Driving Blind: Slave Labor in the Modern Economy
He did not move. Eyes shut, he waited, shivering. He heard Travis breathe loud in the room; he heard Travis shift his rifle, click the safety catch, and raise the weapon. There was a sound of thunder.”
Chandeliers made from recycled bicycles, cut steel, and LEDs adorn an underpass in San Antonio, Texas.
Daniel Dennett tries to balance philosophy and science, and risks getting called a “flaming idiot” in the process.
“There is no reading, only rereading.” And because none of us has the time to do so we risk forgetting what we read just months, weeks, or hours ago.
Nicolas Winding Refn’s (Drive, Vahalla Rising) new film Only God Forgives gets booed at Cannes and Ryan Gosling turns in another one of his stock violent, moody performances.
The final Man of Steel trailer is out, and it’s as good as everything else we’ve seen so far.
Derek Thompson tells those indignant over Apple’s tax sheltering to grow up and get use to it.
More teens are hopping onto Twitter, or is it Tumblr? No one can decide, but the unanimous search for a premature Facebook obituary continues.
This year’s graduating class has the highest average amount of student debt yet.
George Packer has some lame and embarrassing musings about social inclusivity coupled with economic disparity, but Samuel Goldman’s aren’t much better.
Meanwhile, Hamilton Nolan calls for an international minimum wage, exclaiming “Prices would rise a bit. That’s okay. We would never countenance buying goods produced with slave labor, just because they were cheap.”
I’ll still see the Refn eventually I imagine. His Pusher trilogy was pretty great.Report
There was a sound of thunder
Looking back at that story, I’m surprised that it hasn’t been re-written with modern politicians’ names inserted judiciously.Report
Loved me some Bradbury as a kid. That story really sticks with you.Report
re: Bradbury…great quote from him i just saw yesterday.
“I never learned to drive. As a kid, I saw too many fatal accidents and I grew up hating the idea. Automobiles slaughter 40,000 people a year, maim a hundred thousand more, and bring out the worst in men. Any society where a natural man – the pedestrian – becomes the intruder, and an unnatural men encased in a steel shell becomes his molester, is a science fiction nightmare.”Report
I’ve often thought that you could have some fun drawing similarities between automobile travel and the work of Dr. Calhoun.Report
Not familiar with Calhoun, but I read his wikipedia page and I saw this on his experiments with mouse overcrowding:
Which reminded me of all those articles about Japanese “herbivore men” on NPR, WSJ, HuffPo, CNN, Slate a few years back.
At the time I dismissed those articles as pretty sensationalist/silly, just another way to say “metrosexual” – and IIRC most of the articles speculated as to Japan’s economic malaise as a possible cause – but Japan *is* pretty densely populated.
RE: The Bradbury quote, I am no Luddite, and I enjoy driving….but the man is not totally wrong there.Report
Thank you, Hamilton Nolan, for making me laugh today.Report
Apparently analogies don’t actually have to make sense. Let me try one: We would never countenance the government murdering people and stealing all their possessions to raise revenue, so we should abolish the income tax.Report
Derek Thompson’s counsel of despair is the least useful kind of public policy contribution. Thompson writes,
Throw up your hands everyone! “No matter what” people will conduct themselves in a way that subverts massively important goals like basic fairness, financing public goods, and multibillion dollar corporations making proportionate contributions to the societies from which they derive their wealth. The kind of free riding these multinationals are engaging in is a serious problem and has potential policy responses that are well worth pursing to combat – there are several billion dollars worth of reasons to figure it out.
There are the recommendations of the Permanent Subcommittee on Investigations drawn together after examining the behavior of Microsoft and Hewlett Packard late last year, and Apple more recently. There is also the work underway at the OECD, particularly with respect to base erosion and profit shifting. If any country can help step up the pace of coordinated multilateral action on the issue it is the US.Report
And, no matter what, we’re not going to see the vast majority of this money.
I’m not 100% certain, but I don’t think that this is actually true. As I understand it, Apple needs to repatriate the money and pay taxes on it before it can issue dividends. Apple is able to defer the tax, but ultimately will have to pay it. And assuming that Apple can earn a better return on that money than what the government pays on treasury bonds, the government will actually get more money, in NPV-adjusted terms, than if Apple were to realize the income now.Report
Creon,
1 What percent of these billions will go to public goods, as opposed to redistribution to favored groups?
2 The corporations ARE making proportionate contributions to the societies they operate in. In producer countries they get a phone in exchange for wages. In consumer countries they get money in exchange for a phone. Of course most countries are a mixture.
