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Google Warns Irish Government Against Tax Increase
theodp writes "The Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's controversial low corporate tax rate is raised in return for an IMF/EU bailout to shore up the country's beleaguered banking system. According to The Telegraph, a statement signed by senior execs at Microsoft, HP, Bank of America, Merrill Lynch, and Intel points out that although Ireland's tax rate may be low in European terms, it is not when compared with locations such as Singapore, India and China. Separately, the head of Google's 2,000-strong European HQ in Dublin told the Belfast Telegraph, 'anything that impinges on Ireland's competitiveness is going to be a big thing for Google,' adding, 'anything that increases the cost-base of a business is negative for competitiveness.'"
God forbid any company would actually contribute taxes to the infrastructure of the countries in which they operate. I mean, that would just make too much sense.
Give a man a fire and he'll be warm for a day. But light a man on fire and he'll be warm for the rest of his life.
I can't begin to count how many times over the past few years I heard that we needed to emulate the "Celtic Tiger."
If they're actually that big and that well entrenched in Ireland, they won't just pick up their ball and go home that easily
And if they're not, then who gives a fuck if they leave?
Here at home we've got our own little "corporate Ireland" in the pissant state of Delaware.
Given that so many voters there just sent a Democrat into the Senate and also picked a right wing moron over a centrist statesman to run against that Democrat, it seems there is a huge political battle brewing in that tiny little state. If they ever do decide to renovate their business laws, we may see a large number of companies incorporate outside the U.S. and we will be much poorer as a nation for it.
If only raising taxes in the United States were enough to get rid of J.P. Morgan Chase, Bank of America and Merrill Lynch. Ireland should jump at the chance to jettison these systemically dangerous financial institutions and replace them with sound banks of their own.
It seems the countries they compare to Ireland such as China have a completely different lifestylet. Different lifestyle and social norms that usually run on the more luxurious side and the average person perhaps has higher expectations about how things should be or what they get out of the system.
Wouldn't that mean it's a bullshit comparison? Yes, China's tax rate is lower, but the government is not expected to provide the services that Ireland's is expected to?
No sig for you!!
Fareed Zakaria: "While businesses have a way to navigate this new world of technological change and globalization, the ordinary American worker does not. Capital and technology are mobile; labor isn't...That makes it more difficult for the American middle-class worker to benefit from technology and global growth in the same way that companies do. At this point, economists will protest. Historically, free trade has been beneficial to rich and poor. By forcing you out of industries in which you are inefficient, trade makes you strengthen those industries in which you are world-class. That's right in theory, and it has been right in practice...And yet something feels different this time."
A corporation serves only its self interest - it cares not about the local area(s) it operates in as long as it can get some sort of special tax treatment etc. They want full use of roadways - airports - water -etc by paying nothing or as little as possible. Yes they hire locals who have to make up the "sweetened tax deals" out of their own earnings.
I say let them move all their crap to crappy nations and see how that works out for them.
Its not the years, its the mileage
This madness has got to stop.
Executives for healthy companies that move a bit too many activities abroad for no good reason should be forced to stand behind their acts and move their ass where they put our money and jobs.
Yeah. Just joking.
Google is using the standard "report income where tax is lowest" strategy in EU. Google has subsidiaries in multiple countries, and they can avoid paying more taxes by moving their income around as internal expenses.
Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.
There are no atheists when recovering from tape backup.
Ireland has been courting globalised corporations for years by offering grant incentives in addition to the low corporation tax. Now, they must learn to compete on a fair and level playing field. If it means a measure of short term pain as corporations jump ship out of the Emerald Isle, then that is just a medicine that Ireland needs to face. They can prevent it of course: Ensure that those corporations considering fleeing see that their Irish employees add significant value to their company and that it would not be worthwhile to move their operations elsewhere.
At the end of the day, it is bad for business when the government is insolvent.
No sig. Move along - nothing to see here.
On the contrary, outsourcing CEOs has been proposed before.
