On Tax Codes, Corporate Malfeasance, and the Unintended Consequences of Celebrating Amorality in the Free Market

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Tod Kelly

Tod is a writer from the Pacific Northwest. He is also serves as Executive Producer and host of both the 7 Deadly Sins Show at Portland's historic Mission Theatre and 7DS: Pants On Fire! at the White Eagle Hotel & Saloon. He is  a regular inactive for Marie Claire International and the Daily Beast, and is currently writing a book on the sudden rise of exorcisms in the United States. Follow him on Twitter.

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180 Responses

  1. Avatar Mo
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    says:

    This seems to be lumping in unquestionably bad things (poisoning people) with things that are neutral things (tax avoidance). Am I a bad person if I decide to wait 366 days to sell a stock instead of 364, solely for tax purposes or if I space out my contributions to my son’s 529 solely because I can maximize the tax benefit? Vikram’s point is that tax avoidance qua tax avoidance is an amoral act, whereas negligently putting people’s lives at risk is not an amoral act.Report

    • Avatar Burt Likko in reply to Mo
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      says:

      The point seems to me that a corporation lacks ethics but do possess a desire to maximize profits, so we should not be surprised to see corporations exhibit unethical, but profitable, behavior.

      They do so by way of free-riding from public resources (itself a practice of questionable ethical merit, one which I think is sometimes referred to by the trendy moniker of “rent”) and putting forward a façade of good ethics (look at our charitable foundation! read our mission statement and corporate code of conduct!), which is already bad enough, and consistently yields crops of great social harm.

      But the notion that “corporations need not behave ethically because they need only comply with the amoral law” is only going to make it worse; such a notion waives away the idea that corporations can or should be held to any kind of ethical account at all. That, I think is what Tod is getting at.

      To the extent that law and culture effect reciprocal feedback upon one another over time, I think Tod’s pointing to a real phenomenon, one which ought to give lawmakers pause, and one which people who think about public policy ought to have in mind when they consider notions like the purported amorality of the tax code.Report

  2. Avatar Jaybird
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    says:

    I have friends in my facebook feed who spend an inordinate amount of time screaming about how “the Christians” aren’t acting like “Real Christians”.

    They alternate between wishing that these people would get out of the public square entirely and telling them how “Real” Christians would be acting if they were in the public square.Report

    • Avatar Tod Kelly in reply to Jaybird
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      says:

      Can I ask you to flesh that out a bit…?Report

      • Avatar Jaybird in reply to Tod Kelly
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        says:

        The argument, such as I can understand it, is that the Christian Left is arguing that the Christian Right has non-Christian priorities and needs to be more Christian… which, co-incidentally, would lead the Christian Right to right around where the Christian Left has ended up.

        This manifests in my facebook feed as the Christian Left alternating between telling the Christian Right to stop participating so much in the public square and telling them that they should be more like the Christian Left.

        Anyway, the main thread that seems to be holding everything together is that people with the wrong morals have too much power and this wouldn’t be a problem if people with the right morals were instead exercising their muscles a bit.Report

      • Avatar Tod Kelly in reply to Tod Kelly
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        says:

        So, you’re still going to have to thread that needle…Report

      • Avatar Saul Degraw in reply to Tod Kelly
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        says:

        @tod-kelly

        As I understand it:

        1. People who refer to themselves as Christian tend to be protestant, evangelical, non-denominational, culturally, socially, and most importantly for this debate economically conservative to Republican.

        2. The economically conservative part makes them anti-welfare state, anti-union, anti-worker, anti-regulation, anti-safety net, etc. Very much rah rah Reagan and supporting of all this stuff. I’ve heard the phrase “Christian businessmen” and the liberal-cynics I know generally think when they hear the term “Christian businessmen” it means “We don’t use lube.”

        3. The people I know and observe who are politically, socially, and economically liberal but religiously Christian are very very angry at the seeming monopoly that conservative Evangelicals have claimed on the word Christian. Interestingly these liberals tend to be either Roman Catholic (probably with a Jesuit education at one point) or Mainline Protestant (Episcopalian, Quaker, United Methodist, Lutheran, Presbyterian, Congregationalist (United Church of Christ), Disciples of Christ, etc.

        4.The liberal Christians tend to like to challenge conservative Christians/Evangelicals with an interpretation of Jesus as the Lamb of God. This is Jesus at his most hippie, most potentially anti-Capitalist, etc. These is Jesus who threw the “moneychangers” out of the Temple.

        5. Basically it is a doctrinal fight and one that has been around for longer than either side imagine. There is a long history of people who were uncomfortable with Jesus the Pacifist and Jesus as being on the feminine side and they invented muscular Christianity and the prosperity gospels. Long before Joel Orsteen, there was Billy Sunday. There were people who criticized Billy Sunday for the same reasons that Joel Orsteen is criticized.Report

      • Avatar LeeEsq in reply to Tod Kelly
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        says:

        @saul-degraw, like all other holy books, the NT contains something for everyone. Christian liberals and Christian conservatives can find passages that support their point of view. Jesus might have said that its easier for a camel to pass through an eye of needle than a rich man to go to heaven but he also forbad divorce and had some fire and brimstone about him.Report

  3. Avatar James Pearce
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    says:

    I see no reason why an amoral corporation should be encouraged. Corporations are one of the most useful things known to man. If they’re not acting morally, who will?Report

  4. Avatar James Hanley
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    says:

    celebrate their creative use of “tax management” at the expense of a fair and functioning society,

    Really? The consequence of Walgreens “moving” its official address overseas is that society becomes unfair and stops functioning?Report

    • Avatar Jesse Ewiak in reply to James Hanley
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      says:

      Not completely, James. But it’s another chip in the wall.Report

    • Avatar Tod Kelly in reply to James Hanley
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      says:

      If Walgreens does? Well, that alone is unfair, but sure, everything else functions as normal.

      If all the other publicly traded companies begin to do the same? Then yeah, pretty much. Don’t see how the US government and economy survive such a thing.Report

      • Avatar James Hanley in reply to Tod Kelly
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        says:

        So you guys think a 0% corporate tax rate would destroy the U.S. government and economy?Report

      • Avatar James Hanley in reply to Tod Kelly
        Ignored
        says:

        Can I ask you to flesh that out a bit…?Report

      • Avatar Saul Degraw in reply to Tod Kelly
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        says:

        @james-hanley

        I don’t think a 0 percent Corporate Tax Rate would destroy the U.S. but I would not make the rate 0 unless the income was made up elsewhere.

        I also think that corporations should lose their citizenship if they move abroad.Report

      • Avatar Tod Kelly in reply to Tod Kelly
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        says:

        Between corporate income and payroll taxes, businesses pay almost half of the entire US federal expenditure. It varies from state to state, and with some there are corporate property taxes as well, but on average let’s just assume it’s about the same at state and local levels.

        To say that the government can survive without going into bankruptcy — and further, that such would have no impact on the US economy as a whole — requires that you believe that government doesn’t actually do anything.

        I mean, i could start listing all of the various infrastructures, protections, safety nets, etc. that disappear if you halve the entire budget, but that seems a little unnecessary unless we’re really going to go down that rabbit hole, which seems a waste of time — because i think where we really disagree is here, up top, that the government does or doesn’t do anything of value with the taxes it collects.Report

      • Avatar Will Truman in reply to Tod Kelly
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        says:

        I assumed that by “corporate tax” he was talking about federal corporate income taxes in particular, and not payroll taxes. Corporate income taxes are somewhere in between 10-15% of the federal budget, and among the costlier taxes to collect, which seems less chaotic to remove and replace with something else than payroll taxes and the like.Report

      • Avatar James Hanley in reply to Tod Kelly
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        says:

        1. I didn’t realize we were talking about payroll taxes. I’m going to call foul as about 1/3 of federal revenue comes from that source, and only 10-13% from the corporate income tax, so your figure’s a bit deceptive.

        2. An estimation of the benefits of eliminating the corporate income tax.

        3. A primer on the corporate income tax, including discussion of who pays. (As I noted in the discussion of Vikram’s post, tax incidence != tax burden.)

        I have to get to bed now. I’ll catch any responses in the morning.Report

      • Avatar James Hanley in reply to Tod Kelly
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        says:

        What Will said. If my failure to include the word “income” between “corporate” and “tax” confused the issue, I apologize.Report

      • Avatar Tod Kelly in reply to Tod Kelly
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        says:

        @james-hanley @will-truman

        See, I think that’s the thing I never get in these conversations. We’ve established that US corporations of a certain size will bend or change the rules so that their personal income and their business income is magically no longer taxable income because… well, because they have enough money to make it be that way.

        And the reason you want to argue that of course they would never, ever do that with payroll, ss, fica, etc., is what? Why on earth wouldn’t they?

        Indeed, aren’t we agreeing that they have a responsibly to their shareholders to begin getting out of paying those as soon as they’ve locked up the no-income tax part?Report

      • Avatar James Hanley in reply to Tod Kelly
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        says:

        Todd,

        First, that’s a nice change of subject, but I’m not gonna play.

        Second, it’s not the bending of rules that gets them out of paying corporate income taxes, as the primer I linked to explains.

        It’s doubtful, in the end whether any tax’s actual burden, as opposed to its incidence, can ever actually fall on a corporation.

        And now, truly off to bed.Report

      • Avatar Will Truman in reply to Tod Kelly
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        says:

        My impression is that payroll taxes are among the hardest to avoid while corporate taxes among the easiest. It being easier to hide corporate profits (or corporate residence) than hiding employees’ income (starting at the first dollar).Report

      • Avatar Will Truman in reply to Tod Kelly
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        says:

        Not too long ago, I wrote a post on one of my hesitances towards a rigorous carbon tax. Namely, that half of the goal is simply to generate revenue, and as a revenue-generation scheme I am less than comfortable with the regressive carbon tax. I said that basically the way to get me on board was to demonstrate that it’s not about the money (in that case, by passing the money back to the people in one form or another instead of spending it on pet projects).

        When it comes to the corporate income tax, I think the same sort of gut check applies. I suspect a lot of people who want to do away with it want to do so because they want to lower overall tax burdens. I don’t consider that in and of itself to be a bad thing, though (a) I know others do and (b) it wouldn’t be my favored way of doing so.

        So the question to ask supporters of doing away with the CIT is whether they are willing to do so on a way that (a) doesn’t reduce overall collections, and (b) doesn’t significantly alter the distribution of taxes paid (ie doesn’t make it significantly more progressive or regressive). If you can see the candy bar melt in their mind when you ask the question, you get a better idea of where they are coming from.

        For my own part, my answer is an emphatic “Yes!” Not only would I take it, but it would actually be my preference since in the current place and time I don’t think reducing government revenue is a good idea. So nix the corporate income tax and increase income taxes for the higher-earners, increase capital gains taxes, and increase taxes more generally on the sorts of people we think we’re getting with the corporate income tax. (Maybe not just them, but in proportion to whatever fear we might have that they are inordinately benefiting from the elimination of the CIT.)

        John Aziz actually ties the two things (pollution taxes and corporate income) together. It has a certain elegance, but my main concern with that is actually that it would be unduly regressive. I could be convinced otherwise, however.

