ASU2003

FT.com / US & Canada - Obama takes aim at US multinationals

http://www.nytimes.com/2009/05/05/bu...ef=global-home

This is one of those issues that I'm not sure he can win. Even I have a hard time with wanting companies based in the US to have to pay the foreign countries tax, and then have to pay a US income tax on the profits they made.

The way I figure that this is working is that company A that might be based in New York, has large sales in France let's say. The company pays the French tax on the profits(they do need to pay these right?), but instead of bringing that money that is left over back to the US, they use a Cayman Island bank account where they won't be taxed nearly as much a second time(if at all). They can then use this money to fund new expansion or advertising in any foreign country they want to. The US doesn't get any tax revenue from these multinational companies that are doing business outside of our borders (if they use this money outside of the US for business expenses or buy resort homes, yachts and private jets in these foreign countries) .

Is that right, or am I off in my understanding of this 'problem'?

Would they just not do business in the US at all if they sell $1 worth of stuff here they would have to pay taxes on every profit they made worldwide? Would companies that are based in the US start moving to Ireland or the Cayman Islands? Then again, how many corporate headquarters could you fit on those islands? Will we see these companies band together and create an nation of their own like Monaco or some other ultra-wealthy tax haven? I'm sure there would be some countries for sale.

Say what you will about Obama, but at least he is trying to do something. I think he bit off a little too much here though and he needs to come up with a simple tax code that could be used for this.

Marvelous Marv

So in Obama's view:

1. Higher taxes on businesses could not possibly cause inflation.
2. US businesses will not move overseas.

__________________
"The problem with socialism is that you eventually run out of other people's money."
Margaret Thatcher

Willravel

We're closing a corporatist loophole, SUPPORTING capitalism. Allowing this to continue was an attack on the free market.

aceventura3

Think of this issue (the flow of capital and how it is taxed) like it is a large quantity of water. Water will always seek the lowest ground. It may or may not get there but to change its natural flow takes a hell of a lot of work and cement. Sometime trying to manage water is productive and sometimes there are unintended consequences that can cause sever damage.

The question we should ask - is Obama competent enough to manage this complex issue? Obama, being a person who has never run a business and that he is a socialist, does not give me confidence that he knows what he is talking about and that he is exposing populist rhetoric that will damage our tax base in the long run.

In a weird way Obama is SUPPORTING capitalism, in an international economy he will test national loyalty to profits. I bet on profits. As an individual I have loyalty to the USA, but as a capitalist I don't expect corporate entities to have such loyalty, as an investor I want corporations to focus on making me money.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Baraka_Guru

If Obama is a socialist who hates capitalism, then why is he trying so hard to prop it up?

Closing loopholes such as these does many things. For one, it helps separate those companies who are actually in the business of finding, serving, and keeping customers from those who are blinded by the profit chase.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

ratbastid

You failed your poli-sci final, didn't you?

pan6467

This is true. If Obama truly goes through with this and it's just not lip service or he allows loopholes that get taken advantage of, I may rethink my opinion of him.

I have stated elsewhere that I believe the US should tax companies doing business here and enforce the same workers rights and federal regulations on companies overseas that do business here. This could be the start.

And before someone says that's "socialism".... no, because A) you do not have to do business in our country, B) it helps prevent companies from taking jobs from our country for cheaper labor and giving them to countries with no civil rights, workers living in squalor and child labor and C) it helps show that Capitalism and the free market (with some regulation) works better than any other system for ALL PEOPLES. This would increase a middle class and raise the standard of living in many countries thus opening more markets thus providing more profit in the long run.

The problem with that as a middle class grows so will demand for civil rights and so will the demand for government to be more responsive and responsible to the people. This will cause problems in China, India, the Middle East, Thailand, Mexico and so on. These countries will either refuse to do business here because of the above US mandates or they will have to change their governmental and class systems.