Enjoy state ownership/competition in China and gross incompetence in India that will cost you more in sales and long-term brand recognition than you'd ever pay in actualized taxes.
Now Singapore is a relatively new and untested place for offshoring, which is a risk in itself.
It's also worth noting, of course, that none of these places are in Europe, which was the whole point of opening offices in Ireland to begin with. All these companies already have a presence in Asia, so basically they are threatening to do something that they already did, and they want people to believe that they'll give up their regional presence in Europe in order to effectively gain nothing.
It's a poor bluff.
.. and to eat it at same time. It does not mind all governments to be near broke, as long as they have the money. Well it does not work that way, as it seems that all countries that give them safe tax haven will either fail or be unstable to do business in long term.
Corporations should not be above people and government - as we can see they can abuse both to get what they want ($). It is okay to make money, don't get me wrong, but it appears in this process there's only one winner - Big Co, and Joe Smith ends up with the (tax) bill.
How come we have situations where companies make insane amount of money and governments that allow them to be in market are near broke? Well answer is obvious - they abuse system, or lack of it.
So if google wants to help - well it can pay their debt bill. Because they are partially responsible for it.
Working Beyond Borders
...since a company wants to hold your country hostage to its demands.
If they want to leave, make it hurt badly(if not something that outright kills the company). Then make the company an example of how things can go wrong in a robbery. The government isnt there for the company, it is for the people that end up getting hit when the company decides to leave.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
Couldn't this be possible?
Ireland's tax rate may be low in European terms, it is not when compared with locations such as Singapore, India and China.
But the companies are in Ireland because it's part of EU: they HAVE to have headquarters on the EU-area to do business there. There already is Apple Singapore, Apple India and Apple China (and probably rather same percentage of the rest of the companies listed), and they very well can't move their European operations there. If the taxes rise, the only thing Ireland has going for it is a large population of native English-speakers (and already having all the infra built on Ireland).
The rest of the states have tax of average of 26% and none under 20%; Ireland has 12% and if I understand correctly, USA has anywhere between 15% - 35%. The companies currently have extremely good deal, and even if the taxes would rise, the deal would still be very good.
Chronologically late.
Google is using the standard "report income where tax is lowest" strategy in EU. Google has subsidiaries in multiple countries, and they can avoid paying more taxes by moving their income around as internal expenses. Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.
You make an excellent empirical point. It's not enough to make the across-the-board ideological claim that taxes are bad for business and that the taxes their employees pay more than compensate the state for ensuring that markets function under controlled conditions (this is one of the primary functions of the contemporary capitalist state--an observation routinely omitted from ideological claims on account of its empirical basis). The Telegraph article doesn't make the point that if Ireland raises its taxes, corporate leeches such as Bank of America and Merrill Lynch will have to cook their books somewhere else. It's not enough to accept what corporate spokepersons would like us to hear: we need to see the world's spreadsheet.
I'm not sure Ireland's or the EU constitution allows for governments to punish corporations unfairly while protecting others. In fact, this would pretty much put them in violation of many free trade agreements in which they are penalizing foreign trade within the country.
There would be many problems with your suggestions. None of these problems would likely help.
Ireland is part of the EU. Therefore it can export to the rest of the EU with impunity, no extra tax. Ireland leeches off the rest of the EU. Exporting from Singapore would have huge tax issues.
If they want to leave, make it hurt badly(if not something that outright kills the company). Then make the company an example of how things can go wrong in a robbery
And then no company will want to set up shop in your country again. Why would they, when the risk is driven up that high?
There are tons of nations interested in having Google present. If Ireland wants to keep them, it needs to be competitive on taxes and working conditions.
Given Ireland's location and condition, in fact, they really need to be cheaper than other European nations. If Google is going to have to pay high taxes, they might be better off doing it in a place like France, Britain, or Germany.
Doubtful.
But this reminds me of an anecdote I once heard where the Colombian drug lords offered to pay off the national debt if the Colombian government legalized drugs.