        (I should add that even though corporate income taxes are ostensibly paid by corporations, and a lot of carbon taxes would be the same, this is of course fictitious and ultimately that money is coming out of somebody’s eventual pocket in one way or another.)Report

      • Avatar Mad Rocket Scientist in reply to Tod Kelly
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        says:

        Moving a corporate headquarters out of the US does not, AFAIK, absolve a corporation from paying payroll taxes (~30% of tax receipts), or property taxes, or sales taxes, or free employees from paying income taxes, etc.

        All it relieves is that corporate income tax, which makes up about 10%-15% of the tax receipts.

        Seriously, for all the money the US spends collecting corporate income taxes, and all the money corporations burn trying to find ways to avoid paying income taxes, we would be far better off just ending corporate income tax & hiking up rates elsewhere. Save everyone lots of money, plus remove a large incentive for corporations to get involved in politics.Report

      • Avatar Michael Drew in reply to Tod Kelly
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        says:

        Partly to @will-truman ‘s point, what I’m wondering is what are the true conditions preventing a legislative fix to the inversions problem right now. Obviously, they are manifold. Let’s consider.

        Democrats, I think likely (though possibly not in an election year) would take a change in the law constraining inversions (not eliminating them or their like for all time, which is impossible) that didn’t significantly change the CIT rate if it were offered and walk away. But, it should be said, in an election year, they’re probably also perfectly happy using the status quo and Republicans’ refusal to implement a short-term fix that does;t address the underlying rate problem as a campaign issue. Point being, this isn’t a valueless talking point for them just status quo.

        But if we were to move toward substantive conditions, there would probably be a number that could be arrived at for a new CIT rate. But then as Will says, the issue is whether there would be offsets to preserve progressivity. And the parties being the parties, neither would actually put a neutral proposal on the table; they each might claim to but each would be able to point out ways in which more or less progressively was being sneaked in through various slights of accounting hand.

        But then *even if* a CIT reform proposal could in theory be agreed to, in reality each side probably ends up seeing it as in their interest to hold that (and thus the inversions problem) up as a hostage of sorts to use as leverage in the larger tax reform debate. So that resolving the rate and degree of progressivity & etc just wrt to CIT reform isn’t enough; ultimately, for the duration of divided government, the barrier in the way of dealing with the inversions problem (and all other individual tax deformities) ends up being broad resolutions to the problems of progressivity and efficiency within discussions of the overall tax code.

        Which is to say, resolution of this particular micro-issue, like that of all micro-issues in the tax code, is waiting on Godot. And so it goes…

        That’s my take. Anyone have different sense of the politics from this?Report

      • Avatar James Hanley in reply to Tod Kelly
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        says:

        @will-truman,

        Yes, eliminating the CIT should be done in a revenue neutral way.msince the CIT burden falls on real humans anyway, and is not, in the end, actually borne by the corporation, this is not theoretically hard. It likely would be somewhat politically difficult, though. It would require eliminating some tax breaks and, I think, changing how we treat investment income.

        The idea that the corporations pay the tax, though, is the biggest misconception that needs to be overcome. People pay the tax, and while there’s uncertainty about which people , it essentially comes down to capital and labor, with labor possibly bearing more than half the cost. That is, liberals who support the CIT may be screwing over working class folks. The primer I linked to above explains.

        From an economic point of view, the central problem with the corporate income tax is that, ultimately, only people can pay taxes. …

        Modern economic opinion is divided on the incidence of the corporate income tax, but few economists today believe its burden falls entirely on the owners of capital. … The corporate income tax raises the cost of capital and reduces after-tax returns in the corporate sector, and thus leads to a migration of capital into noncorporate or taxexempt sectors of the economy. This migration has two effects: it lowers the supply of capital available to corporations, and it causes a reduction in rates of return in the noncorporate sector as capital becomes more plentiful there. The ultimate effect, therefore, is to lower returns for all owners of capital across the economy. One important result of this capital migration is that the burden of the corporate income tax, over time, shifts to workers: with a smaller capital stock to employ, workers are less productive and earn lower real wages. In a 1996 survey, public finance economists were asked to estimate what percentage of the corporate income tax in the United States was ultimately borne by owners of capital. While their answers varied, the average response was 41 percent, meaning that the professional consensus is that more than half the burden is eventually shifted from owners of capital to workers or other groups.

        The problem is that it sounds so good to make corporations pay. They’re rich, and they benefit from all the public services. But it’s just a pleasing myth to think they actually are the entity that bears the cost.

        And, frankly, if tax policies are literally driving them out of the country, maybe that’s on the country, not them. If a business drives people away, we criticize the firm, not the customers. We’d do the same if it was a non-business entity like a church, fraternal organization, or college. But somehow when we attach the word “state” or “country” to it we absolve it of blame and start talking about disloyalty. But why should any organization that’s screwing you over get a claim on your loyalty?Report

      • Avatar Mo in reply to Tod Kelly
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        says:

        @mad-rocket-scientist Actually it doesn’t even relieve them of all corporate income taxes, it just relieves them of corporate income taxes for non-US income. So MegaCorp, Inc has to pay US corporate taxes on income in the US as well as in Europe, Asia, MEA and Latin America, while MegaCorp, AG only pays corporate taxes on income earned in the US.Report

      • Avatar James Hanley in reply to Tod Kelly
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        says:

        @Mo,
        That’s a point I was wondering about. Walgreens still has to have an American division, incorporated in the U.S.? And that division still has to pay corporate income tax on U.S. revenues? But it doesn’t have to pay income tax on Walgreens’ Alliance Boots pharmacies in Europe and Asia?Report

      • Avatar Mo in reply to Tod Kelly
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        says:

        @james-hanley This doesn’t apply to Walgreens, but where it starts to get really shady is where the IP resides. If the entity that owns the IP resides outside the US, you can have high licensing fees for your US entities baked into the transfer pricing so even though there is a significant amount of revenue, your profit ends up at $0. The IP licensing arm ends up with a massive profit, but that profit all resides in a low tax environment. This is the foundation of things like the Double Irish with a Dutch Sandwich (which sounds ridiculously dirty).Report

      • Avatar Patrick in reply to Tod Kelly
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        says:

        Corporations can already pass through their entire income to stockholders and have it taxed as stockholder real income, in the S corp.

        Since the C corp still exists, I’m guessing that there are practical reasons for it to exist. I’m guessing that one of them is that “people who are stockholders in a C corp pay less taxes over the lifetime of their investments than people who are stockholders in S corps, for certain types of corporations.”Report

      • Avatar Brandon Berg in reply to Tod Kelly
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        says:

        Corporations can already pass through their entire income to stockholders and have it taxed as stockholder real income, in the S corp.

        Restrictions on S Corporations make them unsuitable for very large enterprises. For example, they can have a maximum of 100 shareholders and therefore can’t be publicly traded, and cannot have foreign or corporate shareholders. There are also certain industries in which S corporations are not allowed at all.Report

      • Avatar Patrick in reply to Tod Kelly
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        says:

        @brandon-berg

        Do you think those are unnecessarily restrictive, or about right?

        Is there anything from preventing a C corp from just disbursing all of its profit to all of the shareholders every year as a dividend? (not that I know of)

        The reason they don’t do this, of course, is that the business is not the owners, the business has its own long-term goals which are best suited when it manages its own money.

        That makes it not the stockholder’s money, not directly.Report

      • Avatar Brandon Berg in reply to Tod Kelly
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        says:

        Well, I don’t know the reasons for the restrictions, or the reasons for a distinction between S and C corporations, so I’m not sure whether they’re good reasons.

        In any case, dividends paid out by a C corporation are considered profits, and are not exempt for corporate income taxation. A C corporation can pay out all its profits as dividends each year, but the profits will be subject to double taxation.

        Yes, a business really is the shareholders, acting collectively to achieve some shared goal, usually making money. This is largely a matter of semantics, though—either way it’s not clear why this would justify double taxation.

        Really, the bottom line is that we shouldn’t have a tax on corporate income, or any other kind of income. Taxes should be levied on consumption to avoid penalizing saving and investment the way taxes on income (specifically investment income) do.Report

      • Avatar Patrick in reply to Tod Kelly
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        says:

        You are correct on dividends. I will have to adjust my post accordingly.

        One note about taxes, generally, though… you can tax income, you can tax land, you can tax capital, you can tax consumption, you can tax vices, but the more you depend upon any one of those things the more incentive you put behind finding an exception in that one thing.

        I’m pretty sure if tax consumption and nothing else, you’ll get less consumption (and thus lower economic activity), just like if you taxed income and nothing else, you’d get more things defined as “not income”.Report

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

      So like, if I spray paint graffitti and jump a turnstyle, society comes unglued?
      Yeah, actually, it does.

      Which is kind of why I am not so impressed with econometric analyses of politics, whether its on the elft or the right.
      They miss the impact of culture and societal mores on how we behave.

      I mention this, only after reading posts like this, and Corey Robin’s over at Crooked Timber, about capitalism and slavery.

      There is a part of me that wishes that a set of laws and regulations about land and contracts and government would, by themselves, lead to a just society, but I am not seeing any evidence of that.

      For example, if the Jim Crow South had suddenly embraced a form of socialism, would that have prevented the oppression of black people?
      It should be obvious, that it wouldn’t- we have already heard stories about how the New Deal programs were carefully crafted to deliver the most benefits to whites ahead of blacks.

      If they had created a completely free and functioning market economy, would the oppression have been prevented? No, we already saw, with Lester Maddox, that hatred of black people took first priority over market forces- white businesses behaved irrationally, and formed free associations purely for the purpose of creating oppression even when the market didn’t.

      I’m convinced that its culture, that web of societal mores and taboos and sacred cows that do more work that ec0onomics in determining just or unjust outcomes.

      In the case of Tod’s employer, I can’t really make a case that liberalism would have prevented it- I’m damn sure market forces wouldn’t have either.
      I’m just thinking that evil and malice and destructive greed will always be with us, and politics, at its end, is a way for us to address that and assert a vision of what we want things to be.

      A culture that punishes greed and self-serving narcissism would do a better job at producing justice than one that doesn’t.Report

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

        @lwa-liberal-with-attitude

        Re: Jump a turn style.

        There are of course issues with how broken windows policing has turned urban areas into police states for many minorities especially blacks and hispanics. So maybe we do need to put up with a little lawlessness.

        http://www.slate.com/articles/news_and_politics/politics/2014/08/broken_windows_policing_deaths_racism_in_chokeholds_arrests_and_convictions.htmlReport

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

        Putting up with lawlessness is a little bit like the “Make government smaller” arguments we see so often.
        As if Lawlessness is a dial that can be turned up or down, to get just right.

        On this thread, we have Tod describing obscene levelf of malfeasance, which apparently went unpunished. HSBC Bank admitted to laundering money for terrorist supporting nations, and was allowed to walk free, because they were rich and powerful.
        Yet we also see elsewhere poor people, people of color, being puniched with the most draconian way possible for the most trivial of crimes.

