael-cain @james-hanley

        Ok, fair enough, they were rent seeking.Report

      • Avatar James Pearce in reply to Damon says:

        @michael-cain

        “I suspect that Wyoming had an advantage over other states for the production end of things because for employees who lived to the north, the commute doesn’t change that much.”

        Well, to be fair, the real advantage comes from having the costs of their move, which would be prohibitive otherwise, covered by taxpayer-funded incentives. The employees’ commutes? Not really much of a factor.

        Not to go off on a tangent about this, but have you heard about the Gaylord project?

        @james-hanley

        “You seem to perceive some sort of hypocrisy or foolishness of libertarians here, but there’s really no there there.”

        It’s the second one, James. That’s why I used the word “tricked” waaay up there. ^

        I’ll grant the “order of preferences,” because as you so aptly point out, it’s a people thing, not an ideology thing. But the ideology has some holes, my friend.Report

      • Avatar James Hanley in reply to Damon says:

        But the ideology has some holes, my friend.

        And it’s totally unique in that.

        In all seriousness, I’m no doctrinaire libertarian, but 90% of the critique of libertarianism at this blog is really shallow. Pointing out that someone else’s ideology “had holes,” or that its adherents can be “tricked” are the epitome of shallow critique, because those things are in no way related to the ideology; they’re human characteristics that typify the adherents of any ideology and they’re beliefs.

        And that’s setting aside that often one ideology’s perception of
        “holes” in another ideology points at things that other ideology’s adherents don’t find problematic. I. e., it’s often a purely subjective, ideologically-situated, claim that the other ideology can just roll its eyes at. Plug any ideologies randomly into the various roles, and it’s always just as true.

        Turn it around, and pretend I’d said “liberals can be tricked” and “liberal us has some holes in it.” How impressed would you be? That’s exactly how impressed I am, and for exactly the same reasons.Report

      • Avatar Road Scholar in reply to Damon says:

        @james-pearce , the key to understanding libertarians is to understand that they view issues primarily through the lens of liberty/freedom/autonomy/self-determination.

        @james-hanley , likewise liberals primarily view issues through the lens of equality/fairness/egalitarianism.

        Conservatives? Authority/order/security/tradition.

        Extreme ideologues aside, we all hold these values to some degree with the main difference between us being a matter of weighting and emphasis.

        Yeah, I’m sorta working on a post…Report

    • Avatar j r in reply to LWA says:

      The whole idea that taxes are the equivalent of paying rent strikes me as a bad analogy. And it is exactly the sort of logic that the anti-immigration crowd uses to assert some sort of collective ownership over all the individuals and business that are located within the U.S.’s borders.Report

      • Avatar LWA in reply to j r says:

        Why so odd?
        You don’t see a connection between the services we get, and the taxes we pay?

        I’m not getting how seeing taxes as a rightful fee for service leads to collective ownership.Report

      • Avatar Jaybird in reply to j r says:

        Well, one of the problems I see that comes up again and again is the assumption that the people who pay taxes are being taken advantage of by the people who don’t pay taxes (whether you think of “poor people abusing the social safety net!” or “corporations finding loopholes in tax law!” when you read “people who don’t pay taxes”).Report

      • Avatar j r in reply to j r says:

        I’m not getting how seeing taxes as a rightful fee for service leads to collective ownership.

        Neither do I. Calling taxes rent is what implies collective ownership.

        There really is no perfect analogy for taxation. It is its own thing. I generally find it useful to think about taxes as fees paid for goods and services from the government. This way of thinking about it serves to answer both doctrinaire libertarians who insist that taxes are theft and those progressives who have come to view taxes as some form of moral and patriotic duty.Report

      • Avatar James Hanley in reply to j r says:

        j r,

        Are you using rent in the everyday sense of the word or in the economists’ sense of the word?

        That is, I’m wondering if you and LWA are actually using the word differently?Report

      • Avatar j r in reply to j r says:

        I meant rent as in what a tenant pays to a landlord, which I think @lwa meant as well.Report

      • Avatar James Hanley in reply to j r says:

        OK, thanks for that clarification.