I don't believe in time. It's a grand conspiracy designed to sell watches.
Considering that CEOs seem to jump ship faster with more megabucks that they did when I first joined the workforce, maybe outsourcing them is worth trying, as long as their pay is tied to actual performance and not the virtual blowjob they give to the stock price by cutting staff.
Pain is merely failure leaving the body
The only thing I see fixing this constant "We'll offshore! We'll offshore!" is the creation of a setup whereby you pay taxes on each dollar (euro, yen, pound, yuan, what have you) in the country where it is made, regardless of where it ultimately goes. Ensure that these massive corporations cannot cynically refuse to contribute to the upkeep of the communities who pay their massive executive bonuses.
But in the meantime, ignore it. If the leeches want to leave, let them. It may cause some short-term pain, but it'll also cause a return to more localized economies where money doesn't all take a one-way ticket out of your country.
Obviously, given the state Ireland is in, accommodating these massive corporations by quaking in fear they'll leave is not good for you in the long term. I could've told them that some time ago, but some people seem to think that "business is good" and that's all there is to it. These tend to be the people making the obscene profits, of course, or those who wish they could. Let them go.
To fight the war on terror, stop being afraid.
"Your" country (not sure who "we" is supposed to be here) could do a lot worse than copy Ireland's rise. Down with capitalism, comrade! To the barricades! Wishful thinking will surely change reality this time!
Shutting down free speech with violence isn't fighting fascism. It IS fascism!
When a private corporation attempts to dictate to a sovereign state which policies the state should adopt, there is something terribly wrong with the world.
Everyone knows why they are in Ireland to begin with. If they raise the rate just a little at a time, they will not feel the need to leave. Companies like that almost never follow through on threats like that just because they said they would. All they have to do is raise the rates just enough that they won't leave and also get enough of an increase to make a difference for Ireland.
And then no company will want to set up shop in your country again. Why would they, when the risk is driven up that high?
So, basically, you're saying countries should just let themselves be held hostage by corporations? If there was a rash of bank robberies, would you throw up your arms and say "We should just give them all the money in our banks. After all, if we don't let them, who would want to rob our banks in the future?"
... and then they built the supercollider.
There are one million factors to consider when setting up a business. Somehow I don't think "What if it hurts when we leave the country?" is all that high up on the list.
If they want to leave, make it hurt badly(if not something that outright kills the company). Then make the company an example of how things can go wrong in a robbery
And then no company will want to set up shop in your country again.
This is a classic race to the bottom scenario: unless every country has the exact same tax regime, the argument that there should be lower taxes will remain - right up until there is no tax at all, and thus no - or very limited - government; a complete privatisation of the state. That may or may not be a good thing, but this also extends to 'hidden' taxes, like keeping a safe working environment, paying a fair wage and so on.
I'm tired of hearing about this competitiveness bullshit. Pay your fucking share of the taxes assholes. The people who you employ in the states and the majority of the people who buy your shit don't get to dodge paying taxes by putting playing musical chairs with office space. This whole corporate tax rate shit is designed to let these cocksuckers do this shit too. It encourages it. It's setup by the same cocksuckers who do it. We need to get rid of corporate income tax altogether. It's a waste of time and resources trying to collect it and actually getting it is nothing more than a pipe dream. I say we do away with income, corporate, and all similar taxes and have a single federal transaction tax.
Wanna fight ? Bend over, stick your head up your ass, and fight for air.
Ireland is basically a one party State, AKA banana republic. Most of its TDs (representatives) are apparently teachers on extended leave, who therefore owe their position to the State - in fact, it's very much like Communism, where "politicians" and "civil servants" were the same thing. The Government is in cosy cahoots with the builders, with the result that Ireland, like Florida, is full of unoccupied houses that nobody wants.