        What we have is a society that hasn’t yet come to terms with racism and class structure.
        I could agree that overly severe things like 3 Strikes laws and property forefeiture laws should be eliminated. I don’t think that we, collectively, are suffering from a too-strict mentality.

        We just aren’t brave enough to apply it to the rich and powerful.Report

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

        I’m going to split the issue. Like LWA, I think that ignoring quality of life/anti-social crimes enough can lead to tremendous detrimental effects on society. We have laws for a reason. The evidence strongly suggests that minorities are punished for breaking quality of life crimes more than whites and the punishment exceeds the crime. The issue isn’t so much that certain anti-social acts are against the law but how the law is enforced.

        Its similar to my position on drugs. I don’t think our drug problems are caused by the fact that they are illegal so much as drug offenses are prioritized as a war. Other countries also make most narcotics illegal but don’t suffer from our problems because drug enforcement lacks the public campaign element in those countries. If we treated drug offenses in the same way that we deal with larceny, as ordinary crimes rather than special crimes, than it wouldn’t distort things so much. The same should be for quality of life crimes, they should be enforced just enough.Report

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

        We do a pretty good job of putting up with a bit of lawlessness on the freeways, as long as people don’t push it too far.

        States that have legalized marijuana began by putting up with a bit of lawlessness in drug use, and currently the federal government is doing the same in those states.

        Cities like San Francisco have chosen to put up with a fair amount of lawlessness in regards to prostitution.

        There’s really no point in trying to report a bike theft to the police in any major city.

        I doubt we can dial it up or down with precision to get just the right amount (and I doubt we can identify just the right amount), but as a matter of practice, we do put up with a certain amount of lawlessness. It’s doubtful we could actually avoid doing so, without spending vastly more on policing, and by picking and choosing what we are going to enforce, and how vigorously, we are in fact dialing it up/down, even if not with any real precision.Report

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

        James, legalizing something that was previously illegal is not putting up with lawlessness. Its just reforming the legal system to get rid of a problematic law. You put up with lawlessness when something is illegal but you don’t do anything about.

        The real question is that what sort of anti-social behavior should be illegal and what should be legal. Anybody who lived in a densely populated environment knows that too much anti-social behavior could really destroy other people’s ability to enjoy their life. My apartment is near a New York City ferry stop and there is a promenade and open space near the water. When the weather is nice, its often used as a place for a late night dance party with some very loud music. I can hear it with my windows closed and I live on the seventh floor. I don’t complain and most people don’t complain but the dance parties definetly disturb our sleep at times. Should this be legal or illegal? The people at the party aren’t doing anything immoral but they are being a nuisance and are probably violating an ordinance. We could make a valid noise complaint.Report

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

        Lee,

        You focused just on the legalization of pot bit, and ignored the whole substance of my comment. And even with pot, I stated that they started allowing lawlessness with it before getting around to legalizing it. And driving 75 is still illegal, and prostitution’s still legal in California, etc. etc.Report

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

        “I mention this, only after reading posts like this, and Corey Robin’s over at Crooked Timber, about capitalism and slavery.”

        After several readings of that article last week, all I could get from it was….

        Corey hates slavery. Corey hates capitalism. So capitalism is slavery (or vice versa?)Report

  5. Avatar greginak
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    says:

    This discussion has come up before in different ways. I’d say there is no way our laws cannot have some moral/value basis to them. It just isn’t’ possible. Certainly not ever single rule revolves around morals ie. the park closes at 10 or 11 isn’t’ a major ethical dilemma. But many laws and certainly the concepts around which we base them involve our ethics and morals. It would be better if we just admitted the values we are trying to put in practice them pretend there is nothing there. Companies will play by the rules that are set. But the rules in the broadest sense have values behind them.Report

    • Avatar Saul Degraw in reply to greginak
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      says:

      There is a very long debate among Jurisprudence scholars whether law and morality are separate. The Legal Positivists say they are separate and others disagree.

      I am not sure where I come on the debate. This is because morality is such a tricky and subjective issue for the most part. We would probably get bogged down in debates about what morality means and what is or is not morality. Kind of like when liberals say that their morality makes them support a welfare state and single-payer health insurance and conservatives say their morality makes them support Hobby Lobby and what not.Report

      • Avatar greginak in reply to Saul Degraw
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        says:

        My experience is people who say morality has nothing to do with law will at some point something like ethics or values are part of laws. That all sounds the same to me. Nobody can completely separate themselves from their morals, its just a human thing.Report

      • Avatar Saul Degraw in reply to Saul Degraw
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        says:

        @greginak

        Maybe but I still think we are dealing with issues of what do we mean by morality and whose morality and what is the best way to solve a problem? I’m fully on the liberal side and believe in a social contract. There are plenty of people who disagree with the idea of a social contract or that morality requires a welfare state.Report

      • Avatar greginak in reply to Saul Degraw
        Ignored
        says:

        @saul-degraw The sainted founders told us how to solve, in a general way, how to solve problems and work with different moraliies. Democracy. Yeah i know all the problems with the Big D and i agree with some of them. I’m into the social contract also, so we push. Others push their ideas. We vote and push and talk and whatever to move policies in the way we want. But all of that comes from our values. I don’t think it changes anything to admit that, it’s just being honest.Report

      • Avatar Murali in reply to Saul Degraw
        Ignored
        says:

        @saul-degraw
        The legal positivist doesn’t say that morality has nothing to do with the law, only that there is no necessary connection between the law and morality. The legal positivist is fully willing to concede that in some jurisdictions, moral criteria is required to identify the law. But this need not be the case in all jurisdictions.Report

      • Avatar Saul Degraw in reply to Saul Degraw
        Ignored
        says:

        @saul-degraw @james-hanley

        As I understand it, many urban burglaries go uninvestigated unless violence was involved and/or there were eye witnesses and then burglar was very unlucky to have someone at home while he or she was trying to break in. Years ago, I heard that about 75 percent of burglaries in SF go unsolved because of a lack of witnesses and because most burglars are smart enough to case a place and do as quick a job as possible. When I was burgled in September 2008, the thieves just took what was quick and convenient to take like my laptop, digital camera, ipod, and laundry quarters. All these items are rather inconspicuous.Report

      • Avatar Saul Degraw in reply to Saul Degraw
        Ignored
        says:

        @leeesq

        Rather and in the wrong thread.Report

      • Avatar Will Truman in reply to Saul Degraw
        Ignored
        says:

        When I moved to the small city, I lost my jacket that had a checkbook in it. Someone wrote a check for $60 worth of pizza and to get the creditors off my back I had to file a fraud affadavit. But for that, it never would have occurred to me to contact the police. There was a detective involved, and he got surveillance tape to see if he could catch the guy who took my jacket. He called me to apologize when he couldn’t.

        When I lived in the big city, I had a car broken into at precisely the wrong time and over $2000 worth of stuff was taken. The officer was genuinely annoyed that I filed a report.Report

      • Avatar Saul Degraw in reply to Saul Degraw
        Ignored
        says:

        @will-truman

        The police were pretty cool and understanding with me but only did a cursory glance/investigation before writing up a claim that I could submit to my rental insurance company. But generally big city police probably realize the uselessness of trying to find the items stolen with no witnesses.Report

  6. Avatar Jaybird
    Ignored
    says:

    Out of curiosity, did anybody go to jail for that little thing that happened or was making a contract that said “we will take your money and spend it on mistresses” in the fine print something that, hey, they should have noticed with a better lawyer?Report

  7. Avatar paradoctor
    Ignored
    says:

    <>
    In D&D terms, your employer was Lawful Evil, and your team was Chaotic Good.Report

  8. Avatar Road Scholar
    Ignored
    says:

    What we have going on here with the corporate inversion business is a form of panarchracy, a system flogged by libertarian utopianists that supposes the ability to choose your favored flavor of government without having to physically relocate. Sorta the way you choose your cellphone company.

    I’ve yet to see a proposal that strikes me as workable, much less politically feasible, but apparently the corps have figured out a way. If we’re going to accept them having this ability how about extending the privilege to actual people instead of just the artificial variety?Report

  9. Avatar Gabriel Conroy
    Ignored
    says:

    I think I agree with @mo in the first comment above. But I do think the distance between Vikram and Tod is not necessarily as far as the OP suggests. For one thing, Vikram was talking about tax policy and not, say, poisoning people, neglecting safety rules, or stealing/”reappropriating” clients’ money. Now, maybe his suggestion that we look at corporations as “amoral” when it comes to tax policy has, as a logical implication, the types of outcomes that Tod in the OP mentions. Maybe that’s the sum of Tod’s argument, and it can’t be ignored because most of the examples Tod mentions are indeed examples of immoral things being done.

    But one of the takeaways from Vikram’s OP for me was to consider how useful it is to ascribe morality to corporations’ actions when it comes to facially amoral rules, like tax codes. If one insists on ascribing moral standards to following the rules–or to investing the millions of dollars necessary on a legal team to ensure compliance with the rules while paying the lowest taxes possible–that doesn’t go very far in changing the behavior.

    One has to rewrite the rules and reorganize the incentives. As Tod points out, that solution is fraught with difficulties because corporations hire enough lawyers to find the loopholes. Maybe, then, one solution is to devise easier ways to collect the tax, or a similar amount of money with a different kind of tax, as Will and James mention above in the discussion about abolishing the corporate income tax. Or maybe there’s no solution. Life is a tragedy and we just have to depend on the good graces of, or moral admonishments against, the people who work for a corporation. Per Tod’s examples, that doesn’t seem to have worked very well so far.

    But back to my point about what Tod and Vikram have in common. Vikram is speaking specifically about tax policy and about the moral implications we can assign to tax policy as compared with, say, criminal laws. In fact, Vikram prefaces his “tax policy is amoral” argument with this:

    If the criminal code had a loophole that allowed you to kill a person because of a Twinkie, people would be rightly angry if you took advantage of it. The criminal code is consistent in saying that murdery things are bad, and you shouldn’t do them.

    To the criminal code, I might also add codes about torts and other forms of liability natural persons and corporate persons bear. We say a corporation can be sued if a customer falls on a slippery floor inside an office building because it’s wrong not to warn people of a danger. The people who ran the other state offices in Tod’s former company evidently found a loophole that enabled them to cheat their clients. That, too, in my view is wrong, a harmful thing done legally.

    But again, Vikram was limiting his own argument to the tax code and to tax management.

    Finally, I’ve bracketed for the most part the question of whether corporations are really moral agents. In my view, corporations, even not for profit ones, cannot be moral agents. I still think they can and ought to be held liable for harmful actions, but as agents, corporations as such cannot have a moral interest. The people who run them, though, do. Even if you disagree with me, I’m content to rest my argument on whether it’s useful to see corporations as moral agents. I suggest that it usually isn’t useful, but when it comes to writing the rules or holding corporations accountable to harms they make, we can do so without the assumption of moral agency.Report

  10. Avatar Damon
    Ignored
    says:

    Oh dear god..

    Don’t bitch about people and companies coming up with clever ways to avoid taxes. Change the law so that it’s simple and clear. That’s the source of 90% of all this kerfuffle. But, but lobbyists…Yah, well, they are doing the same thing you are doing, or want to do; change the tax law to what they think it should be. Too much money on their side? Better start organization and fund raising. But no one cares until and unless something makes the papers and then someone must “do something”.