To allow what is happening to continue shows the US to be hypocritical in that we say our way is the best way, Capitalism and the free market are great.... but we're ok with buying products from people with no rights, living in squalor and having children work in sweatshops... just so long as it is not in our backyards.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

FuglyStick

If nothing else, it may provide the incentive for those businesses to keep those jobs in the US, even if the tax generated is nominal.

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roachboy

unless nation-states want to find themselves entirely impotent before capital flows that they imagine are like water, they have to start going after stuff like this. whether the obama administration can deal with the whining from the corporate sector and their political allies is at this point up in the air--but the move to clamp down on this kind of officially sanctioned tax evasion is global, so it's really just a matter of time.

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

Cynosure

That's from the same political rhetoric book as "trickle-down economics", isn't it?

aceventura3

I think a person can be a socialist and not hate capitalism.

but that aside, I think Obama is confused. Not in the way that would imply he lacks intelligence, but in the way that his positions on issues lack clarity. He tries to hard to try to be everything to everyone. so we end up with half assed positions. It seems to me that by nature he is a socialist, but he often tries to pretend that he is not. I am a capitalist and I have no shame with that. If Obama is a socialist why isn't he o.k. with it?

To be clear corporations pass increased costs on to consumers. If a company like Intel is using the Cayman Islands as a base for one of its subsidiary companies in order to reduce costs and to remain competitive with international competition, and then they are faced with increased costs what are the posible outcomes?

One possibility, they become less competitive and loose market share. They make less profits, invest less in R&D, employ fewer people, and pay less in taxes to the US.

---------- Post added at 04:34 PM ---------- Previous post was at 04:34 PM ----------

No.

---------- Post added at 04:40 PM ---------- Previous post was at 04:34 PM ----------

No matter how you cut it up in the end, people pay taxes. Corporations may be the conduit, but the costs will be passed on to consumers. In my view I think we would want US based companies with US shareholders/stakeholders (paying taxes on the income passed on to them) to be as strong and as competitive as possible making the US taxpayer able to support paying US taxes as US citizens.

---------- Post added at 04:43 PM ---------- Previous post was at 04:40 PM ----------

Often the reason a company has an offshore entity is because they generate offshore income and reinvest some of that income in their growth offshore. To suggest that a company like Coca-cola is unpatriotic because they have offshore companies and employ people in other countries seems wrong in my view.

---------- Post added at 04:45 PM ---------- Previous post was at 04:43 PM ----------

Sort of. Remember some person or entity has to be making some good coin if they are going to hire people and pay livable wages.

---------- Post added at 04:48 PM ---------- Previous post was at 04:45 PM ----------

Yea, countries like France are licking their chops wanting to see US based companies become weakened or to choose to put their capital in France. In a country like France the tide is turning back to becoming more corporate friendly. They have seen the damage that making corporations the enemy can cause.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

shakran

Don't make shit up. He is not a socialist. Stop parroting Limbaugh.

To the issue:

In my opinion the "multinational corporations," by which it is meant "corporations which enjoy the benefits of being in the US while also enjoying the benefits of exploiting cheap labor overseas to the detriment of our workers" need to have an outsource tax. Saved 700 million by outsourcing our jobs to India? Guess how much your tax bill just went up.

Rekna

If the companies pass the increases down to the consumers then the consumers can just purchase from their competition that didn't abuse the tax system to evade paying taxes. Also closing these loopholes will likely make it more expensive to outsource work which will bring jobs to the US. I'm for that.

shakran

Exactly. The thinking seems to be that anything that gets in the way of corporations making higher and higher profits is a bad thing. That's just silly. Corporations survived for almost 200 years before the outsourcing trend began. They can do it again. The CEO will have to content himself with choosing between a mega yacht and a mansion every year, instead of buying both.

Seaver

I am in complete support of Obama in this regard.