3 Considering the complexity of tax codes and the ease of moving capital (profit shifting), perhaps instead of trying to achieve fairness by addressing base erosion they should get out of their box and achieve fairness by setting corporate tax rates at zero, and instead tax profits via individual capital gains and dividends. Seriously.
The other paradigm, for the record, is that competition and “exit rights” of capital among multi nationals is a great thing. It forces competition for tax dollars and requires nations to actually fairly provide value to the corporation (actually those owning it) in exchange for taxes. In other word it can also reduce exploitation of corporations. Of coursed exploiting the powerful is like an oxymoron to some folks.Report
“tax profits via individual capital gains and dividends. Seriously. ”
Great idea!Report
It forces competition for tax dollars and requires nations to actually fairly provide value to the corporation (actually those owning it) in exchange for taxes. In other word it can also reduce exploitation of corporations.
Can you explain what you mean by this, Roger?
I get ‘competition for tax dollars,’ I think; Apples Celtic Tiger woes might be a good example, no? But ‘exploitation of corporations’ could use some examples and flushing; I’m really not certain what you’re getting at here.Report
By exploitation I mean an action which harms one party to benefit another. My point is that it is possible to exploit an entity, such as certain individuals or the stakeholders of a corporation, via taxation. I am assuming this requires no examples. Certainly George Harrison artistically elaborated this case back in the sixties.
By fairness I mean rules which are impartial and which the participants to the rules agree to in advance before the game is started. Furthermore, I believe rules can be made more fair via variation and competition. If there are multiple sets of rules that we can go by, people with different values can choose the rules which seem most fair. With markets, part of what makes a market attractive is the size, which means that part of the decision to enter a market is the how many others have chosen it. Thus as more people choose a set of rules in a potentially positive sum game, it behooves others to join too. However, if the rules are too partial or biased, the participant should have the freedom of exit.
This creates a competitive-cooperative dynamic. If too exploitative based upon the opinions and values of the participants, they will exit. This puts pressures on the rule making process to keep rules fair according to all participants and thus reduce exploitation.
Douglas North and various institutional theorists believe that institutional competition was an essential element in the great breakthrough from ten thousand years of destitution to modern prosperity. I could make a similar argument for institutional competition today.Report
Roger, I have now idea what any of this means; but I have not much sympathy for large multi-national corporations. Why? I’ll quote you:
By fairness I mean rules which are impartial and which the participants to the rules agree to in advance before the game is started. Furthermore, I believe rules can be made more fair via variation and competition. If there are multiple sets of rules that we can go by, people with different values can choose the rules which seem most fair. With markets, part of what makes a market attractive is the size, which means that part of the decision to enter a market is the how many others have chosen it. Thus as more people choose a set of rules in a potentially positive sum game, it behooves others to join too. However, if the rules are too partial or biased, the participant should have the freedom of exit.
I have a number of investments in small start-ups. I’ve written extensively about small business. And the rules are not fair, but it’s regulatory capture that’s the problem. If you want to seriously talk about what that means, yeah. What you see as evidence of a competitive market in regulation/taxation I take as evidence of a healthy competition to capture regulation in different markets.
I get that regulatory capture also involves regulators and rule makers. I also get that sometimes, nothing will ever get done without some capture; I’ve talked to regulators who say often end up giving in on some things just to get some other thing accomplished. Justice Scalia’s son, purportedly a brilliant attorney, is out there making sure every single rule in Dodd-Frank has gone through a compete cost-benefit analysis and every single comment (some that are 100’s of pages long, and there are millions of them, mostly from the banking industry,) is responded to in detail, including the cost-benefit analysis.
This is intentional gumming of the works for small businesses in the favor of big, consumers in favor of marketers. That’s not fair. But it is business as usual.
So what you said? It doesn’t comport with my business experience or my reporting experience. I can find evidence over and over of larger companies using every tool they can find to create advantage. But I don’t see much poor-pitiful exploitation of multi-nationals.Report
Thanks for pushing back as usual, Zic.