        I’m not really following either his argument or your response, but at least now I know it’s just me.Report

    • Avatar Brandon Berg in reply to LWA says:

      Well, no one is actually moving. Corporations aren’t fleeing America, to find a more business-friendly venue somewhere else. They love to do business in America. They just don’t want to pay the rent.

      Let me see if I’m following this correctly. You don’t object to the fact that the law allows corporations to escape US corporate income taxation by actually locating their operations outside of the US. What you do object to is companies being allowed to escape US corporate income taxation while retaining their operations in US territory.

      If I may connect the dots here, what you want is to change the law so that corporations operating on US territory must pay US corporate income taxes. In other words, you would like to change the law so that it more strongly incentivizes corporations to locate their operations in countries with lower rates of corporate taxation.

      This strikes me as rather myopic. We want corporations to invest in the US and hire US workers. The value of such investments, especially during a recession, outweigh any revenues we could reasonably expect to get by raising taxes. If a multinational corporation is considering investing in the US, our primary concern should be how we can encourage more of that, not how much we can shake them down for.Report

      • Avatar LWA (Liberal With Attitude) in reply to Brandon Berg says:

        The idea that you can take a loss in the short term, while developing relationships and committments which lead to more lucrative engagements later, is a fine and valid idea- companies do it all the time.

        Well, not all the time- because it can only be done in very limited circumstances, and is always a risky move- its the old saw about the guy who loses a dollar in every widget, but hopes to make it up on volume.

        And isn’t that, when applied broadly, kind of a pump priming Keynesian idea? Because what bneefit would we get out of their coming here? Jobs? Hell, if all we wanted to do was make jobs, while not worrying about deficits/revenue imbalance, we could just cut out the middle man, and have the government hire people.

        Not that there’s anything wrong with that!Report

      • Avatar Damon in reply to Brandon Berg says:

        I don’t see what “us territory” has to do with anything.

        The us gov’t claims the right to tax us citicizens on income no matter where they actually reside. I’ll assume this is also the case for corporations.Report

  11. Avatar Francis says:

    Odd. This entire discussion so far is almost entirely devoid of the most important element — people.

    Since corporations, according to this discussion, exist entirely independently of their shareholders, managers, employees, clients and vendors, I’m expecting some revisions to the earlier discussions about the Hobby Lobby case.

    Dropping the snark for a second, the real problem as I see it is that international corporate law now exists entirely independently of any economic reality. So Apple says that a subsidiary based in the Bahamas owns a bunch of patents and so the California entity must ‘pay’ a patent license fee, with pre-tax dollars of course, on products it purchases from Foxconn. That’s just a paper transaction; the inventors, lawyers, accountants and executives are all in Cupertino. But billions of dollars are now conveniently off-shored in a low-tax environment. Of course, the money actually isn’t in a Bahamian bank; Apple puts it to use wherever it wants, just so long as it’s not paid as a dividend to the parent.

    Ireland, so I’ve read, is used so much as a corporate hide-out that it substantially affects the calculation of national accounts; none of this ‘Irish’ money actually employs any Irish people. And that, to turn full circle, is the point: as a country we have so lavished attention on corporations that along the way we’ve lost track of the people involved.Report

    • Avatar Alan Scott in reply to Francis says:

      I wonder what the effects would be if we adjusted our Intellectual Property laws and treaties so that patents and trademarks held by overseas tax shelters were basically impossible to enforce.

      “Oh, it looks like your Bahamanian affiliate owns the patent related to this case, and they don’t have the standing to sue on patent issues in a US court. Samsung wins!”Report

      • Avatar Dan Miller in reply to Alan Scott says:

        It’s diabolical for sure, but given that the U.S. is a massive net exporter of IP, I’m not sure this would be for the best.Report

      • Avatar Francis in reply to Alan Scott says:

        You gotta be really careful that the cure isn’t worse than the disease. Patents are property and should be freely marketable to anyone who wants to buy them. Companies based in foreign jurisdictions really should have equal access to American courts. American companies should be able to establish subsidiaries in foreign jurisdictions so long as they are in compliance with local law.