    None of my support for V’s “amoral” tax code points have anything to do with support of other amoral or immoral behavior by corporations…but I will say this…nobody has gotten more than a slap on the wrist for any of this crap. All those banks and the crash? All that other stuff? Anyone in jail? Any billions of dollar fines? Rarely. Talk to me about morality when the enforcement mechanisms that are allegedly in place are actually used.

    Tod, you mentioned the minor tweaks to the contracts? Did not these States have lawyers to review these contracts? Lawyers eat that up. Oh, they didn’t really review it? Yah, it’s your entire companies fault. Right. You did a good thing, the right thing. Legal / Moral / Illegal / Amoral are 4 points, sometimes they intersect, run parallel, most times they diverge. No one in your company’s corp hq had the balls the do the right thing. This is a failure of humanity and company culture. No law would have stopped it.Report

    • Avatar Kim in reply to Damon
      Ignored
      says:

      Damon,
      The final enforcement is you and your gun.

      If the world finance system had gone tits up (martial law and all that),
      guns would have come out. The kind of folks who thought they could hide…
      would find out that the little guys are smarter than they thought.Report

      • Avatar Damon in reply to Kim
        Ignored
        says:

        @kim
        Actually kim, i’ll reword that “The final enforcement is us and our guns.” You want to “fix” the system? Remove the current system. We did that in the late 1770s. No reason why it’s cant be done again.Report

    • Avatar Jim Heffman in reply to Damon
      Ignored
      says:

      “Change the law so that it’s simple and clear.”

      So sales tax should apply to every level of transaction? Even between a raw-materials supplier and a distributor, neither of whom sells anything to an end user?Report

  11. Avatar North
    Ignored
    says:

    Hair raising my Todd. Though this just seems to emphasize that doing away with the corporate tax rate (and eliminating other tax deductions such as the capital gains exemption to pay for it) is a good possible fix. The corporate income tax brings in relatively meager revenue, it’s an absolute pain in the ass to collect, there’s a constant arms race between corporations inventing new ways to game the calculation of corporate taxable income and the IRS in trying to cope with that, it’s a massively distortionary tax and it also upholds things like capital being taxed less because of “double taxation” excuses. If the corporate income tax was eliminated* that’d be an enormous boost to the country in terms of competition and efficiency. On top of that it’d actually diminish the incentive to lobby.

    It won’t happen of course. Right wingers and the wealthy would squeel like pigs over the deduction and loophole eliminations/tax increases required to pay for it. Left wingers and low info voters would squeel like pigs over the optics of not making big companies “pay their share” and all of the specific vested interests (boards of managers, corporate tax accountants etc) would fight it as if their lives depended on it because their professional lives would.

    *And again I emphasize in a revenue neutral manner.Report

  12. Avatar Patrick Bridges
    Ignored
    says:

    I’ve always found the “0% corp income tax” proposal troublesome for one reason: it would require the IRS to spend significantly more trying to prevent people from hiding personal income as corporate income and benefits, something they already do a lot of and that results in a lot of the complexity of our tax code.

    So if the usual suspects got their way on this, would we next see them complaining (even more) about the complexity of the tax code, so that we should “obviously” just abolish all income taxes and just go with a straight regressive consumption tax?

    Color me suspicious.Report

    • Avatar Will Truman in reply to Patrick Bridges
      Ignored
      says:

      Most people don’t have corporations in which t hide their income. And my understanding is that if they want to spend the money for themselves, they would need to declare it as personal income anyway. (If they’re using the company to spend it on their behalf – corporate jet – by my understanding the same difficulties in assessing that apply for both since the jet is an operating expense.)Report

    • Avatar North in reply to Patrick Bridges
      Ignored
      says:

      Will is on target here. If you try and hide your income in some kind of personal corporation it’s never going to fly past an audit so it’s usually not worth the trouble.Report

      • Avatar zic in reply to North
        Ignored
        says:

        I dunno about this; I’ve seen several examples of this used by men who want to pay as little as possible in child support. There seems a pattern of 1) give up regular employment for freelance consultant (often through the same employer for highly skilled people), 2) treat much of the living expenses as corporate expenses, thus lowering the income of the corporation, 3) pay child support based on income of corporation that’s paid for your personal expenses.

        In one particular case, the ‘consultant’ in question included most of his rent (home office), all internet/computer costs (technology business), gym fees (he also worked as a free-lance personal trainer), club memberships, and meals with clients so that was living high-on-the-hog lifestyle while his children lived well below the poverty line.Report

      • Avatar Mo in reply to North
        Ignored
        says:

        @zic The thing about the home office thing is that he could very well get killed in an audit. If he used the internet access, rooms that were the “home office”, PC, etc. for personal use, they no longer are a home office. So if he does his evening internet surfing in the office room on the office internet it ceases to be a business expense and he can be forced to pay back taxes.Report

      • Avatar dhex in reply to North
        Ignored
        says:

        back in the city, it always amazed me how many of my wife’s colleagues (phd students, largely) would attempt to do the “home office” tax scam. one of them got quite badly burned by an unamused irs a few years back but i don’t know if that dissuaded the rest from playing chicken with leviathan.Report

    • Avatar Michael Cain in reply to Patrick Bridges
      Ignored
      says:

      Consumption taxes need not be regression. Sales taxes are, but that’s not the only way to do it.Report

    • Avatar Francis in reply to Patrick Bridges
      Ignored
      says:

      Pretty much this. A large part of the CIT actually exists as a bulwark to prevent high-income individuals from incorporating. The reason that the effective CIT has dropped so far is that the actual tax professionals in Congress understand the distorting effect of the CIT and have allowed actual corporations ever more tools to avoid it.

      But if it were completely eliminated, then tomorrow I would incorporate. My company would be an independent contractor to my employer and own my house. Ta da! I’m now paying my mortgage with pre-tax dollars. My company would offer food service to its employee — and now my food bill is pre-tax. Transportation — now my car payment is pre-tax. Basically, I have enormous incentives to have my corporation retain its earnings.

      So, we eliminate the CIT, but then adopt an enormous new federal corporation code (corporate regulation has historically been a province of the states) regarding the powers of S corps to offer services to its employees? This is progress?Report

      • Avatar North in reply to Francis
        Ignored
        says:

        I’m skeptical Francis, this all seems transparently easy to see through with even a light review. Note that in a no-corporate income tax world the IRS would have a lot more manpower and policy power to devote to policing this kind of thing.Report

      • Avatar Jim Heffman in reply to Francis
        Ignored
        says:

        “Transportation — now my car payment is pre-tax. ”

        But it’s being provided to employee F. Rancis as compensation, which means that Francis Incorporated owes payroll taxes for it.Report

    • Avatar DavidTC in reply to Patrick Bridges
      Ignored
      says:

      it would require the IRS to spend significantly more trying to prevent people from hiding personal income as corporate income and benefits, something they already do a lot of and that results in a lot of the complexity of our tax code.

      The problem is, that is blatantly against the law and the IRS will *walk all over you*. Seriously. Don’t try that.

      Everyone can point to someone who gets away with it…until, of course, they don’t. Don’t look for the stories of people who get away with it, look for the stories of what happens when the IRS catches someone at it and flays them alive.

      I’m someone who normally works from home, and I *could* try to claim a tax deduction for my home office, and internet, and whatnot. But I don’t, because it’s too blended into my non-work…I mean, my work laptop is on a KVM with my home computer. I’m sitting in my office chair right now. I have one internet connection. Trying to calculate what part is ‘my office’ and what part is ‘my home’ is madness. That way invites audits. It’s just not worth it for me. And that’s just a deduction…I can’t even imagine what they’d do if I tried to incorporate myself and rent my house to myself.(1)

      I’m not sure what to make of the proposal to get rid of corporate income tax, but I suspect I’d be in favor of it if a) we got more IRS agents who actually made sure people weren’t abusing corporations to hide money in, and b) thanks to it no longer being ‘doubled taxed’, we’d start taxing capital gains at normal income rates, or even higher.

      1) I’m reminded of a weird way to get home appraisals correct: Let everyone do it themselves, but make it where any person can come and give the homeowner that amount of money, plus a small charge for the inconvenience, and now that person owns the house. I.e., the ‘If you claim it’s only worth $100,000, you should be willing to sell it for $120,000.’ rule.

      While that’s silly for home appraisals (It’s not like people can just go find another identical house), it would be rather hilarious to make it apply in this situation. Oh, a corporation that you set up owns your house and just charges you rent to live in it? Well, I am offering them slightly more rent then that, and demand they rent that house to me *instead*. Your corporation provides food services in your house? Well, I’ll be showing up and buying food from them also.

      This wouldn’t actually work, but it gets to the heart of what I’m sure is an IRS rule of thumb: If a corporation exists that will only do business with *one specific individual*, it’s clearly not actually a corporation at all, but merely a tax dodge for that individual.Report

  13. Avatar j r
    Ignored
    says:

    My problem with calling tax avoidance immoral, as opposed to amoral, can be summed with the following question:

    Has anyone here or does anyone here know of anyone who has ever prepared their taxes in such a way as to maximize their tax bill?

    Lots of people leave money on the table by virtue of being risk averse and not wanting to push their deductions to the maximum for fear of running afoul of the IRS. Does anyone, however, say something to the effect of, “yes, that deduction is clearly legally allowable, but I’m going to pass it up because I want to make sure that I’m paying the government its fair share?” I personally think that we should phase out the mortgage deduction, but I still claim it on my taxes. Is that immoral?

    Is minimizing the tax bill only immoral when corporations do it?Report

    • Avatar James Hanley in reply to j r
      Ignored
      says:

      Is minimizing the tax bill only immoral when corporations do it?

      Of course not. It’s immoral when rich individuals do it, too.Report

      • Avatar Patrick in reply to James Hanley
        Ignored
        says:

        Like I brought up on Vikram’s thread, one of the differences between “poor people paying taxes” and “middle class people paying taxes” and “upper class people paying taxes” is “how susceptible the tax code is to shenanigans by the various groups of people.”

        So, no, it’s not immoral to pay what you owe and not a cent more.

        It may be immoral to pay what you owe and not a cent more when you’ve been greasing palms to get the tax code to look like, “Hey, well I’ll be durned… I pay a lower effective tax rate than some schmoe who makes 45k a year.”Report

    • Avatar Dan Miller in reply to j r
      Ignored
      says:

      Let’s assume that you wanted to reduce or eliminate some of these deductions, to secure additional revenue and/or reduce distortions arising from the tax code. How would you go about building a political movement to achieve that change? What kind of messages would you use?Report

      • Avatar Kim in reply to Dan Miller
        Ignored
        says:

        You might try to speak to someone who actually has done this, in which case they’d tell you to simply do a big enough favor for a Senator or something, and then get them to slip your simple, small change in.

        Players gotta play the game.Report

      • Avatar Roger in reply to Dan Miller
        Ignored
        says:

        “How would you go about building a political movement to achieve that change? What kind of messages would you use?”