I fully expect most people and collections of organized people to look for their personal advantage. If allowed to, most will exploit others, free ride, and interfere with others freedom for their own benefit.
My suggestion, which you may see as utopian nonsense, is to make rules as simple and unbiased as practical. I agree that regulatory capture tends to go to the powerful and to well organized incumbents. Thus I recommend relatively simple, consistent rules which are resistant to regulatory capture. For example, I would much rather see a consistent across the board sales tax with no exceptions than a ten thousand page income tax system with exemptions, favored status, active regulatory officiating, and constant congressional fiddling. The latter system is virtually guaranteed to foster regulatory capture. The dynamic pretty much guarantees it. Anyone not engaged in regulatory capture is going to be exploited by those that do.
I am not very worried about the powerful being exploited. I am worried that a system which allows or fosters exploitation will sink all our ships together.Report
a sales tax that is flat across the board is really, really punishing to the lower classes though.
PA is pretty nice — food’s not taxed, some clothing isn’t taxed (we could have better rules there). and then a flat sales tax. Plus an income tax, but that’s pretty flat too.
… nothing like the federal government, which had cap-gains tax set at 0% for a while.Report
I agree that the food exemption creates a less regressive tax. Of course, I would keep the exemption simple and consistent, so firms don’t compete for special privileges. I also agree with a flat income tax with a large standard deduction. For example, twenty five percent of all income with a single exemption of $10,000 per person.
My vision of each rule would be a couple paged rule which is only even considered for change once a generation or so, and which requires a supermajority to do so. Consider this an ideal more so than a recommendation though.Report
Would your flat tax bring in more or less than current?
I personally believe in a progressive tax system (sans loopholes like mortgage deduction)Report
Depends on the rate and the deduction size and the goals of those setting it. In other words it is neutral on the question.Report
Roger,
I’m tempted to link to this, but honestly, does it make a difference? The government has outlined how much it is going to tax and how much it is going to spend, whether for redistribution or public goods. Agree or disagree with those spending side decisions, the use of tax havens and aggressive tax planning should be troubling.
Here we differ. The mere act of engaging in commerce does not amount to a sufficient contribution to me. Just to be clear, the companies the Senate subcommittee has addressed directly thus far: Hewlett-Packard’s market cap approximately $40 billion, Microsoft’s market cap about $250 billion, and Apple’s market cap approximately $400 billion. When looking around as to what entities should help finance the functioning of society, roads, schools, military, etc. I look at multinationals in part because that’s where the money is.
Probably more important than whether I think a sufficient contribution is being made, the act of engaging in commerce does not amount to a sufficient contribution according to the duly passed laws of the US. There is a corporate tax rate, it is 35% (for earning above X million).
That’s a possibility. Unsurprisingly perhaps, I happen to disagree with it. Corporations draw tremendous benefits, using the court system, patent system, education system, infrastructure, etc., etc. To my mind that means they too should make a contribution, in the form of income tax, to the upkeep of the society in which they operate.
Overall I’m extremely wary of this idea of nations competing to “fairly provide value to corporations” in the way you describe. Among other things I’d worry about a race to the bottom. Also, to me, tax havens are among the free riders in the international system, drawing the benefits of stability, regulation, trade, while sheltering monies rightly owed to various states that must spend on these emphatically not free goods. It isn’t that the companies involved don’t have exit rights, as you put it. They simply want to cross the bridge without paying the toll.
As for exploitation, call me flabbergasted. I complain about sweatshops, unsafe working conditions, people with limited options “choosing” to work in difficult circumstances and often have to eke out concessions in the comments around these parts. “Safety has costs you know”, I am told (paraphrasing there). Along comes a multi-billion dollar, multinational corporation saying, “Yeah, make our tax rate 0%”. Did I hear you right, zero, nothing, nil? Yep, that’s right, hands off my profits – actually, hands off my billions in profits. And you’re concerned about them being exploited! Your heart bleeds, for Apple? Microsoft? Hewlett-Packard? Go figure.Report
We certainly do represent a conflict of visions. Thanks as always for sharing yours.
I agree the state needs money for public goods and that the state can add value by facilitating safety nets that can’t be adequately handled better by voluntary mechanisms (and I agree some are best handled now by the state). I also agree that corporations benefit from courts and rule of law and large healthy markets with good safety nets and that the corporations can reasonably be expected to pay to play.