        So suddenly you go from “Apple is avoiding US taxes” (which it is) to “GAAP and IRS accounting need to prevent trans-national tax avoidance” (which is a lot less compelling).

        (What was the capitalization of the subsidiary? Did it pay fair market value for the patents? Should the IRS be empowered to decide to pierce the corporate veil and require Apple to account for the subsidiary as an American subdivision? Most importantly, do I have any idea what I’m talking about?)Report

      • @jaybird

        I approve of this.

        When Dan Miller suggested above that there might be ways to make it difficult for corporations to move, you accused him of being a Chavez sympathizer.Report

      • Avatar Jaybird in reply to Alan Scott says:

        I see a *HUGE* difference between confiscation (or, perhaps, shackles) and telling corporations “we’re not going to expend energy on your behalf”.

        Enough that I can be totes against the one and totes for the other.Report

      • Avatar James Hanley in reply to Alan Scott says:

        I wonder what the effects would be if we adjusted our Intellectual Property laws and treaties so that patents and trademarks held by overseas tax shelters were basically impossible to enforce.

        Adjusting our treaties requires renegotiation of the TRIPPS agreement. And the Constitution requires that treaties be treated as the Supreme Law of the Land.

        And I foresee devastating consequences. Chrysler was briefly owned by Daimler. Assume Daimler decided to simplify matters by officially moving Chrysler’s headquarters to Germany, while still running factories, etc., in the U.S. Now we’re refusing to enforce the patents of a German firm, and how does Germany respond to that? They take it to the WTO, which rules against the U.S., which then either has to stop doing it or allow Germany to retaliate.Report

      • I didn’t see Dan Miller urging confiscation. He just raised the possibility that there’d be a way to discourage it without lowering taxes.Report

      • Avatar Jaybird in reply to Alan Scott says:

        Now we’re refusing to enforce the patents of a German firm

        Oh, I wasn’t suggesting anything so easily prosecuted. There surely is more than enough wiggle room when taking such things as time to process paperwork and whatnot into account.

        (Also, I’ve heard over and over again that European countries demand to pay less for American Medication lest they say ‘screw you, we’ll make our own’. Is that not something equally likely to be taken to an international court? Are they instead threatening to exploit a loophole?)Report

      • Avatar James K in reply to Alan Scott says:

        @alan-scott

        Sure, if want the WTO to slap you upside the head.Report

      • Avatar Alan Scott in reply to Alan Scott says:

        @james-hanley , is Germany a tax shelter, though? I’m not suggesting that we suddenly stop enforcing all IP rights when owned by a foreign country.

        I’m suggesting that we stop enforcing IP rights when owned by a US company that has transparently transferred non-physical assets originating in the US and created by American employees to foreign affiliates because they’ll be paying lower tax rates.

        And, to be perfectly honest, I’m not seriously suggesting it. This is more of a just desserts/payback fantasy idea that I suspect has all sorts of inobvious negative consequences. I can absolutely see the WTO getting upset about us screwing over firms from Germany. Will they get upset about us screwing over firms “from” the Caymans?Report

      • Avatar James Hanley in reply to Alan Scott says:

        Alan,

        Then we’ll need rules to figure out which countries qualify as tax shelters, and firms will sue to challenge the decisions and probably win because of our treaty obligations and the WTO will still, as James K said, slap us upside the head.

        Besides, if our position is a “moral” one, I suspect these tax havens need whatever they’re getting out of those firms more than what we’re getting out of them anyway.Report

    • Avatar James Hanley in reply to Francis says:

      @francis
      Since corporations, according to this discussion, exist entirely independently of their shareholders, managers, employees, clients and vendors, I’m expecting some revisions to the earlier discussions about the Hobby Lobby case.

      Are we talking about closely held corporations here?

      If you don’t see the closely-heldness as a significant factor distinguishing from publicly held corporations, that’s fine. As I’ve said numerous times, I’m totally on the fence about that, and while not fully persuaded, I’m also not persuaded that view is wrong.