__________________
"Smite the rocks with the rod of knowledge, and fountains of unstinted wealth will gush forth." - Ashbel Smith as he laid the first cornerstone of the University of Texas

Willravel

Welcome to the liberal side of the force.

aceventura3

I am a capitalist and Obama is not a capitalist in the classical definition of the term. Obama believes government is the only answer to problems in the market, no capitalist would agree with that. If Obama is not a capitalist, what is he? And why is he unwilling to say what he is? Why is he not proud of what he is?

$0

There are many reasons why a company may outsource jobs. In the situation you mention, perhaps we can look at the specifics and get a better understanding of what happened. Corporations don't have the motivation to hurt American workers, however, they may have a motivation to maximize ROI (return on investment) and if it is cost effective to outsource jobs it is going to be done (remember capital will flow like water to lowest levels). the responsibility of 'American workers' is to add greater value so that it is not cost effective to outsource. Asking Uncle Sam to 'force' companies not to outsource has risks and will end up costing the consumer (workers are consumers too) so the the net benefit is zero at best.

---------- Post added at 05:23 PM ---------- Previous post was at 05:16 PM ----------

You call it abuse and evading taxes, but many of these companies are directly competing with international companies being subsidized by their governments or who may have lower tax rates. How do you expect GM to compete with Chinese auto companies, if they can't outsource and if the capital they use to compete faces a 35% tax rate when a Chinese company may be getting a subsidy (effectively paying less than 0% in taxes relative to foreign competition).

I think Obama's simplistic rhetoric is harmful and fails to take into consideration the complexities of our international economy. It is more than being about jobs and tax rates, we need US companies to be competitive on an international basis.


How about getting the folks in Obama's administration to simply pay the taxes they owe? That would be a good start.

---------- Post added at 05:32 PM ---------- Previous post was at 05:23 PM ----------

[quote=shakran;2633085]Exactly. The thinking seems to be that anything that gets in the way of corporations making higher and higher profits is a bad thing. That's just silly. [quote]

Let's be real. Corporations either reinvest profits (eventually) or they pay out those profits to shareholders/stakeholders. These shareholders/stakeholders pay taxes on that money. This is about American people benefiting from strong American corporations. Weaken our means of production (or means of generating wealth) from corporations and you hurt American people.

You are kidding, right? Importing and exporting goods and services from one place to another dates back to the dawn of agriculture. Importing goods and service is the equal to outsourcing. In either case you send capital or resources somewhere else in exchange for something else.

the US doesn't have enough people for all of our production needs, in our economy some jobs have to be outsourced.

---------- Post added at 05:35 PM ---------- Previous post was at 05:32 PM ----------

I moved my business out of California because of taxes among a few other reasons. If you look at some statistics of the number of companies that have left California or have expanded outside of California you may change your mind. I would hate to see some major US corporations reincorporate and move their operations overseas.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

flstf

He seems to be a typical modern American polititian who's core beliefs and positions are very close to most other Democrats and Republicans. The government screw ups and bail outs are the result of both parties actions and inaction.

aceventura3

Obama is nationalizing our largest banks. Given those banks a competitive advantage over over small banks. In essence competition is being severely restricted in the market, over time ther will be less and less competition as the big banks buy up the small ones and the government will have controlling ownership, regulatory control, and the power of legislation to dictate or mandate what the banks do. that ain't capitalism, that is socialism.

He is doing the same in the Auto industry. Socialism

He wants to do the same in healthcare. Socialism

He wants to do the same in energy. Socialism

He wants to do the same in education. Socialism

Etc.

Etc.

Etc.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

shakran

The alternative being to scrap the free market entirely and devolve into pure socialism. Which Obama is trying to prevent. So how does that make him a socialist again?

That's rather like saying "if an animal is not a bird, then it MUST therefore be a fish." It's an uninformed and narrow statement that requires a very large set of blinders to say with a straight face. You managed to take it even further by trying to convince us that a sparrow is, in fact, not a bird.

For the same reason he doesn't run around specifically answering every drooling slackjawed GED hopeful who accuses him of being a muslim.