Ireland wanted both a low tax State to encourage foreign investment (good) and a cosy one Party mafia State (bad). They now cannot afford either. The reason is not economics, but the failure of their politicians to even begin to understand it.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
Time for the world to make a decision: Are the peoples of the world going to control both their presents and their futures, or are they going to cede that power to a literal handful of corporate owner/operators who care nothing about them?
Orwell: "In a Time of Universal Deceit, telling the Truth is a Revolutionary Act"
European governments do not work together as you think: they will happily screw each other in order to bring business to their countries for their own benefits. Europe is "united" only in the sense that business like. Another EU country will happily take business going away from Ireland, and the Irish can scream until their throats go hoarse. It's not like blackmailing Germany. And if you're big enough, you can.
Geeks are so full of shit that "beating the crap out of them" takes a whole new meaning.
Ireland is just being used as a proxy here, imho. This is really aimed at the EU which is generally a high tax area. Corporations probably wouldn't dare to insult the EU directly but it's OK, apparently, to diss Ireland now that it's been brought low by corruption and incompetence. Given its history, location out on the fringes of mainland Europe and the strength of lack of it of the Irish economy, attractive rates of corporation tax are probably one of the few USPs Ireland has to attract jobs and business. So it's probably a good idea to keep these tax rates low but that is, or should be, the sovereign decision of the Irish people and what they decide we should respect. It's worth pointing out that of the corporations doing the complaining, two are utterly discredited and owe their continued existence to public funding (the banks) and three are gross monopolies. Complaints from outfits like these that poor people should become poorer so that rich people elsewhere can become richer are pretty darn sickening. If the Irish people decided to send these fellows home in a rowing boat, one couldn't blame them.
However, the larger question here is whether the EU/IMF bailout of Ireland will be sensitive and sympathetic. If the rulers of the EU (i.e., France and Germany) use the exercise as an excuse to strip Ireland of the few advantages it has, such as the option of offering low rates of corporate taxes, claiming "harmonisation" but with the real aim of luring these companies elsewhere then the "rescue" will really amount to a rape. These days you don't need to strip factories and ship them home, you just need to shuffle the foreign bank accounts and trusts around. Given the arrogance and clumsiness of those who run the EU, it would be prudent not to be too confident.
Las qué passoun
tournoun pas maï
There are actually two separate issues here.
Issue 1.
We're talking about American companies based in the U.S. that base their European headquarters in Ireland for the Tax breaks. All this occurs only because higher level executive can order some European executive to live in Ireland. Alcatel, Airbus, Nokia, etc. are not based in Ireland because Ireland is a shit hole.
If Ireland raises their tax rates, but still keeps their taxes slightly lower than France, German, England, etc., all these American companies will keep their existing European corporate headquarters in Ireland. Ireland would need to raise their tax rates slight above some other European country before any corporate headquarters moves.
Issue 2.
All these American companies maintain European work forces in Ireland because the corporate tax rates are lower. If Ireland raised it's tax rates, they might consider moving some facilities to European countries with cheaper labor, like Spain, Poland, etc.
We're not talking about a terribly fast process however for various reasons such as : The company benefiting from specific work forces being near their European corporate headquarters, which we've established won't move. Inability to simple move the people coupled with a lack of suitable workers in the new country. etc.
So what is the real cost of raising taxes?
Easy, Ireland will cease growth due to new foreign investment. American companies will not establish new divisions in an expensive shit hole like Ireland once the corporate taxes rise to European standards. Instead, they'll either look for lower wage locations in Eastern or Southern Europe, or preferably India and Singapore. Or they'll invest in more expensive but better educated workers in probably Germany, but maybe Scandinavia or France.
In fact, almost any jobs that could be exported to India and Singapore will most likely be exported eventually anyways. So honestly all the other countries of Europe will benefit enormously from forcing Ireland to raise it's corporate tax rates. I'd argue this holds true even if this means the ECB must bail them out eventually.