I am not sure why you believe corporations should not use “aggressive” tax planning or shelters. I would fire a CFO that didn’t do so within the law. I personally do whatever is necessary to minimize my tax obligations, and have not paid state or federal taxes for several years (of course I don’t make much, so all I need is Turbo tax). I agree they should not break the laws to lower their taxes. You and I do seem to differ here though. What is your reasoning?
I am not a tax expert, and am arguing only on principle, but if I am not mistaken, the rate for corporations is not really 35%. It is 35% subject to the definitions, rules, exemptions and exceptions written into the code. Thus, I expect a corporation to pay taxes based upon the written code in total, not an estimation of what the rate is absent all the rest of the fine print. That is the amount that is “rightfully owed.”
I am not exactly sure why you make a distinction from a tax standpoint between Apple as a corporation rather than as an aggregation of capital owners. Profits need to be distributed back to the owners, that is why they own it, and it seems six vs a half dozen which you tax. I am probably missing some deeper reason though. They can also be asked to pay sales or value added taxes (or not play).
I of course agree that everyone wants to cross the bridge without paying the toll. Such is human nature. Indeed that pretty much encapsulates one of my major concerns with liberal ideology — it attempts to justify free riding off others efforts while seeking exemptions from paying the toll of creative destruction itself (this is way off topic though).
Again, I must stress that I am fine with the concept of “you must pay to play.” If people in a state want to establish a VAT or sales tax, then they should be free to do so, especially if the action is unanimously agreed to. Thus is a corporation does not want to pay to play, then they can take their business and factories and jobs elsewhere. This is exactly what I mean when I endorse exit rights. Apple should be free to decide where it plays, and should pay the toll for doing so. Where it doesn’t want to it should be free to not play and not pay.
I understand the concept of race to the bottom, but I believe it is completely oversimplifies the situation. I think it is totally groovy that states are competing for tax dollars. This forces them to be fair in terms of value offered (courts, roads, ports, rule of law) for taxes collected. If it interferes with our visions of safety nets, then perhaps we should build or pay for our safety nets differently. I have some great suggestions along this front.
Bottom line, you and I have a very different view of the role of competition and how it can be used constructively and fairly.
On the issue of exploitation, I am against any party (strong or weak) being forced to do something against its will. I am against coercion because I view it being greatly a zero sum process which leads long term to negative sum results.
I am against forcing a person to work against their will. I am against prohibiting a person from offering to work at a lower wage than another man. I am against forcing a business from paying lower or higher wages than they want to. However I am fully in support of people within a state unanimously agreeing to a set of impartial rules and playing by them, especially if the parties have easy alternatives or exit options.
Am I crying for Apple stockholders? Hell no. But I also don’t know the empirically correct rate and taxation methodology to maximize human welfare. Neither does anyone else. I believe the way to discover this rate is by voluntary agreement and experimentation between hundreds of states and billions of individuals that can watch what each other is doing and learn from itReport
What I described is not competition, it’s using whatever power at hand to bend the rules to gain competitive advantage and create an unlevel/unfair playing field. It wasting taxpayer resources without regard. And corporate taxes is only a tiny part of what happens.Report
But I am emphatically against this type of activity. I call it rule wrestling.
I believe competition between corporations should be on the playing field of the market. They should compete based upon quality, value offered and service, not based upon what special rules they can carve out for themselves. They should have a clear and level playing field.
I am well aware that we built a system of crony capitalism where the path to success is using politics and bureaucracies to carve out special status. I am against this in every way shape and form.
The antidote for crony capitalism is as follows:
1) allow the market to work at policing wherever possible
2) where not possible, keep rules as simple, consistent, equitable and impersonal as possible
3) allow competition over rules via the concept of subsidiarity.
4) minimize the size and power of regulatory agencies and keep them extremely focused
Of course the above will only occur if the people living in that state share this paradigm. Today they don’t and we get exactly what you are concerned with.
And yes, I am aware that this in reality means we may still need a set of rules prohibiting dumping raw sewage in streams or on another’s personal property.Report
Crony Capitalism is worst when the market is policing itself. (“with BBB as an upstanding example” –as opposed to informed consumers).