Cheap shot, and it's not even true. Try again.

That is a huge steaming pile of crap. Corporations escape taxes through a myriad of loopholes, and then "reinvest" in the corporation by hiring little girls in China to make their products for 2 cents an hour while spending several million renovating the CEO's bathroom. That is not helping the American people. It's furthering the incessant march toward serfdom.




Is unemployment at 0%? Then your logic is seriously flawed.

Baraka_Guru

A pure market economy is just as believable and sustainable as a pure communist or pure socialist economy.

Obama is not a socialist merely because he employs socialist techniques. Even conservatives use socialist techniques.

You want to run a nation effectively? Learn how to manage a mixed economy. Anything else is a recipe for disaster.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

Willravel

Bailouts aren't the same thing as nationalization, Ace. Nationalization of industries might be in the same zip code as "socialism" but bailouts aren't anything of the sort. Baili-outs are artificial capitalism and corporatism, not socialism. If Obama were nationalizing the banks, he'd be laying off the upper management and be replacing them with a government agency. He's not. We've giving the existing, free market companies money as an investment. There's a massive difference between the two.

BTW, if the market can't compete with the government in certain regards, isn't it in accordance with capitalist theory that the government, as the most efficient competitor, take the reigns in those regards? I'll give you a hint, the answer is yes.

aceventura3

In China there is a booming economy and a growing middle class because of their moves towards a more free and open economy.

---------- Post added at 07:22 PM ---------- Previous post was at 07:16 PM ----------

It is not clear to me what you would consider a socialist. I think the moves the Obama administration are clearly socialism. And, I would prefer that people simply be honest about what they are, I agree that there are degrees of separation on this topic, but at some point it becomes clear what a person truly is. I am just surprised by the degree at which Obama and his defenders pretend to hide from what he really is. On a scale of 1-10 with one being to pure free market capitalist and 10 being a pure socialist, I am about a 2 and I would put Obama at about 7. How would you rank yourself and Obama?

---------- Post added at 07:27 PM ---------- Previous post was at 07:22 PM ----------

It is interesting but I have been seeing some interviews of Ariana Huffington, I rarely agree with her, but on this issue (perhaps for different reasons) we agree, there is a concept of, and she used the term this morning, "creative destruction". I think that was well put, and in capitalism that concepts strengthens the overall market in the long-run. Bailouts or whatever we want to call them are short-term fixes that will be costly in time.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Baraka_Guru

They are essentially a mixed economy.

This is a good question, and a valid concern. The numbering system you have here is a bit arbitrary, however. I don't think Obama is anywhere near a 7. China would be closer to 7 than Obama. Obama, in all likelihood, could be anywhere down to a 4 or 3. It's hard to tell because we only know him with one economic, political, and social situation: his first 100 days are barely past. If Soviet Russia is a 10 on socialism, and some point in America's history it was 1 (neither of which were exactly pure), then I'd put myself at about a 4...which I think would be around where Canada is. Again, however, I'll point out that this is a bit arbitrary.

I'll say this: Obama is trying to fix a fairly big problem. He is using socialized programs, etc., to attempt to lessen the blow of an otherwise horrific economic turbulence. It might simply result in putting back in place what was removed from previous administrations: regulation, laws, controls, checks & balances...the kind of thing you see in mixed economies such as Canada. You know, one of those nations who aren't in deep crisis mode due to certain stabilizing factors.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

Rekna

The easy way to protect US companies from cheap overseas labor & products is a tariff.

aceventura3

Using a logarithmic or geometric scale? Just kidding That a fair answer, given the question.

---------- Post added at 07:47 PM ---------- Previous post was at 07:46 PM ----------

What about protecting the consumer?

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Rekna

If a consumer doesn't have a job they don't care about the cheap alternatives. You can't have it both ways. You either outsource the work and get cheaper products or you keep the work here but have more expensive products. As long as outsourcing is viable because of 3rd world labor this will be true. In the end it comes down to finding a balance between jobs and costs of goods.