        I see this message as going against the steam. Politicians and regulators thrive on complex rules and tax codes with a constant never-ending series of amendments, expansions and exemptions. The very act of revising taxes and regulations empowers politicians and regulators. They thrive upon the game and do not want to see it end.

        Thus I see three escape hatches:
        1). Foundational beliefs. People in general see this and act upon it in their expectations, demands and controls on government (very unlikely)
        2). Cultural evolution. Industries and areas or states or nations which are not over regulated will continue to grow and thrive faster than regulators and politicians can screw them up. (Quite common)
        3). We go over the edge and then start the cycle again within a state or industry.(?)

        The message? Ideas matter.Report

      • Avatar Kim in reply to Dan Miller
        Ignored
        says:

        Roger,
        beware the Great Molasses Flood…
        Regulators don’t do their job half the time (why do you think they needed personal notes to get off their lazy asses?). They do not ask for more laws and more complications — in fact, they hate them.

        Do you really think the IRS wants people paying their workers in chickens? That they’re going to have to audit? And then lose money because their paycheck is based on winning audits???

        No, of course not!

        If nothing else, people are lazy and self-interested. While I’m certain excessive regulation MIGHT SOMEWHERE be self-aggrandizing, Bribery Works Better.Report

      • Avatar Patrick in reply to Dan Miller
        Ignored
        says:

        Roger:

        This is one of those optics moments that I wonder about, when it comes to “how Pat sees the world” v “how Roger sees the world”.

        “Politicians and regulators thrive on complex rules and tax codes with a constant never-ending series of amendments, expansions and exemptions.”

        The people that thrive on tax rules are the people who gain economically from the tax rules that favor them. The politicians thrive on the deals that they make with those as collateral.

        If nobody was lobbying to make their product tax exempt, I really doubt any politician would give a good goddamn about making tax rules around that product more complex.Report

      • Avatar Roger in reply to Dan Miller
        Ignored
        says:

        I certainly don’t disagree that corporations receiving favors thrive, Patrick.

        Let me put it his way, the people that ask for million dollar checks in the mail obviously thrive to the extent they get them for less than a million in lobbying.

        The problem which needs to be solved isn’t people asking for million dollar checks. If asking has any chance of working, the incentives are such that they all will ask and anyone not asking is leaving money on the sidewalk. Their stockholders should be upset at the fools not asking.

        The root of the problem is those that are peddling the million dollar checks, in return for campaign support. That is the hard problem to solve. Preaching against the million dollar handout seekers misses the real problem completely.

        Let me restate it without the analogy…
        If lobbying for favors works, then anyone who can be expected to win favors cost-effectively will do so. Anyone not seeking favors will be at a severe disadvantage, and over the long haul may very well cease to exist. Thus the key to the problem is to address the incentives and capacity of politicians and regulators to grant favors and privileges.

        In other words, “nobody lobbying” is extremely unlikely, and borderline illogical (for the firms, that is).

        Does this clarify?Report

    • Avatar Kim in reply to j r
      Ignored
      says:

      jr,
      Yes, I know several people who have done so.
      Also, Dr. David Brin sends money to pay down the government debt, yearly.Report

    • Avatar Scott Fields in reply to j r
      Ignored
      says:

      I think there is some misdirection here… minimizing the tax bill at the time of filing isn’t the immoral act. Minimizing the tax bill through superior lobbying advantage is.

      Barry Bonds takes steroids. He does so off the field.

      During the game, he follows all the rules (no extra strikes, no slower pitcher just for him), but because he took those steroids outside of the game, he has unfair advantage during the game. Did he cheat? Was Bonds behavior immoral? I say it was.

      Now, a lot of people will want to downplay Bonds behavior. The team will turn a blind eye as long as they’re winning and so will the fans. But, it will take moral outcry, mostly from the teams and fans put at a disadvantage by Bonds cheating, to bring about a tightening of the rules or a stricter enforcement of the existing rules. Some outrage from some Giants’ fans who honor integrity over winning would have even more impact toward that end.

      As I clarified to Damon in Vikram’s thread, pointing out immorality doesn’t mandate a legislative response. But, as I think Tod makes clear in his OP, moral admonishments are a vital first step to starting the organization and fundraising necessary to competitively lobby for fairer rules and stronger enforcement. Accepting the amoral behavior, or worse yet defending it, only empowers the cheaters.Report

      • Avatar Kim in reply to Scott Fields
        Ignored
        says:

        But, of course, it’s only cheating because it’s reversible.Report

      • Avatar j r in reply to Scott Fields
        Ignored
        says:

        I would love to believe that moral admonishments are the first step in a process that ends in more sensible tax laws, but that is a very Schoolhouse Rock version of how laws are made.

        In reality, moral admonishment from Democrats mostly serves as a cudgel to bash Republicans to get more Democrats elected, just as moral admonishment from Republicans mostly serves the same purpose. At some point in the indeterminate future I suppose that one side will accumulate enough chips to cash them in for something passing as reform. That reform, however, will most likely be light on actual reform and heavy on doling out preferential treatment to their preferred constituencies.Report

      • Avatar Kim in reply to Scott Fields
        Ignored
        says:

        jr,
        ignoring the small reforms doesn’t mean that they aren’t there.Report

      • Avatar Scott Fields in reply to Scott Fields
        Ignored
        says:

        @j-r So, NO moral admonishment won’t have any negative consequences and taking NO steps ensures more equitable tax laws will be written?

        The cheaters win by banking on your indifference and cynicism. Which episode of Schoolhouse Rock was that? I must have missed it.Report

    • Avatar NoPublic in reply to j r
      Ignored
      says:

      I’m late to the party (I was out of town) but I regularly pay more tax than is required due to my distaste for the charitable contribution deduction. I’ve discussed this here before and I’m aware of the hypocrisy and irony involved. But I do do it.Report

  14. Avatar zic
    Ignored
    says:

    Tod, this is a wonderful piece, thank you so much or writing it. I’m strongly resisting the urge to post the video of Greenspan apologizing to congress because he thought banks had it in their self-interest to avoid risk, and so did not need to be regulated. For the most part, our recent financial collapse was perfectly legal.

    But your also pushing at a greater question here, too: in a world where there is little or no regulation over corporate behavior, immoral and harmful actions depend on the courts to determine harm, and corporations are innocent until proven guilty. First, there seems a huge burden of proof in individuals who have been harmed coupled with disparity in access to legal resources necessary to prove that harm. Second, since regulation very much is part and parcel of litigating harm, how does adjudication happen? Tort seems to be the place where people always grouse they want to limit; but such a system would require it as the basis, or so it seems to me.Report

    • Avatar j r in reply to zic
      Ignored
      says:

      But your also pushing at a greater question here, too: in a world where there is little or no regulation over corporate behavior…

      The approximately 80,000 pages published every year in the Federal Register serve as a counterpoint to the claim that there is little or no regulation over corporate behavior.Report

      • Avatar Vikram Bath in reply to j r
        Ignored
        says:

        Part of the argument being made is that many of those pages are written by corporations themselves, and corporations have a moral responsibility to support the government they, um, own.Report

      • Avatar Roger in reply to j r
        Ignored
        says:

        Good point, JR. How many pages does it take to qualify as “regulated”, Zic?

        Seriously, could you help us out and define what regulated means? Can we recognize it when we see it?Report

      • Avatar Kim in reply to j r
        Ignored
        says:

        Roger and jr,
        Regulations != enforcement.

        I can think of three/four federal agencies I’ve called on various companies, because the companies were performing badly. I’ve been well served by about half the agencies.Report

      • Avatar Roger in reply to j r
        Ignored
        says:

        “Part of the argument being made is that many of those pages are written by corporations themselves….”

        Via our elected representatives. And we can all see how that could be a problem. I can think of lots of solutions:
        1) different representatives
        2) less activist or interventionist rules
        3) prohibitions against corporations from having any voice in how they are regulated.

        I can see the potential value of the first two, but the third seems problematic to say the least. Perhaps others see value in it which eludes me.Report

      • Avatar Kim in reply to j r
        Ignored
        says:

        Roger,
        Here’s a simple idea: if you let the corporations lobby, make it cost them a bit. They want every new car to have a backup-camera? Submit business plan, talk about the reduction in price of that backup-camera, talk about lives saved… and talk about the net effect of the price increase.

        … this is what it would be like if you let physicists run things, I’m pretty sure.Report

      • Avatar Roger in reply to j r
        Ignored
        says:

        This applies only to corporations? Not individuals? Not non profits? Not organizations which represent others interests? Not unions?

        Not sure what your logic is.Report

      • Avatar Kim in reply to j r
        Ignored
        says:

        Roger,
        my fairly ill-thought out logic was “they can afford it.” Which puts EFF and unions squarely in the “sure, you guys can do this too!”

        If you’re talking a 3 person nonprofit, um… probably not. But I would probably be okay with letting a 20 person shop lobby without providing proof too! [Now the small corps have Chamber of Commerce, which I would expect to provide proof.]Report

      • Avatar Mark Thompson in reply to j r
        Ignored
        says:

        Honestly, if we want to actually reduce the influence of corporate lobbying, there’s a remarkably simple solution that raises no free speech concerns whatsoever and actually addresses the root of the problem: ending the revolving door. The existing restrictions on lobbying by ex-members, ex-staffers, and ex-Executive Branch officials are incredibly weak. Senators and Cabinet Members are barred from lobbying for a whopping 2 years – barely enough time for them to finish their memoir. Senior Congressional staff have only a year of fairly minimal restrictions – ex-Senate staff can’t lobby the Senate during that time, and ex-Hill staff are only prohibited from lobbying their former office or committee. Midlevel Hill staff are entirely unrestricted.

        Lobbyists command big corporate dollars because of their Rolodexes, not because of their ability to direct campaign contributions, and you can rest assured that an ex-senior Hill staffer has a massive Rolodex with plenty of contacts in both houses, and the Executive Branch for that matter.

        In order to lobby Congress effectively, you need access to a lot of members of Congress. The surest ways to get this widescale access are either through fomenting a large grassroots movement (which is hard to do in all but the most emotional of issues) or through hiring someone who has a nice Rolodex, which is easy but has a limited supply. Because the effects of legislation on large corporate entities are so potentially valuable, they’re willing to pay infinitely more for these Rolodexes than all but the wealthiest activists and activist groups.

        Prohibit ex-staffers and officials from getting paid to lobby any branch of government for five years and the playing field becomes a lot more level. The economy of DC goes to hell, but that’s another issue altogether.Report

      • Avatar Scott Fields in reply to j r
        Ignored
        says:

        Thank you @mark-thompson!

        The choice isn’t only between Roger’s “prohibitions against corporations from having any voice in how they are regulated” and no restrictions at all. Stronger enforcement of existing rules is also needed.