Ireland fucked up. Germany & co. now own their ass. Time to pay the piper guys. And one payment will be more American investment in Germany instead of Ireland.
p.s. Don't forget that China isn't exactly an option. Google is currently only discussing their moral qualms with China. All the industrial espionage is however a major problem for *all* companies. You realize even being married to a chinese national precludes you from any kind of U.S. security clearance? It's entirely realistic that the U.S. could start banning software developed in China from any sort of sensitive industrial processes. etc. China isn't a good option, plus the Indians do software better.
The Christian religion has been and still is the principal enemy of moral progress in the world. -- Bertrand Russell
They have their own banks. They aren't sound.
These American banks, and corporations, are subsidized by the US, so there isn't really any downside to having them in Ireland.
Do you really think that these companies would be such idiots if Ireland were looking for an excuse to get rid of them?
"I assumed blithely that there were no elves out there in the darkness"
I live in Ireland, and like many Irish people I'm sick about hearing about the economy. Things on the ground in Ireland are actually pretty good: people are still spending so VAT income is good, and our exports are doing well throughout this recession. It is widely predicted that we will have a medium-term export led recovery. The problem we have is that the financial markets are not prepared to lend to us at less that an exorbitant interest rate of ~8% due to the perception that our deficient is massive, which is an anomaly due to the EU forcing us to include our own internal bank bailout (NAMA) on the countries balance sheet. Basically our problems are at the macro level not at the micro level: lots of Irish companies including the one I work for are still doing very well in this tough global economy thank you. The only reason we have to go to EU & IMF for funding at 5% interest is because the markets are screwing us at 8%. It is the markets that are hurting us, not corporations like Google etc. which are creating a lot of wealth in the country with the high salaries they pay.
"Gettin' too big for their britches" if you ask me. Which you didn't but I'm sayin' it.
Won't somebody think of the multinational corporations!
Microsoft
Hewlett-Packard (HP)
Bank of America
Merrill Lynch
Intel
other story:
Google
Imagine if corporations actually paid taxes based on where their clients reside
Tax rates differ in every state, every county, and every city, and they are amended every year. Under your proposal, every business would have to check the tax code of every state, every county, and every city every year before selling to any customer in that state, county, and city. Sorry, but I don't see how your proposal would be workable.
Why, the Federal Reserve isn't even a government entity.. no more federal than say, Federal Express.
I see your point, but one nit: Federal Reserve has actual federal officers on its board. This means it's as federal as General Motors, which since the U.S. auto industry bailout is somewhat more federal than FedEx.
yep make that mistake in the wrong bar in Ireland or NI and you are in a world of hurt a few yes ago you might have even ended up kneecapped, 50/50'd or even "missing" back in the day if you worked for the "crown forces" you where a target for the IRA. There was a huge fuss a few years ago when the company i worked for but its logo on the company car park passes as in NI that would have marked you out.
Its not widely known that in NI a lot of people had Concealed carry permits for personal protection weapons if you worked for the state or companies that did work for them.
They don't have the money.
Google is using the standard "report income where tax is lowest" strategy in EU. Google has subsidiaries in multiple countries, and they can avoid paying more taxes by moving their income around as internal expenses. Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.
So why aren't money and/or expenses that are shuffled this way between subsidiaries taxed as imports/exports each time it crosses a border? If subsidiary companies were required to incorporate as independent entities in each country, these numbers games could be reduced or eliminated.
'The tyrant will always find pretext for his tyranny.' - Aesop's Fables
You're underestimating the short-term thinking of executives and investors. Even after all the speculative bubbles that have burst in the past, they still keep throwing money at new ones.
So, basically, you're saying countries should just let themselves be held hostage by corporations? If there was a rash of bank robberies, would you throw up your arms and say "We should just give them all the money in our banks. After all, if we don't let them, who would want to rob our banks in the future?"
I think a better analogy would be that for each person who made a legitimate withdrawal you spin a wheel and if it comes up '0', you shoot him. The number of '0's on the wheel depends on the size of the withdrawal. No how many people would deposit money with your bank? What sort of interest rate would you have to pay to attract deposits?
