“Ok, face.. the nose is gonna get it.” 3 Reasons to forget about lost tax revenue from expat corporations

 

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Allan Sloan Allen Sloanwrote the cover story for the July 21, 2014 Fortune magazine entitled: POSITIVELY UN-AMERICAN Big time companies are moving their “headquarters” overseas to dodge billions in taxes…that means the rest of us pay their share.

This is stupid.  Here is why:

1. Corporate income tax is stupid.

Taxes are a cost of doing business for any company large or small.  And like all costs it is rolled into the price of the product(s) paid for by the consumer.  Think about it.  Why do businesses use a federal tax ID number to avoid paying sales tax on goods resold to end users?  Because the consumer pays the tax on the product and it is silly to pay a tax only to have to add it to the price of the product.  But this is what happens with corporate income tax.  Why do you think LLCs are so popular?  I can hear the bullhorn activist now: “But if corporations didn’t pay taxes then its employees/shareholders could get all kinds of tax free income through perks and benefits… wah wah, blah blah”.  So what?  They do it anyway with loopholes.  This comes from profit that can be competed away to the benefit of the consumer.  Free market competition is far better than the government for making companies price their wares appropriately.  The only time we consumers pay “their share” is when corporations pay it first.  Whatever COGS (cost of goods sold) offset is NOT required to recover the tax, when not paying any, either makes the product cheaper or attracts competition that adds to supply and then drives down the price.  Either way the consumer wins.  And consumption is the purpose of ALL production.  Mr. Sloan either forgot that or his head has been filled with so much Keynesian twaddle that that’s all that comes out.   The truth and irony about this college campus mentality is that it empowers the government over citizens.  We pay the taxes corporations pay through higher prices for their goods.  This transfers otherwise savings from our pockets to the federal government’s coffers that we must send representatives to DC to try to shovel back to our states through grants, subsidies etc.  Someone please explain why this is so much better than me keeping my money that I earn.

2.  He’s just angry.

About halfway through this poor substitute for journalism he confesses that this is something that makes him “deeply angry”.  It makes him angry when his political opposition does not capitulate to his demand that our ever expanding federal government be allowed to spend us into oblivion.  I’m sorry Mr. Sloan, about the inconvenience of the eighteen enumerated powers of congress and the constitutional limits on executive power.  Do you require toilet paper shortages and water rationing like in Venezuela to see the problem with unlimited government?

To be fair Mr. Sloan does mention that he has trouble “dealing with it emotionally”.  Meaning that he sincerely believes that by avoiding taxation these corporations are actually hurting the country he describes as a cornucopia of resources they exploit without due remuneration to the US treasury.  This is the saddest part.  His view of where resources for production come from is so distorted by Keynesian, “you didn’t build that” obtusity that I think he truly believes that this results in an erosion of the fertile soil from which prosperity springs forth.   We must all be glad this is not true.  To believe this is to believe that government produces things.   Government can only reroute resources it confiscates and does so at a significant loss.  This idea that without copious and regular spending by government there would no markets, no communities, no labor to contract into service is nonsense.  Rumpelstiltskin has a better chance of spinning gold from straw than government has of producing a net positive from central planning.  Let it go, man.  The purpose of production and trade is to create abundance for the purpose of cheaper consumption of articles by the end user.  That’s it.

3. It doesn’t matter.

His article features in giant text: $19.5 BILLION that “could be” lost to future inversions over ten years.  Holy cow… This is where I’m thinking: “how in the world is this twaddle in this magazine let alone a cover story.”  $19.5B over ten years?  Seriously?  Let’s assume these “desertions”, yes he calls them deserters, result in the actual losses he is forecasting.  That’s almost $2B per year.   And “that’s a lot, if you look at it the right way” , he says.  Cue the perspective:

2012 Foreign aid: $48B worldwide.

2013 Foreign aid: $50B worldwide.

2014 EPA budget: $8.1B

2015 IRS budget: $21B

So ALL of these BIG companies are bringing the sky to the ground in shards of our shattered future.  Oh the humanity!

So Mr. Sloan, how about we do this?  Obviously the above, as bad as it is, is just a drop in the bucket of the total budget of our benevolent government.  So why not just confiscate all of the ten years worth of future tax revenue from these companies today and toss it into the government coffers now.  It looks like they need it.  Then, after they spend it in literally 4.5 hours, what?  How you can criticize free citizens to use legal means to avoid exorbitant taxation while you pretend that “their share” means anything in the shadow of this federal leviathan is pathetic.  He describes these companies as “sucking out of the US Treasury” with no notion of what sucking effect the US Treasury has on the private sector.  Classic seen vs. unseen.

-m

 

 

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