        (And again, to reinforce the point of Tod’s OP, in order to get sensible lobbying reform or stricter enforcement in a democracy requires that the public demand it. And in order to rally the public so that they’ll demand it requires some moral outcry about the malfeasance that follows from the undue influence that now exists via corporate lobbying. Dismissing such corporate behavior as amoral rather than immoral just perpetuates the self-serving rule making.)Report

      • Avatar Roger in reply to j r
        Ignored
        says:

        Mark T and Scott,

        This may be a good idea, but if we assume it is, it isn’t sufficient to solve the problem. It is at best a partial solution, which modifies (and probably improves) my third point from “any” to “less.”

        I do agree in a way with Scott’s last paragraph. We do need to get the public to demand that interest groups not be able to secure favors and privileges at others’ expense. This applies of course to all interest groups, not just ones progressives don’t like (agreed?)

        As below, the reasonable way to address this is not to demonize just the privilege seekers, but to demonize the seekers and the granters.

        IOW, it is the process which needs to be changed. Agreed?Report

      • Avatar Mark Thompson in reply to j r
        Ignored
        says:

        @Roger the proposal isn’t about demonizing anyone ; it’s about recognizing that legislative influence has little to do with the merits of proposals and everything to do with access and who you know (or more accurately, who a limited number of people willing to sell their Rolodexes know), and seeking to change the way in which access is made available so that merits play a bigger role in obtaining access.

        If the concern is that it punishes the seekers but not the granters of privilege, I think that’s quite inaccurate. The revolving door analogy doesn’t hold that the problem is only that corporations are able to afford those with the most access, it’s also that staffers and politicians are happy to provide that access to ensure they can make a lot of money as linguists when they are done on Capitol Hill.Report

      • Avatar Scott Fields in reply to j r
        Ignored
        says:

        I can agree, @roger, that were we to achieve a system where interest groups would not be able to secure favors and privileges at others’ expense that system would, of course, apply to all interest groups, not just ones progressives don’t like.

        And I agree that both the seekers of privilege and the grantors of privilege are culpable for the system we now have (which is a system where interest groups CAN secure favors and privileges at others’ expense).

        I don’t suppose I could get you to agree to Mark’s latest point that access to the grantors of privilege is not made equally available to all interest groups, and that difference in access has something to do with all the money that’s to be made – by both seekers and grantors.

        Now, if we can agree with these things, all that remains is to change the process, as you say. Of course, that will require legislation, will it not?Report

      • Avatar Roger in reply to j r
        Ignored
        says:

        Mark,

        My “demonizing” hyperbole was not in reference to your proposal but was aimed at reinforcing Scott’s point about rallying the public against malfeasance. I agree with him that we should be outraged about favor-granting with our outrage directed both toward grantees, and (especially) toward granters.

        My gut instincts are to agree with your proposal for all reasons you cite. I do worry about possible unintended consequences, but this would probably be off topic. So, I would say, this is something we should definitely consider as it is probably a step in the right direction.

        I definitely do not think it would be sufficient to solve the problem. The problem is much bigger than a revolving door. I assume you would agree.

        Scott,

        I agree access to influence is unequal. Addressing this aspect of the problem is not sufficient though to stem widespread rent seeking. It is at best a step forward. The root to this weed isn’t found by addressing access to influence. It is addressed by focusing on influence itself.

        As long as we all believe that businesses must be micromanaged with complex rules which determine specific outcomes, then the problem of massive rent seeking will by necessity continue to flourish. It is the natural and almost inevitable outcome.

        The logic here is that to the extent success and failure or profit and loss are determined more by privilege seeking with regulators and lawmakers, the more businesses will shift from market competition to competing in the zero sum game of rent seeking.

        This does not mean no regulation. It means the rule of law with consistent, general, robust regulations which concentrate upon a fair and unprivileged playing field and a non activist role for regulators.

        My sports analogy is a simple rule book, rarely revised, well understood and agreed to by all players which uses referees to call fouls according to the rules with no regard to trying to influence the game. Once they try to influence the game (by for example getting more equal scores or wins) the game shifts and corrupts.Report

    • Avatar zic in reply to zic
      Ignored
      says:

      My word. How quickly we forget. How often we have to wash, rinse, and repeat to learn the lessons Tod lays out for us.

      First off, 80,000 pages includes everything — every old person honored, every proclamation, ever silly-little bill someone files to impress the voters at home with no chance of even finding another sponsor, let alone becoming a law. Everything. Size of the federal register is not a meaningful measure of regulation. Size of a law is meaningless, too, when measured as numbers of pages. Size of government (big or little) is also meaningless. Competency matters, a large bill law that’s competent (my state’s shore-land zoning laws, for instance) can be a very good thing; and small law that’s incompetent might be a nightmare. Anyone who continues to hold up size as an argument get’s zero cookies with their tea and teased about relating everything to genitals, where size might matter, but it’s mostly in ways the opposite of what’s first assumed. It’s a non-argument, stop making it. It only makes you look silly.

      So onto the real meat of my comment — we had a completely unregulated market; and Alan Greenspan apologized to Congress for not recognizing that banks, without regulation, would not act in the long-term fiduciary interests. Which is what Tod’s describing his former company did, also completely legally. There must be some biz buzzword for legal fiduciary incompetence.

      But let’s not pay attention to an actual pattern of behavior that fleece’s small people of their hard-earned cash and shift income up to the top earners who obviously can never be big-enough earners.Report

      • Avatar James Hanley in reply to zic
        Ignored
        says:

        First off, 80,000 pages includes everything — every old person honored, every proclamation, ever silly-little bill someone files to impress the voters at home with no chance of even finding another sponsor, let alone becoming a law.

        That’s not the Federal Record. You might be thinking of the Congressional Record, but that’s a completely different beast. I’d think this kind of knowledge would be relevant.Report

      • Avatar Mark Thompson in reply to zic
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        says:

        Just as clarification, the Federal Register is solely comprised of Executive Branch regulations, and does not include anything done by Congress in a given year. Its size is inflated quite a bit because of legally mandated boilerplate language for most regs and because a lot of regs wind up getting published twice, once as a proposed rule and once as a final rule, so I don’t like the 80,000 page number. However, there are about 3,000 final rules published every year, roughly a third of which are considered “significant,” with the rest mostly classified as “routine” or “informational.”

        Source: http://fas.org/sgp/crs/misc/R43056.pdf

        Those are exclusively Executive Branch rules that are required by law to be published.

        All that said, I don’t see how the size of the Federal Register really tells us much at all – as someone mentioned above, it includes both regulations and deregulations, tightening of standards and loosening of standards. About the most that can be said about it is that it shows how much of a particular type of regulatory activity is occurring as a result of pre-existing legislation delegating authority to the Executive Branch. I don’t think that’s a particularly useful metric for anything.

        More importantly, though, it doesn’t tell us anything about what’s being regulated and how tightly. I think most people would agree that there are at least some arenas where there is very tight regulation and other arenas where regulation is light to non-existent, even if we might disagree about what should and should not be regulated tightly.Report

      • Avatar Roger in reply to zic
        Ignored
        says:

        As I wrote to Tod, I do not get his message at all. I have no idea what immoral corporate behavior, which should be prohibited, has to do with their taxes. What does the former have to do with the latter?

        As to your situation, you keep suggesting there is NO regulation. But you are obviously exaggerating. When pressed you seem to really want better regulation. If so, we agree. However, we probably have different ideas on what better looks like.Report

      • Avatar Roger in reply to zic
        Ignored
        says:

        As I wrote to Tod, I do not get his message at all. I have no idea what immoral corporate behavior — which should be prohibited — has to do with their taxes. What does the former have to do with the latter?

        As to your situation, you keep suggesting there is NO regulation. But you are obviously exaggerating. When pressed you seem to really want better regulation. If so, we agree. However, we probably have different ideas on what better looks like.Report

  15. Avatar Vikram Bath
    Ignored
    says:

    I just want to present my subjective impression of what I feel has happened. I’d have to read through what I wrote in more detail to see if that impression has grounding in reality. With that disclaimer:

    Me: There is no moral amount of tax to pay, only the legally required amount.
    Tod: How dare you say management should be able to steal from clients through contract trickery!

    I find this response especially interesting since I posted a thousand words a week ago about how companies shouldn’t hide behind poorly presented legal disclosures that no one expects anyone to read.

    I never advocated an abandonment of the rules of morality in general. I merely stated that it is difficult to read morality in tax policy. The switch to a territorial tax system has already been adopted by twenty-six OECD countries. You know, tax dodging havens like “Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom”. http://www.imf.org/external/pubs/ft/wp/2013/wp13205.pdf

    Here are the 7 that follow our system: “Chile, Greece, Ireland, Israel, Korea, Mexico, and Poland”.

    Also, the selection of Walgreens ought to trigger the readers’ interest in what has been excluded. Well under a third of IBM’s employees are in the US. Most are overseas, of overseas nationalities, serving overseas clients that serve overseas consumers. Still, the United States demands to collect its share of this activity. When GM builds and sells a car in China, the United States asks the Chinese consumer to pay for it. (The “you didn’t build that” retort becomes increasingly tenuous when it’s actually the Chinese government that educated the workers and built the roads and Chinese workers who build and buy the cars.)

    Yet, I’ve never heard a US CEO grumble about this (though perhaps not being Republican congressmen, they manage to do it privately). The only place I see such complaints are in expat forums where US workers grumble about still having to pay US personal income taxes when it’s been years since they last saw the US.Report

    • Avatar Murali in reply to Vikram Bath
      Ignored
      says:

      This.

      While, at a certain level of abstraction, it is wrong to avoid paying the taxes necessary for the infrastructure which is crucial to one’s profit margin, the key word is necessary. It seems that if your tax system is already unreasonable and efforts to prevent such tax avoidance make it even more so, it seems that the unreasonable-ness of the law undermines any moral obligation to obey it.Report

      • Avatar Dave in reply to Murali
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        says:

        While, at a certain level of abstraction, it is wrong to avoid paying the taxes necessary for the infrastructure which is crucial to one’s profit margin, the key word is necessary.

        That would require going to a level of abstraction that ignores the reality that profit margins are not a function of this at all.Report

      • Avatar Mike Schilling in reply to Murali
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        says:

        Profit margins go to hell if you lack the infrastructure to run a business at all.Report

      • Avatar Citizen in reply to Murali
        Ignored
        says:

        How do profit margins correlate with infrastructure?Report

      • Avatar Mike Schilling in reply to Murali
        Ignored
        says:

        Try running a mail-order business without mail.Report

      • Avatar Wardsmith in reply to Murali
        Ignored
        says:

        @mike-schilling Never heard of FedEx or UPS?Report

      • Avatar Mike Schilling in reply to Murali
        Ignored
        says:

        That works for packages. You wouldn’t want to pay those prices to send monthly statements.Report

      • Avatar James Hanley in reply to Murali
        Ignored
        says:

        @wardsmith
        FedEx and UPS use infrastructure, too. Of course their gas taxes and license plate fees cover at least some of their road share costs.

        @mike-schilling
        Since it’s ultimately not the corporation that’s paying the taxes anyway, at least according to the consensus of the economics profession, why do “corporate” income taxes matter for infrastructure?Report

      • Avatar James Hanley in reply to Murali
        Ignored
        says:

        Oh, and I would add, Mike, if sending billing statements via UPS/FedEx is such an obviously bad idea, why do we need a law forbidding them from competing in the first class mail business?Report

      • Avatar Mike Schilling in reply to Murali
        Ignored
        says:

        @james-hanley

        If we assume the revenue from the corporate income tax is replaced in some non-regressive way, I’m OK with it. Since that would be a “new” tax, I suspect Grover Norquist has taken it off the table.