'The tyrant will always find pretext for his tyranny.' - Aesop's Fables
"Don't be evil."
I don't blame them for wanting to pay more, but about the threat aspect of this is what changes my opinion. Not fooling anyone anymore G.
This is a huge issue for Google. But not because of Google's operations in Ireland. Google's whole tax-avoidance strategy, which gets Google's tax rate down to 2.4% (!), is based on a tax strategy which exploits Irish law:
Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.
Google's income shifting -- involving strategies known to lawyers as the "Double Irish" and the "Dutch Sandwich" -- helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.
"It's remarkable that Google's effective rate is that low," said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. "We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent."
The Bloomberg article describes how this works. Google "licenses its advertising technology" to "Google Ireland Holdings", which owns "Google Ireland Limited". That unit sells 88% of Google's $12.5 billion in non-US advertising. Google Ireland Limited then pays royalties to Google Netherlands Holdings B.V. in Amsterdam (which, according to Bloomberg, is a dummy company with no employees), to get the benefit of a tax break for royalties paid between European Union countries. Then Google Netherlands Holdings B.V. pays royalties to Google Ireland Holdings (headquartered in Bermuda) $5.4 billion in "royalties". "You accumulate profits within Ireland, but then you get them out of the country relatively easily. And you do it by using Bermuda." After all that, the tax liability has been laundered out of existence.
That's why Google is concerned about changes in Ireland's tax laws.
Except that it's not a perogative for most private persons to move. You have to fulfil immigration requirements, for one thing. You need to learn a language. You need to drop most of your friends and family. You need to be ready to let your mother die, alone, in a nursing home. All of those things make it impractical for many people to pull up their stakes and go to a different country.
People are not very mobile.
Its a race to the bottom when corps threaten a host country with outsourcing elsewhere. Look what happened to manufacturing in the USA; Wallmart bought cheap forcing companies like Rubbermaid to shut its doors in the USA and buy cheap from China; either that or their competitors would do it first. The US economy got gutted for short term gain in a sort of twisted tragedy of the commons. Now corps have no scruples about doing it to Ireland over a tax issue. Some corps insist that countries PAY them before they invest or exploit a resource.
Ireland is bankrupt and you cannot expect other European nations or the IMF to tolerate Irish tax evasion policies any more. Sorry, no way google. And if google leaves the EU expect Brussels politicians to get tough on the search giant and it privacy infringements. It is not competitiveness, it is beggar-thy-neighbor. No way. Ireland is one of the worst offenders in tax evasion forum shopping. US tax payers don't like that nor do continental ones. This has to stop of we won't let Ireland off the hook.
just send over 100 Billion Euros - thats it. No corporate tax then for you!
If you do not contribute to the economy of your host country ...
Isn't creating jobs(*) a contribution? Here in the US we often hear of states, cities or towns that offer tax breaks to companies to incentivize them to locate in their area. These areas feel that the jobs and associated economic activity and individual payroll taxes more than compensate for the lost corporate tax. *If* Ireland were a region of low employment then their tax breaks may have increased overall contributions. Economic activity is often a very complicated web of companies and individuals, think of all goods and services that a company purchases locally and that employed people buy that the unemployed do not. Focusing solely on one company in that web, even the company driving the local activity, can be misleading. This issue is not as simple as you seem to be portraying it.
(*) I'm not claiming Google created many jobs, this is a general question.
It is an attempt to dictate when they can cause damage by their departure. Those companies are political creatures, and should not be given a pass just because they're "a business".
The company can threaten the locality with loss of tax revenue and larger amounts of joblessness. This would put the region's government(s) in a world of hurt with eventual budget shortfalls and tons of people on government assistance.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
... Google would not have had to post 200+ positions on a weekly basis for Dublin and consistently _FAIL_ to fill them. The situation with a lot of other emloyers in Ireland is not much different. They all continue to have a long list of positions for qualified labour open ...