I favored Obamacare simply to give businesses a level playing field, ya know?Report
Not following you.Report
1) Ford and GM compete against Nissan and Honda. Except that Nissan and Honda pay far far less for their health care for their employees.
2) BBB is rather infamous for allowing corporations to “buy off” (aka pay BBB money) bad reports on them, to get the bad reports removed.Report
Not sure why I would assume paying more for health care is a good thing. I think wages should go to where supply meets demand. Not for purist reasons, but because it optimizes efficiency and promotes utilitarian outcomes. Health care costs are part of wages.
If BBB is biased, then why should I trust their approval? To the extent that they become less impartial, they create an incentive for another free market competitor to replace them and for free market publications to publicize it. Once their brand is gone, so are they.
Imperfect yes, but we already started by claiming how imperfect state regulation is. Choose the lesser imperfection.
That said, I am absolutely convinced that you and Creon are simply unable to live with market based solutions to these problems. It simply violates your world view to allow companies to compete by lowering benefits, fleeing taxes, or by offering sweatshop wages. As such, you guys will do whatever is in your power to regulate these decisions.
Hence another reason I stress constructive competition, which you guys label “race to the bottom. ” It is a race to escape your plans. I am cheering the race on. The best escape from (what i onsider) intolerant and misguided interference in markets is often freedom of exit.
Again, I strongly recommend reading Douglas North on institutional evolution and competition. And I think he leans liberal?Report
Roger,
Oh, I’m not saying you would. Just saying that there are bonafide libertarian reasons for even such a big liberal program as Obamacare.
Brands are fun like that, aren’t they? The last time you bought potting soil, did you send it in for an analysis? (most people don’t).
I’m not certain that I’d get all pissy about companies competing by lowering benefits/fleeing taxes/offering sweatshop wages. I think there is PLENTY that governments can do, in order to not have corporations act like little thieves (which is what they’ll do if you give ’em half a chance. steal the “tax incentives” and then run out of town as soon as they end — citing Atlanta on this one).Report
Not sure what your libertarian case for Obamacare is. I am all ears.Report
Roger, can you provide some examples of ‘the market policing itself?’ In specific, examples where the big players didn’t, in some way, price out new competitors.
Can you please explain what you mean by:
Because here we get into what is the smallest unit. The atmosphere is a common we all share, for instance. So the concept of regulation atmospheric emissions raises many questions of what the most-local governing unit might be. Who gets to make those decisions? That, in itself, becomes a matter of what you’re calling ‘crony capitalism.’
Here in Maine, we get excess amounts if mercury in rain from the coal the burn to generate electricity for folk in Ohio; our Fish & Game department issues warnings to be very careful of how many brook trout you eat here due to risk of mercury poisoning; and they issue those warnings for every single water body, at great expense; expense bourne by taxpayers in Maine, not taxpayers in Ohio.
So the most local potential regulator — either towns where plants are located or the State of Ohio, is unlikely to want to increase costs for generating electricity there to protect my health here. And the power-generating industry, being well aware of this, will obviously seek to make sure the most-local regulator is picked, because the won’t want to pay, as they generate electricity to power Ohio industry, for safe fishing here in Maine. In fact, they’ll use good arguments like those you’ve put forward, to achieve that goal.Report
The market polices itself via competition. People want safe, reliable, consistent quality products and services that are superior to alternatives. Businesses want a consistent and loyal customer base. As such they create brands which represent something about themselves. This process can and does occur absent regulation. I designed products and services and set prices for a living, and the effect of every decision on our brand was paramount. However we did sometimes screw up, and felt the repercussions in revenues and repeat business.
The market also polices itself by non coercive information sources or standards. Underwriters laboratory is the classic example. Of course these information sources also compete for credibility.
There are other types of market policing, and none of them are perfect. Many are quite potent and robust though.
As for your comment that big players price out new entrants, that is what they are supposed to do. I strove to keep my price as low as possible to keep out competitors, new or old, from capturing my customers. Of course I also did everything in my power to maximize profit per customer. These work at cross purposes, so I constantly worked to design new value added features, or to take out unnecessary costs. Wages were a big cost and one which we constantly monitored on behalf of customers. Of course, if our wages were too low, we lost our best employees, so we had to set them just right. these ate all examples of the self policing dynamic.