        The monopoly on first-class mail assures universal coverage. Opening it up to competition would mean that private companies could cherry-pick the lucrative bits, leaving the USPS or its successor to hemorrhage money serving just the middle of nowhere.Report

      • Avatar James Hanley in reply to Murali
        Ignored
        says:

        If we assume the revenue from the corporate income tax is replaced in some non-regressive way, I’m OK with it.

        Well now, Mike, if you’d been paying attention here, you’d see that’s been emphasized repeatedly. Almost universally everyone who talks about eliminating the corporate income tax talks about taxing investment income just as income and closing cozy loopholes. There’s just no point in you throwing that out there in a “well, if you guys would be willing to consider…” kind of way when literally everybody is already considering exactly that.

        The monopoly on first-class mail assures universal coverage.

        Chapter 5 in the Big Book of Liberal Myths, right?Report

      • Avatar Patrick in reply to Murali
        Ignored
        says:

        Almost universally everyone who talks about eliminating the corporate income tax talks about taxing investment income just as income and closing cozy loopholes.

        Well, everybody *here*.

        Out in the real world of legislators and pundits, almost universally everyone who talks about eliminating the corporate income tax has done nothing at all to change the tax law on capital gains and in fact seems to kinda prevent those changes from being made.Report

      • Avatar James Hanley in reply to Murali
        Ignored
        says:

        Patrick,

        They don’t want to give up one thing without getting the other.

        And of course there are people who just want to do and say anything to reduce all taxes. But I was talking about people who talk seriously about tax structures. That’s” universally everyone” because all the rest aren’t smart enough to count. 😉Report

      • Avatar Patrick in reply to Murali
        Ignored
        says:

        That’s fair enough.

        One note about tax policy in general, though, is that if you put that package on the table you might still get some resistance ’cause “I don’t trust that you’ll give me the thing I don’t want along with the thing I *do* want and then add to the first and take the second away immediately”.

        I suspect that any real change in the tax system, for it to work, would require something more stringent than “the next Congress can just resume monkeying around with it in ways I don’t like”, in order to get anybody really on board.Report

      • Avatar James Hanley in reply to Murali
        Ignored
        says:

        I’d generally be inclined to enshrine it in the Constitution (it is, after all, very much a constitutional level restructuring of the system), except for the fact that we don’t have any actual empirical evidence on the general idea or its various permutations yet.Report

      • Avatar dave in reply to Murali
        Ignored
        says:

        @mike-schilling

        Profit margins go to hell if you lack the infrastructure to run a business at all.

        What infrastructure does is help to create the playing field under which market transactions are conducted. While it plays an important role, it has nothing to do with how companies can win market share over their competitors who have the same access to infrastructure, police, fire services, etc. etc. as everyone else. The companies that can compete the most successfully against their counterparts have the highest profitability. Things like reputation, superior product, superior service and other business-related factors take far more precedence than anything dolts like Elizabeth Warren can come up with.

        I guess we can take “infrastructure” to some abstract level and say without an infrastructure no one make money. However, it’s real world value is next to non-existent.Report

      • Avatar dave in reply to Murali
        Ignored
        says:

        @mike-schilling

        To soften my last point a bit – if you and I discussed the differences between, say, Costco and Sam’s Club and we were talking about which firm does a better job at capturing market share, neither of us would probably bring up infrastructure.

        Hopefully, this will soften my last very blunt statement. My bad.Report

      • Avatar Mike Schilling in reply to Murali
        Ignored
        says:

        We wouldn’t bring up oxygen either, e.g.. “The trouble with the Sam’s Club model is that the customers all asphyxiate before they can get their wallets out.” And for the same reason: we assume that both the oxygen and infrastructure required for commerce to take place will be present.Report

      • Avatar Dave in reply to Murali
        Ignored
        says:

        @mike-schilling

        And for the same reason: we assume that both the oxygen and infrastructure required for commerce to take place will be present.

        We are talking about what drives profits not the things that are needed for commerce to take place. The mere presence of commerce does not mean such commerce is profitable.

        Why people choose to do business with FedEx as opposed to UPS or Starbucks as opposed to Dunkin Donuts has nothing at all to do with infrastructure if all companies within an industry have access to the same infrastructure.Report

      • Avatar Mike Schilling in reply to Murali
        Ignored
        says:

        Why people choose to do business with FedEx as opposed to UPS or Starbucks as opposed to Dunkin Donuts has nothing at all to do with infrastructure if all companies within an industry have access to the same infrastructure.

        Well, sure, there’s no point discussing how F is a function of X if you assume that X is fixed.Report

    • Avatar Tod Kelly in reply to Vikram Bath
      Ignored
      says:

      @vikram-bath :

      Me: There is no moral amount of tax to pay, only the legally required amount.
      Tod: How dare you say management should be able to steal from clients through contract trickery!

      Well, kind of.

      The first point I was trying to make (perhaps poorly) is that we are largely trained to think of how big corporations (and the very, very wealthy) dodge taxes is the same way everyday folks do: they take legal deductions that are offered to them, just like I take a deduction for my kids, or the interest paid on my mortgage.

      But as I tried to illustrate, this isn’t actually how it works. Because once you get to a certain size, you get to write (to your individual favor), circumvent, and break tax laws rather profitably (even after paying fines). There is, in other words, a material difference between saying, “hey, this deduction is available to me, I will take it,” and “I’m going to break this tax law,* because I’ve been able to help write the regulations that oversee this and I have it rigged so that I will have a fraction in fines compared to what I will reap by my malfeasance.”

      The second point I was trying to make is that it’s dangerous in a system like ours to discount corporate watchdogs (and, perhaps, whistleblowers) as moralizing scolds. We really do collectively let large corporations get away with all kinds of terrible and immoral things, and I would argue that when you say “hey, they get to be amoral” for the small stuff, you make it infinitely harder to reign them in on the bigger stuff.

      *I scrapped this example for space, but a good example of this is AT&T in Portland in the 90s, who collected federal taxes with their customer billings and make a specific decision to not pass them on to the feds for over a decade. When they were finally caught (after years of court battles), the government fined and settled with them in a way that collected about 20 cents on the dollar, which meant that almost all of the federal taxes AT&T collected for 10 years went to AT&T. Im y company had tried such a thing, I would have faced a very different scenario than “well heck, why don’t you just keep most of it” after I was caught.Report

      • Avatar Vikram Bath in reply to Tod Kelly
        Ignored
        says:

        There is, in other words, a material difference between saying, “hey, this deduction is available to me, I will take it,” and “I’m going to break this tax law,* because I’ve been able to help write the regulations that oversee this and I have it rigged so that I will have a fraction in fines compared to what I will reap by my malfeasance.”

        I’m again a bit flabbergasted. I am against breaking the law. Somewhere in the top 3 takeaways from my post should have been “you should follow the law!”

        We really do collectively let large corporations get away with all kinds of terrible and immoral things, and I would argue that when you say “hey, they get to be amoral” for the small stuff, you make it infinitely harder to reign them in on the bigger stuff.

        I think it’s OK to make rap albums, but I am still capable of condemning gang violence. It’s really not that hard. You do it by looking at the behavior and judging that rather than by looking at the actor and judging him.

        Well, maybe that is hard. It is certainly easier to just decide who to like and applaud them in all things and who to dislike and condemn them in all things. And that does seem to be the more popular route to go, but I’d rather not.Report

    • Avatar Gabriel Conroy in reply to Vikram Bath
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      says:

      @vikram-bath

      Your comment here reflects pretty much what I wanted to say in my comment above, at least in respect to your argument. (I added some things that you hadn’t said in your OP.)Report

  16. Avatar Mark Thompson
    Ignored
    says:

    A lot to chew on here, Tod.

    My thought on this topic has been evolving the last few months such that I’m now inclined to distinguish between closely held and publicly held corporations here.

    I think publicly held corporations are, by their nature, necessarily amoral – once you have any significant number of people involved in owning a given entity, the question immediately becomes “whose morality controls?” This is especially true when those people may not even belong to any single culture, or when a substantial portion of that ownership is other corporate entities – mutual and retirement funds – that explicitly exist for the sole purpose of maximizing returns for their investors. The only morality that we can discern out of such an entity is the fiduciary duty of its officers to the shareholders. In other words, the decisionmakers in such an entity are essentially charged with representing the unified interests of all the shareholders, not just the shareholders that control 50% + 1 votes at the annual meetings. While those decisionmakers are typically also shareholders, their primary duty is as a representative of the other shareholders, not as an individual owner with independent moral obligations.

    Walgreens, for instance, may well be incorporated in the United States and have the majority of its operations in the United States and is certainly legally bound to abide by the laws of the United States in those operations. But its shareholders need not be citizens of the United States themselves, much less natural persons with independent moral obligations, and Walgreens’ management owes as much a duty to those shareholders as it owes to its living, breathing American shareholders. If its management then acts as if it has a moral duty to abide by the spirit of American law in addition to its legal duty to abide by the letter of it, it is breaching its fiduciary duty to its foreign and corporate shareholders. That doesn’t necessarily mean that Walmart has a fiduciary duty to incorporate elsewhere mind you – public relations are no small part of securing shareholders’ interests, and I see no problem with people complaining about how incorporating elsewhere while operating here is inequitable and amounts to free-riding that should be prohibited. If the corporation lobbies to keep the law as it is, I see nothing wrong with complaining about the corporation’s ability to influence legislation and seeking to reduce that influence – I may object to a particular means sought to do this, but I won’t object to the goal. And if there are particular individual shareholders who are American citizens or residents demanding that Walgreens skirt the spirit of the law, I think we can fairly argue that those shareholders are acting immorally in making those demands. But I don’t think we can attribute morality to the ultimate corporate act or management decision itself.

    When we start talking about closely held entities, though, I think the equation changes quite a bit. At that point, the ultimate decisionmaker(s) and the owners are one in the same. The owners are individuals with their own set of clear moral duties. They are almost always residents or citizens of the same country, and have the moral obligations that come along with that. While there should usually be a legal distinction between the acts of the individual owners and the acts of their closely-held corporation, I don’t think there should be a moral distinction.

    As a practical matter, closely held corporations of course almost always have pass-through taxation, so there’s usually little reason to seek to incorporate in a foreign country. On the other hand, I’m sure there are at least some closely held businesses that incorporate elsewhere, allowing their owners to hide income in foreign accounts. I have no problem in the least bit with calling this – or any other attempt under the guise of the closely held corporation to skirt the spirit of the law or engage in freeriding or do anything harmful to others – immoral.

    This distinction is a double-edged sword, though – the capacity of closely held entities for moral action means that the principals of such entities have a right to let their own conscience guide their business decisions in addition to the duty to live up to their other moral obligations. By that same token, the lack of capacity of publicly held entities for moral action outside of its fiduciary duties means that its decisionmakers lack a right to assert their own morality as a rationale for their decisionmaking.