That may not indicate that Ireland inherently lacks skilled labor and is somehow behind other EU countries. It *may* be that too many tech companies have located there and outstripped the local resources. Ireland has a population of 6M and Germany 80M, Dublin 500K and Munich (München) 1300K (*). All other things being equal, a lower tax rate that disproportionately drives companies to Dublin would lead to the situation we see today, a labor shortage starting with Dublin.
I worked once worked for a US company that had a tech support center in Ireland to support our EU customers and our parent company also operated an office that localized (translated) our products, manuals and web pages into the EU languages. The general opinion we had in the US was that our Irish counterparts were knowledgable and skilled. This was 2000 to 2003 'ish, I do not know how that era's labor market compares to today's.
(*) I'm just aribtrarily picking a German city that is somewhat of a tech hub.
Not if it is communicated properly that the company tried to buy off the government, and that there are legitimate ways to set up shop in the country.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
Back in like 1905, corporations paid 50% of all Federal taxes, meaning individuals weren't taking the hit. Now corporations are paying like 5% of the federal taxes. I'd say rebalance the taxes onto corporations.
Except that it's not a perogative for most private persons to move. You have to fulfil immigration requirements, for one thing. You need to learn a language. You need to drop most of your friends and family. You need to be ready to let your mother die, alone, in a nursing home. All of those things make it impractical for many people to pull up their stakes and go to a different country.
Except that we have considerable evidence that people move. Somehow they fulfill the immigration requirements. Somehow they learn the language. Somehow their friends and family (particularly Mom) come later once the first few are established.
There are one million factors to consider when setting up a business. Somehow I don't think "What if it hurts when we leave the country?" is all that high up on the list.
That's because just about no country does what the GP recommended doing.
And then no company will want to set up shop in your country again. Why would they, when the risk is driven up that high?
So, basically, you're saying countries should just let themselves be held hostage by corporations?
I'm saying they should no more be slaves to the government than anyone else should be. If they decide not to business in your country you get to -steal- all their assets? That's probably one of the few times that the WTO would come down hard on a country and I'd actually think it was justified.
There should be a zero % corporate tax rate. Remember that all corporate taxes are just taxes passed on to the consumer through higher prices.
The real problem is that in all this is simple. And that is people.
People need to eat, people need to have a place to live, people need to thrive, period.
Automation saves you from the drudgery of being:
So the problem comes down to too many workers and not enough jobs because it no longer takes 500 guys to work in an auto plant it takes about 100 once all the automation machinery is up and running. Engine plants are almost all robotic now almost nothing is done by hand.
We keep finding more and more ways to remove workers from manufacturing, except where the automation equipment is far more expensive then hiring 1000 pennies per hour workers.
The problem is that we don't find other things for them to do. How many miners are there in the USA these days, how many in vehicle assembly plants, how many of them in anything we manufacture. We do our best to keep them out because that way someone makes more profit.
Profit is not bad, but the demands for higher and higher profits irrespective of the true costs are. How many times have you read about CEO X gets fat bonus because he reduced the workforce. How many times have you watched what you though was a good investment in the market turn to shit because some pencil neck analyst screamed SELL as loudly as he could because some company missed his profit estimate by a penny a share and all the big industrial investors unloaded everything overnight and your investment is now worth half of what is was.
Short term gains that is all anyone ever thinks about and that is killing our economy.
The right wing says "Pick yourself up by your bootstraps and get a job". memo to the right wing... "Uhmm love to, can't really do it though because you are to busy either setting things up to make it easier for company X to ship all it's jobs to India or setting things up so that company X can import more and more people from other countries because "You can't find Qualified Workers in the USA".
People flock to the cities because that's where people find jobs but they cannot afford to live in those cities, well unless you live in a part of the city where carrying a side arm is pretty much mandatory.
People can't even opt out because every square inch of the USA has a no trespassing sign on it. It is either owned by a corporation, an individual the federal or state government. I would love to just go move into rural Wyoming or someplace like that and live off the land. Go ahead and try it sometime, you will be in court real soon.