To be concise, I agree that the size of the problem dictates the proper level in subsidiarity. The concept is as small as prudentially practical, not as small as possible. In the case of acid rain, it needs to be real large. No argument.Report
The market also polices itself by non coercive information sources or standards. Underwriters laboratory is the classic example. Of course these information sources also compete for credibility.
But even here, we get into crony capitalism, as you seem to have defined it. Do you know anything about fisheries? The labels for sustainable fish you might see at you local market? You use these labels after you fishery has been reviewed by a review agent. But even here, not all reviewing agents are created equal; and it’s little surprise that the agency most hired by marine industries is the agency with the least amount of actual fish science in its review process.
We can spin down this rabbit hole forever, Roger.
And when I said ‘pricing out,’ I refered to regulatory pricing out, too. Things like the big fry-shops working with state gov. on food safety standards, setting requirements that they know will price small competitors out of the market. As the process unfolds, the lobbyist for the fast-food industry will seem so helpful; will argue some points, and then reluctantly agree on these points, all in the name of public good, offering up helpful studies they’ve paid for, etc. And all the while knowing the result will make sure the sandwich shop you dream of opening down the street cannot will never happen because you cannot afford the equipment the fry-industry purchases at bulk discount. I’ve sat in the room and watched them work.
This kind of regulatory capture happens all the time; and it doesn’t really matter if it’s the state or a third-party evaluator. It makes it nearly impossible for start-up companies to enter the market, let alone enter with any hopes of actually competing.
You call it smart business, all the while bemoaning lack of a level and fair playing field.
I say this is the biggest barrier to a level and fair playing field.
Otherwise, I think we agree and many things.Report
I think we agree even more than you do. Thanks again for sharing, Zic.Report
And I am not just being nice by saying thanks. I genuinely learn a lot from you sharing your experiences. You really help to make this site awesome.Report
Roger,
Sometimes the scandal is what is legal.
Business Insider helpfully juxtaposes two charts, corporate profits in the US since 1950 and corporate taxes as a percentage of government receipts since 1950, writing, “Since 1950, corporate profits have exploded in the United States”, “However, corporate taxes as a percentage of government receipts are at an all-time low”.
Another pair of tables also via Business Insider, presenting (1) global sales of an Apple subsidiary and global taxes paid by that subsidiary and (2) foreign sales and the amount of tax avoided. Just 2011 figures: Apple subsidiary’s pretax earnings $22 billion, paid $10 million in tax, a tax rate of 0.05%. Is that Apple’s fair share, $22 billion minus $10 million? According to the second table, in 2011 Apple avoided $3.5 billion in tax.
I know you’re very keen on positive sum games, but there are some zero sum games. Probably an oversimplification, but if Apple successfully shields billions from taxes, that money has to be made up somewhere. That burden is spread less widely across society onto shoulders that can less easily carry the weight. Certainly less easily than a corporation with a $400 billion market cap. To me, that is a scandal.
There’s an awful lot of handwringing about less well off people potentially taking advantage of the welfare state and safety nets. Moochers, scroungers, shirkers… the name calling gets quite vivid at times, welfare queens in Cadillacs buying t-bones with food stamps. The disadvantaged face social opprobrium for the pittance they, legally, receive to (barely) stay afloat. But a multinational can avoid billions in taxes and get an apology from some quarters (ahem, Rand Paul).
Whether or not we should transition to an entirely different structure where corporations pay zero income tax is a separate discussion to me, perhaps that policy has something to recommend itself. But as of now, corporations are notionally supposed to chip in. Due to tax havens and accounting tricks they are dodging that responsibility.
I have a question about the nations competing track you’ve outlined, where do the tax havens fit in? Jersey, Guernsey, the Cayman Islands, the Bahamas, and their ilk. From the Senate reports, there are billions in US corporate cash stashed away in these locations. Globally speaking now, beyond the US and beyond just corporations, another source says $21 trillion to $32 trillion is hidden in tax havens (BBC). What’s worse, some of these havens have privacy rules to hamper tax authorities’ ability to find the tax avoiders, evaders, and dodgers. They essentially compete to facilitate cheating and illegality (e.g. UBS).