      But to the extent others do see that as an important distinguishing factor, I don’t think your expectations are valid, as they refer to a match that doesn’t exist in their beliefs.Report

  12. Avatar Francis says:

    Dear management:

    When I comment on a post and later return to the post, I don’t see the later comments. For example, on my (office) computer I see that there are 55 comments, but my cell phone shows 64. Clicking on a subsequent comment posted on the right-hand side has no effect.

    Is there some rational explanation for this, and a simple fix?

    Thanks.Report

  13. Avatar James Hanley says:

    So did Jonathan Alter really use the term “loyalty oath”?

    Fish that monkeyfisher in his monkeyfishing fishhole.Report

    • I was trying to figure that out myself. “Loyalty oath” appears in quotes in the headline, but it only appears once in the article and is a historical example. I think they were using quotes in the “I don’t want to own up to this word choice” kind of way instead of the “this guy said this” kind of way. At least that’s what I “think”.Report

    • Avatar Dave in reply to James Hanley says:

      @james-hanley

      I’m trying to figure out if the article is his way of playing a joke on everyone. I can’t stop laughing at this:

      For those companies less able to act as Americans or recognize their real interests…

      Act as Americans, eh. That’s rich and now my sides hurt.Report

      • Avatar James Hanley in reply to Dave says:

        And “recognize their real interests.” I always get a good laugh out of people telling people whose lives they’re not living, or businesses they have no involvement in and often little real knowledge about, what their “best interests” are.

        Exactly how is it that these firms aren’t recognizing their real interests? Oh, yes, if the government decides to take the steps that Alter is urging them to take, then the businesses would face a cost from this choice. In which case they could then “move” back to the U.S., meanwhile having enjoyed the tax advantages for the X years between now and whenever the gov’t does Alter’s bidding.

        Really what Alter’s arguing is a sort of protection racket.Report

  14. For the record, when I think of tax “dodging,” I think of people/corporations not paying what they’re required to pay , not of people exploring and exploiting loopholes. Of course, you struck out the word to emphasize what you’re really talking about is “tax management” and not “dodging.”

    I do think tax dodging, in my sense, is morally wrong, or at least is presumptively wrong,* because the dodger is getting away with not doing what other people have to.

    *By which I mean, “there might be exceptions, but you’ll have to prove to me that any given case is exceptional or that the tax is exceptionally unjust.”Report

    • Krugman calls them “tax dodgers”. I agree that that term should be used for those who are not following the law, not for those who are following the law in a way that I don’t like.Report

      • Avatar Damon in reply to Vikram Bath says:

        @Vikram Bath
        That’s why it’s called “tax avoidance” when it’s legal, and “tax dodging” when it’s illegal. However, there is often a very fine line between one and the other. I’m excluding, of course, when the IRS “reintreperts” a tax law. Different story then.Report

  15. Avatar ScarletNumbers says:

    Did you choose the British version of Monopoly because it was the version you played as a boy, or is it just a coincidence?Report

    • I chose it because the photographer made it available through a creative commons license.

      But I am glad it is the British version anyway because that is where some of the companies seek to move to.Report

      • Avatar James Hanley in reply to Vikram Bath says:

        So Germany’s not a tax haven, but Britain is?

        That’s what the critics of these firms are complaining about, right?

        So either Britain has, to my surprise, adopted the Cayman Islands model, or in fact this issue does deal with “important” countries, and any retaliatory actions could be really bad politics.

        Assuming I understood you correctly.Report

      • Avatar DavidTC in reply to Vikram Bath says:

        @james-hanley , yes, the UK has become a foreign tax haven. In 2012, it stopped taxing any overseas profits.

        Ergo, if businesses that operate solely in the US move there, *they pay no income taxes*.

        That’s…the definition of a corporate tax haven. (1) A place that corporations from other countries can move to (on paper) and pay no taxes. That’s it. That’s what a tax haven is.

        Granted, the UK isn’t a *perfect* tax haven. They apparently require that some board meetings happen in the UK, so companies can’t make the move *entirely* paper, they actually have to relocate some of their management. And as the UK has a functioning first-world economy, many multinationals do some business there, and hence still pay *some* taxes. (Traditional tiny tax havens usually work off the same rules, usually just not taxing any overseas profit, but almost none of the businesses taking advantage of the tax haven do any business there, and hence pay no taxes.)