We are, in point of fact, on a collision course with civil war. The haves build bigger and bigger places to lock the great unwashed masses out and eventually someone is going to metaphorically say "Let them eat cake" and the end result is going to make the French Revolution look like a school yard dust up.
I don't want that to happen but I don't see how we are going to avoid it either. There are about 300 million people in the USA and the unemployment rate is pushing 10 percent. Yup that is 30 million people that can't find jobs. The vast majority of these people are not sick/lame/lazy or crazy. They are people who have been down-sized, right-sized, had their jobs sent to foreign countries or the technology is changing SO fast it is a practical impossibility for them to keep up.
Everything is in this country, the space to grow food, the raw materials to build things, the labor, the talent it is just that it is being abandoned at a staggering rate in search of greater profit, not greater quality, just greater profit and that will be our undoing.
Hey KID! Yeah you, get the fuck off my lawn!
Here I pay more on income tax in a single day than Walmart Mexico in a whole year. This arrangment destroys the markets. After all, poor people don't buy stuff.
Mexico: 100% conservative's America now!
Apologies for not responding sooner, I rarely engage in longer conversations with AC's as I don't know if they reciprocate.
Removing FRB simply means most money will not be available any more internally
Depending on how you replace it. Transition to a non-FRB system does not necessarily entail changing the amount of currency available (by various measures) at any specific point in time.
remember, you're talking about removing approximately 95% of money from the economy by requiring it be tied up in redundant collateral.
Over a longer period of time that would shift; as asset bubbles are valued recursively due to availability of capital and artificial interest rates, the price of those assets and the level of capital tied up in them as an aggregate would look very different eventually.
the system is no longer able to fund the production and importation of food and other essential commodities.
The denomination of the currency is not relevant to the ability to produce; the important thing is the ability to have a medium of exchange of value agreed upon by both parties.
with a real economist
Yah, well, that's the problem innit. You'll find Real Economists (tm) agreeing with both of us. It ain't exactly a hard science.
You're saying a loan doesn't have value?
When backed by assets that are themselves valued depending on the availability of capital and interest rates? Try the mental experiment of doing what you suggest I suggested; remove 95% of all currency, and see what you'll get on a mark-to-market basis when you sell a house or a stock, or some other asset backing loans.
Loans themselves have a value as time preference shifted investments, but allowing them to be further pledged will automatically dilute the value of the collateral. You get a systemic insolvency as you cannot liquidate the systems collateral at par. Each failed liquidation further recursively affects asset values, just as the excessive funding did during expansion.
There are other ways of preventing recursive valuations that might be alternatives to outright banning FRB that would at least mitigate the problem, like setting collateral values as a function of the asset price over historical running time of the loan. It might mitigate asset bubbles, but I suspect it would be papering over a fundamentally unsound system.
And no, personally I don't subscribe to the notion of gold as a universal medium either; it has advantages, but using a single commodity as a universal store of value isn't practical or necessarily efficient either.
economies grow when you can loan money, they shrink when the money supply is tightened
Economies grow when more experienced value is produced for less experienced effort. Nominal growth in any specific medium used for exchanges at a specific frequency interval may or may not coincide. Such growth is not dependent on the arbitrary blowing of bubbles; in fact, overly easy availability of capital may create a disincentive for minimizing effort and decrease productivity growth, as the funding is available at a cost to others (defaulting/inflating), not the producing entities.
Actual measurement of wealth is, of course, at the root of the problem of producing sane hard science models for economic growth or money in itself. FRB itself destroys some unmeasured values of wealth (time preference value, experienced security in value stores, etc). The concept of maximizing employment, also usually tied to FRB theories, ignores the value of free time to the extent of forcing people to work to fund other peoples undesired work (Keynsian money burying/digging), ie, disguised redistribution that actually destroys the value inherent in free time and decreases aggregate unmeasured but actual wealth.
is Iceland Scandinavian? It seems like they might be a counter example...