Brandon Berg offered that the US corporations’ money will be taxed at some point, but if I understood correctly, some companies have come up with clever mechanisms to repatriate cash and still avoid the tax man – Hewlett-Packard using nominally short term loans and lending itself money from subsidiaries in Belgium and the Cayman Islands to fund its US operations including: “stock repurchases, payroll expenses, and possibly US acquisitions” (Senate Exhibits, p. 26, pdf).
What happens when countries compete in perverse ways? What happens when competition accentuates pathologies like financial secrecy aiding kleptocrats, organized criminals, and other malefactors? What happens when the competition is how much free riding states (or sometimes “crown dependencies”) can help free riding corporations and free riding individuals?Report
re: countries competing for business.
They aren’t. The Cayman Islands are not competing for Apple’s operations.
Apple isn’t moving its operations from Cupertino to Bangladesh.
There is a reason why the most innovative and productive companies are located in some of the most highly taxed and regulated environments- because those environments are worth it.Report
Oddly, I think the last sentence is basically a succinct summary of my argument. If you want to tax someone, make it worth it.Report
That America is a great place for Apple to do business is already an established fact. They have deliberately chosen California as their base of operations.
What we are talking about is why the government has allowed them to evade paying the rent.Report
Maybe they need a longer and more complex tax code with more caveats, exemptions and fine print?
Or maybe they should quit chasing capital, which is extremely free, and get taxes another way?Report
Or maybe a shorter one, that strikes out all the special loopholes that allow Apple to define “taxable income” the way it wants.
Line A
“Apple, Inc. Gross Revenue”
Line B
Multiply Line A by 28%
Make your check or money order payable to the United States Internal Revenue Service.
Works for me.Report
You get an A for simplicity. However, my guess is it may not get high marks for reciprocity. My guess is many a corporation will head for Ireland or other such greener pastures.
But again, I love the approach. The final amount will probably be somewhere between 2% and 35%,Report
“When I spent years saying that corporations that didn’t like our tax code should move to Somalia, I didn’t mean that corporations that didn’t like our tax code should go somewhere else.”Report
I could quibble over the chart, but that would just side track us from the conflicting visions.
I fail to see why someone should be expected to stand still so they can be taxed. Corporations should be free to incorporate wherever they want to. The state should bid for their presence. They can offer security or whatever in exchange for profits. Yes this means the 100 plus states not getting the incorporation lose out. I suggest they improve their offers to the corporation or that they seek resources elsewhere. Individual capital gains, dividends, sales taxes and VATs.
I can see you totally disagree, but my reasoning is that this type of competition is extremely constructive. It creates a dynamic which requires the state to offer value in return for services rendered. Tit for tat. Fairness. Reciprocity. Voluntary mutual gains. Looks like Ireland and Apple both came out ahead. This is good, the losing states should look for other sources of income.
The second area of disagreement is that there is a key difference in my mind between corporate or personal handouts, and a competition over reciprocal interaction (you can sell here in exchange for a share of total sales).
I do however agree that once we set a fair, consistent and voluntary tax rate — let’s say a five percent sales tax on all sales — that allowing anyone to lobby for personal exemptions is dysfunctional in large part. This would create a negative political dynamic. Rules should be fair, unbiased, consistent, and the type of thing all participants would accept behind a veil of knowing their particular position. This however is a political position based upon a cultural expectation of the people choosing their government. It is of course a paradigm that predominates among classical liberals and is widely and IMO foolishly ignored by those of other political persuasion. Insert Pogo quote here.
“What happens when countries compete in perverse ways? What happens when competition accentuates pathologies like financial secrecy aiding kleptocrats, organized criminals, and other malefactors? What happens when the competition is how much free riding states (or sometimes “crown dependencies”) can help free riding corporations and free riding individuals.”
I agree that competition can be perverse if not structured properly. I haven’t thought about it, but I might be fine with a state refusing to allow or recognize a corporation which has done something which is clearly wrong according to common decency. This is kind of risky though, as some folks think sweatshops (hiring the poor in mutually beneficial interactions) and constructive tit for tat reciprocity is nefarious. Things which I believe are great for all parties involved and the human race in total are viewed by others as evil.Report
Roger,
Take a hypothetical, if you will: What if we suddenly switch to a zero-sum game, or even a negative sum game? Then are sweatshops immoral?Report
If you are asking if I would support voluntary sweatshops if the net result was harm long term to the poor, then my answer is No.