        1) Of course, when people say ‘tax haven’, they often mean for both corporate and personal income, but the UK still taxes individual income just fine.Report

      • Avatar James Hanley in reply to Vikram Bath says:

        David,

        Perhaps I was too subtle for you.Report

      • Avatar Mike Schilling in reply to Vikram Bath says:

        And when the federal government comes looking for their tax revenue, the companies don’t tell them to “dollar sand”.Report

  16. Avatar Wardsmith says:

    Ask yourself the most important (unasked) question in all this.

    What percentage of the federal (and states) budget comes from corporate tax collections?

    Answer: Not nearly as much as you imagine.Report

    • Avatar Mad Rocket Scientist in reply to Wardsmith says:

      Last time I checked (about 2 weeks ago while arguing with my aunt, who was all flustered about Walgreens), Corporate taxes are about 10% of the fed.gov tax reciepts.

      We could eliminate corporate taxes pretty easily and make small increases to other taxes and come out even.Report

  17. Avatar clawback says:

    I take it, then, you’re not one of those people who think it immoral to walk away from an underwater mortgage or to declare bankruptcy when convenient.Report

    • Avatar Vikram Bath in reply to clawback says:

      Declaring bankruptcy is not immoral even if done for convenience (though I’d question how often this really happens).

      I haven’t totally thought through the ethics of strategic mortgage defaults, but I’d lean towards that being OK too. On a policy basis, I could see how we might want to restrict strategic defaults because otherwise a mortgage becomes an attractive way extremely leveraged, limited-downside bets on house appreciation rather than a route to home ownership, but if we don’t restrict it now, I wouldn’t condemn someone for taking advantage of it.Report

      • Even then, I wouldn’t say the problem is that a leveraged bet is being made. The question is whether it’s appropriate to use the subsidy architecture the US has for mortgages for those types of bets.Report

      • Avatar Kim in reply to Vikram Bath says:

        Vik,
        I think so — bankruptcy carries its own consquences, and there’s no reason that the homeowner should be stuck paying oodles and losing their retirement simply because everyone muffed the audit.Report

      • I actually struggle with these. Though my arguments are consequentialist as much as anything. People who walk away from underwater mortgages are undermining no-recourse laws that I support for the sake of those who actually cannot make payments. The same can be said, to a lesser extent, of bankrupcies. We got a bogus “bankrupcy reform” law in large part because arguments for it resonated because of abuse. The entire rationale behind making student loans non-dischargeable is due to fear of strategic default.

        The system works better when we can assume a degree good faith. Without good faith, we have to start passing laws and these laws make things harder. It’s better if culture can do the heavy lifting, so that the law doesn’t have to.

        (For taxes, I consider the system inherently adversarial where one party gets to create all the rules. That could well be my ideological flag flying. To be fair, I forgive a lot of employees taking advantage of their employers along similar lines.)Report

      • Avatar Kim in reply to Vikram Bath says:

        Wil,
        we got a bankruptcy reform law because the credit card companies wanted it, and wrote it. Same way we got Ebay (except it’s marginally more okay for the reporters to not write their articles, than congress to let corps write their laws).

        Jinglemail states give the banks more responsibility to verify that the house is sound, and that they’re not going to lose money even if someone does walk away. I don’t think we’ll need more laws — just let the banks do as they please (harder contracts! maybe more collateral!). So fewer people buy houses? Good, it’s a 1/4 of a million dollar transaction, those ain’t peanuts, folks!Report

      • Jinglemail states give the banks more responsibility to verify that the house is sound

        A lot of people who ended up underwater purchased perfectly fine houses. It was the market that collapsed, not the house.

        we got a bankruptcy reform law because the credit card companies wanted it, and wrote it.

        Without great public opposition. I think in good part because a lot of people believed that the system was being abused. (Which is how the CARD Act got passed which put the screws on the banks: People felt the system was being abused.)Report