    In exchange for having the freedom to act amorally, publicly held corporate entities in my mind should have not only a strict fiduciary duty to their shareholders, but also should be subjected to rather strict enforcement of their legal obligations. In exchange for having moral obligations, closely held corporations should have leeway to allow for its owners’ conscience to guide decisionmaking.Report

    • Avatar Mo in reply to Mark Thompson
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      says:

      @mark-thompson I think the difference between publicly traded and closely held is smaller than you think. By the IRS definition of closely held, Google qualifies since Page and Brin own 56%.Report

      • Avatar Vikram Bath in reply to Mo
        Ignored
        says:

        Page and Brin own 56%

        I dispute this figure. At least if we’re talking about common shares. Google’s a $400 billion company, and I don’t think either of those guys is worth $100 billion.

        It’s possible that they’ve retained some other class of shares that gives them voting rights disproportionate to their value. Is that what you mean?Report

      • Avatar Mark Thompson in reply to Mo
        Ignored
        says:

        I’m thinking this through conceptually rather than via any legal definition, so when I say “closely held” here I’m referring to situations where there is no publicly traded stock whatsoever. Nonetheless, if we need to also have a legal definition, this is no different from the definition of a company that is eligible to file as an “S” corporation. While Google may technically be a “closely held” company, it cannot be an “S” corporation for tax purposes.

        Even still, I’m open to throwing in a caveat for a company where the decisionmakers hold the controlling majority of shares but publicly trade the rest of the shares. In that situation, there’s obviously still a fiduciary duty, but since the decisionmakers are also the primary beneficiaries of abiding by that fiduciary duty, there’s a strong reason to believe that fiduciary duty will be used as a pretext for decisions that would otherwise be personally immoral, particularly since there is often a broad range of decisions that can be justified under “fiduciary duty.”

        In hybrid situations like that, it may well be fair to insist that the decisionmakers have moral obligations but only very limited moral freedoms. But I have to think about that a bit more.Report

      • Avatar Wardsmith in reply to Mo
        Ignored
        says:

        @mark-thompson DISH network is structured like that. A friend of mine used to be on their board. Charlie ran things his way, period.Report

    • Avatar Dan Miller in reply to Mark Thompson
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      says:

      There’s also the issue that while the company as a whole may be allowed to act amorally, individual people certainly aren’t obligated to work there. Let’s say you’re a lobbyist for Walgreens who works to change the tax code so that it’s easier for them to dodge U.S. taxes. Am I allowed to say your actions at work are immoral?Report

      • Avatar Mad Rocket Scientist in reply to Dan Miller
        Ignored
        says:

        @dan-miller

        Would you say the same about a defense attorney who defends a person they know to be guilty of the crime?

        Or do you recognize that lobbyists have a duty to represent their clients interests to the best of their ability?Report

      • Avatar Mike Schilling in reply to Dan Miller
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        says:

        Would you say the same about a defense attorney who defends a person they know to be guilty of the crime?

        There are limits on that, eg. not allowing them to call witnesses they know will perjure themselves. So far as I know, there’s no similar canon preventing lobbyists from telling lies and presenting blatantly false “data” to support them, provided they’re not testifying under oath.Report

      • Avatar Mark Thompson in reply to Dan Miller
        Ignored
        says:

        Allowed? Of course. Whether I think that’s a fair assessment is a bit of a different question to which I haven’t given any thought, and my rubric isn’t really intended to address the evaluation of individual employees or closely-held suppliers/representatives.Report

  17. Avatar Roger
    Ignored
    says:

    Tod,

    This article really confused me. I don’t know why or how immoral activity (which we can all agree should not be allowed) has any bearing on paying taxes in accordance with the tax code.

    I assume we all agree it is OK for us as individuals to minimize our taxes legally.
    I assume we all agree the same is true for corporations.
    I assume we all agree we we should be free to lobby congress for changes to the tax code.
    Is your argument that corporations should not have this privilege or right? Why?Report

    • Avatar Patrick Bridges in reply to Roger
      Ignored
      says:

      Isn’t lobbying Congress to change the tax code in your favor classic rent-seeking that you, James, and others have always said is *not* moral, Roger?Report

      • Avatar Roger in reply to Patrick Bridges
        Ignored
        says:

        It could very well be, especially if the lobbying organization benefits and someone else is harmed. (This is arguably not always the case).

        But, the next concern is that if one class of entities is prohibited from lobbying and others are not, that we have shifted to a situation of privilege, where those not prohibited can exploit those who have. Oh no, stockholders will be exploited!! Smiley face.

        Thus I would tend to lean toward less activist regulation for all as opposed to activist for our side and a prohibition of voice or input on the other side. Seems more fair to me.Report

  18. Avatar Mark
    Ignored
    says:

    Is maximizing profit a corporation’s sole responsibility now? It seems as though that’s where we’re headed (the financial industry reached that point a long time ago). The more and more we defend the amorality of corporations, the more we allow them to abdicate any other responsibility except for maximing profit. With court rulings granting them ever more rights, why is there such little discussion about what responsibilities they have?Report

    • Avatar Roger in reply to Mark
      Ignored
      says:

      Well, if our institutions are built properly*, profit is the reward for discovering and fulfilling consumer needs as efficiently as possible, leading to wide scale prosperity and technological advance.

      In this case, I don’t know if profit is the only thing they should focus on, but I sure am glad they DO focus on this. I would even offer that if they focus too much elsewhere that it will be counterproductive to the welfare of humanity.

      * to the extent institutions are NOT functioning properly, I suggest better institutions, mores and norms.Report

      • Avatar Patrick Bridges in reply to Roger
        Ignored
        says:

        ” to the extent institutions are NOT functioning properly, I suggest better institutions, mores and norms.”

        I note the conspicuous absence of the words “regulations” or “laws” from this statement.Report

      • Avatar Mark in reply to Roger
        Ignored
        says:

        I’d love to see an example of a corporation focusing too much on something besides profit.Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        Institutions are the broader term. I certainly assumed it includes some regulations and laws. I am not against reasonable regulations in the slightest. They seem good to me..Report

      • Avatar j r in reply to Roger
        Ignored
        says:

        I’d love to see an example of a corporation focusing too much on something besides profit.

        Have you ever heard of Amazon?Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        Mark,

        Why? Do you believe you or I do as much good for humanity as the average large corporation? Sure we can identify exceptions to the rule, such as cigarette and liquor companies, but when I look around my house (no cigarettes or liquor, naturally) I see nothing but great products that make my family better. What do you see around you?Report

      • Avatar Mark in reply to Roger
        Ignored
        says:

        My last reply got away from my first point. Of course corporations should focus on profits, but what other responsibilities do they have?Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        Oh, sorry. I assume they should be seen as good corporate citizens. Good neighbors. Good employers. Good and trusted brands.Report

      • Avatar Kim in reply to Roger
        Ignored
        says:

        Roger,
        then your house is far wealthier than most. Brand destruction is an American pastime these days, and it thrives on the loss of wealth of the American middle class, as they slide into poverty.

        Progresso ring a bell? Ain’t any better than Dinty Moore, if you care to do an honest valuation. Do you remember when Progresso was a gourmet brand?

        Breyers, same difference (I don’t buy it now, mind).Report

      • Avatar Kim in reply to Roger
        Ignored
        says:

        Roger,
        I suppose you’ve never been introduced to the quite legal corporations that trade in white slavery or in theft (mainly from other countries, mind).
        [haven’t mentioned America, because they aren’t. Still corporations though, even if they treat their workers like slaves.]Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        Is white slavery the bad kind?

        More seriously, your comment ignored my crucial point on proper institutions. This was intended to exclude theft, slavery and cheating on taxes.

        As to what is surrounding me in my house. I see innumerable products which made my life better, along with a few exceptions which I thought would make my life better but didn’t. For example, that Esperanza Spalding CD. She needs to quit wailing like a sick cat and stick to the instrumentals.

        I rarely eat soup though.Report

      • Avatar Mike Schilling in reply to Roger
        Ignored
        says:

        I have heard of Amazon. What are they, in your opinion, doing “too much” of?Report

      • Avatar Wardsmith in reply to Roger
        Ignored
        says:

        @mike-schilling Are you being purposely obtuse? Amazon has Never turned a profit! If it were not for the largesse of the stock market they would be Long dead and buried. My son worked for them on an abysmally stupid project that never stood a chance of seeing the light of day. He quit Google to go there and I was pissed but it is his life. Later he told me I was right. I’m not saying it wasn’t fun but am saying from a business sense it made No sense, which is what I told my son when his friend who had also quit Google encouraged him to go there and work on it. Jeff Bezos blows money like no one outside of government ever could. I prefer corporations even IF they are evil because compared to governments they are positively benign.Report

      • Avatar Mike Schilling in reply to Roger
        Ignored
        says:

        My impression is that Amazon could be highly profitable if they so chose, but prefer to spend big on things they expect to lead to further growth. I expect that you don’t believe in the “largesse of the stock market” any more than I do, so investors must somehow see a lot of value there.

        Oracle did this in their early days; they always managed to be profitable (sometimes with the help of feloniously creative accounting), but they were far more focused on growth and market share. Though Amazon has kept it up for much longer.Report

      • Avatar Dave in reply to Roger
        Ignored
        says:

        @mike-schilling

        My impression is that Amazon could be highly profitable if they so chose, but prefer to spend big on things they expect to lead to further growth. I expect that you don’t believe in the “largesse of the stock market” any more than I do, so investors must somehow see a lot of value there.

        That’s my high-level view of Amazon and as far as I know, the analyst community hasn’t thrown up all over the company (including the buy-side analysts).

        Amazon a bust? I don’t know about that. Traditional bricks and mortar retailers see Amazon as the 800-lb gorilla in the room, a threat to smaller retailers and the big boxes alike (it’s been joked that Best Buy is Amazon.com’s showroom). The company may throw good money after bad at certain projects but what large company doesn’t do that?Report

  19. Avatar Mark
    Ignored
    says:

    It seems as though we’ve given way too much latitude to corporations in regards to what’s acceptable behavior as long as it’s in the name of maximizing revenue and/or profit. I would go in more detail, but Patrick Deneen says it way more clearly than I ever could.

    http://ethikapolitika.org/2014/07/25/neo-conservative-imagination-interview-patrick-deneen/Report

    • Avatar Roger in reply to Mark
      Ignored
      says:

      I wonder if he actually believes the Catholic Church has done more good for living standards, wisdom, freedom, health and life quality than science and markets?

      If so, I would love to see his argument.Report

  20. Avatar notme
    Ignored
    says:

    Do you mean the CI tactic that the Obama admin used to bail out Delphi? I guess Obama was for it before he was against it.

    http://www.bloomberg.com/news/2014-08-06/obama-let-delphi-avoid-taxes-in-tactic-president-assails.htmlReport

  21. Avatar zic
    Ignored
    says:

    Pondering the notion of eliminating corporate taxes — this would certainly be one way to end employer-provided health insurance, since it would also (I’d think) eliminate the tax credits and penalties underlying it.Report

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