There are classes of interactions which are voluntary but which lead consistently to bad results and regrets. I am against these. I support sweatshops and free markets in wages as opposed to minimum wages because I believe they are “euvoluntary.”
http://euvoluntaryexchange.blogspot.com/Report
No, I think I’m asking a different question. If we’re at 0% growth — no added money supply, nothing “getting better” in general. Is a sweatshop a priori bad? If we aren’t saying that so and so’s kids will be better off (because of growth)… is it still worth it?
Again, still voluntary, and I’m not certain it’s harming the poor.Report
Oh, I get it. Are you asking if I support them just because i believe it contributes to long term growth?
No, I would support them because they are euvoluntary. All parties engaged benefit and no major negative externalities. Value is created. The world is reasonably expected to be a little better place.
If the proven chain of effect is that somehow it makes the world a little bit worse, then I would we willing to quickly abandon any default position for freedom.Report
” We can pass a law saying simply that any multinational corporation of [X] size that wishes to sell goods in America must pay all of its employees and subcontractors a minimally acceptable wage.”
Even if the minimum wage idea were a good idea and not likely to backfire, there is no practical way to enforce Nolan’s ‘simple’ idea. Short it being a lawyer / lobbyist full employment act.Report
” We can pass a law saying simply
That right there is an inerrant sign that the author hasn’t actually considered the world in which they are writing these laws. It assumes people simply respond as desired, rather than understanding that every law creates incentives to avoid its bite.Report
Perhaps we could pray about it.Report
The man of system is apt to be wise in his own conceit …Report
Exactly what I was thinking, but I couldn’t find the quote offhand.Report
This quote, specifically:
He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.”Report
Re: Packer & Goldman – I thought they both made good points, actually.
Re: Hamilton – It strikes me as odd to focus on minimum wage. Even if it were enforceable, my issue would be not just that it would make things cost more, but that it could deprive developing countries of their competitive advantage. I think safety would be a better place to focus, if we were to do something like this at all.
Re: Facebook – Does anyone else get the sense that Facebook was being egged on to do the whole Facebook Phone thing right up until they were about to release it, and then suddenly everybody pointed out “Why would anyone need a Facebook phone?” That question should have been asked much earlier. I wonder if the same thing will happen with regard to the Kindle Phone.
Re: Graduates – At least they’ll have degrees, which means that (in theory) they will earn a price premium that will eventually pay for the degree. The ones we should feel bad for are the ones we told to go to college who couldn’t cut it and are dropping out with debt but without a degree.Report
Re: Dennett — As usual, Daniel Dennett is the living proof of the statement that complex arguments cannot be simplified for hoi-polloi. Which isn’t to say hoi-polloi don’t deserve explanations. They first need an basic education, especially in logic.
The phrase “Free Will” is a contradiction in terms, it seems to me. We aren’t free to choose anything, chiefly because we don’t want every choice on the shelf. If we’re moral, some of those choices are not seen as wise. If we’re sensible, we understand some will have bad consequences. We make the least-worst choice, most of the time, in the light we are given. Some freedom, eh?
Maybe I’ve spent too long in prosaic AI, which isn’t as tough as it might seem from afar. Most of it is deadly dull, vast sets of rules, themselves containing rules, comparing x to y, putting the results into z for use by yet another rule which compares z to a. Consider how your FICO credit score is calculated. Some of my code is in there and far more of my code uses a customised version of it for other purposes.
If there is no “Free” Will, there is Will. English is too slippery and vexing. The word you want is German: Absicht == Intention, purpose, aim. The trouble starts with Latin, Bona Mens, the goddess of the mind. She had a temple on the Capitoline Hill. And ever since, even the lawyers, who spend their lives defending us from the consequences of our bad choices, are stuck with mens rea, the concept wherein the act isn’t punishable if the mind isn’t guilty.
This is especially good: “The history of philosophy is the history of very tempting mistakes made by very smart people, and if you don’t learn that history you’ll make those mistakes again and again and again. One of the ignoble joys of my life is watching very smart scientists just reinvent all the second-rate philosophical ideas because they’re very tempting until you pause, take a deep breath and take them apart.”Report
From the Apple tax article “Let’s take, for example, the first dollar from an iPhone sold in China.”
If the iphone is sold in China isn’t it Chinese taxes that are being evaded rather than US ones?Report