For example a tariff on work produced with labor that doesn't meet certain pay/safety standards could be used to lower the tax rates for companies that do follow those standards.

shakran

And they're turning out cheap crap, poisoned food, and lead-tainted toys in order to achieve their wealth. China is hardly the role model we should be aspiring to.

Oh, and they also have a nice influx of money from US corporations who are hiring their people instead of ours. Brilliant.

I'm awfully tired of people calling Obama a socialist, because he isn't, and I'm also tired of people acting as though public support of the commons is a bad thing. It isn't. But if you think it is, I expect you to send me a refund for my share of the highways that you drive on, because by god, I'm not paying for you to enjoy socialism.

Baraka_Guru

Yeah, and the U.S. is the pinnacle of corporate ethics. You really are pointing out the worst of the worst, while skipping over everything else.

I'm not suggesting that China /is/ a role model for anything, but at least they understand the value of economic dynamism and innovation, despite their traditional political leanings. In many ways, there are parallels to Russia.

Neither China nor Russia have respectable reputations when it comes to their economies, but what they do have is a track record of moving from tough communist restrictions to a globalized economic structure. And they've done so reasonably well. You have to give them that. Give them time, and you just might see less of the horrible things you mentioned.

And about labour: this isn't China's fault. There are many factors leading to this. America has to let go of the fact that their manufacturing isn't going to return to its former glory. Times change.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

shakran

When did I ever say that? The Nixon defense is no reason for us to aspire to be like China, which I know you didn't suggest, but Ace seems to have.

When I see less of the horrible things I mentioned, I'll give them that. Until then, hell, anyone can screw people over.

No, it isn't. It's ours. We should never have allowed outsourcing to happen.

It has to. Period. A country that doesn't make anything is relying on everyone else wanting to move little pieces of colored paper around for their economy to survive. That's a piss poor foundation on which to build a financial system.

The_Dunedan

A Question, directed at those who insist that Mr. Obama is not a Socialist:

If Socialism may be understood as an economic system wherein the Means Of Production (both Capital and Material) are controlled by the State (or in some understandings by Worker's Unions)

and

Mr. Obama's Gov't has been systematically either gaining control of the Means Of Production (both Capital and Material; buying up shares of banks, automobile firms, investment groups, insurance companies, etc) or handing control of such Means over to Unions (such as the UAW coming into ownership of 55% of a major automobile manufacturer, Chrysler, in a Gov't-mandated "deal"),


How are Mr. Obama's policies -not- Socialist? How is Mr. Obama -not- a Socialist when he is enacting programmes which are, on their face and by the Socialist's own definition, Socialist? The Majority Shareholder controls the company (ie the UAW now controls, or owns, Chrysler). Government ownership of a company, to whatever degree, -is- nationalization of that company to whatever degree the Gov't owns shares therein.

How, then, are these programmes and this president not Socialist? I'd really like to understand, because from where I sit (me and plenty more folks just as well-read and well-educated, moreso in many cases) it looks, walks, quacks, and smells like Socialism.

Seaver

You still won't get any reparations out of me

__________________
"Smite the rocks with the rod of knowledge, and fountains of unstinted wealth will gush forth." - Ashbel Smith as he laid the first cornerstone of the University of Texas

Baraka_Guru

I didn't suggest you did. I was merely pointing it out as a comparison. China has far more new to its economy than America does at the moment, and so you're going to get growing pains.

Agreed. But, let's not paint everyone with the same brush.

I disagree. You honestly think outsourcing should have been made illegal and/or ruinously expensive? Wow, how isolationist of you. What is your opinion on other factors of global trade?

Not true. There are economic systems based heavily on services and other industries that do just fine (economically). How strong is Saudi Arabia's manufacturing compared to oil and services? Not everyone can nor needs to make a lot of shit to succeed. You need to make use of what resources you have and move your economy to where the demand is. You need to innovate. You need to be flexible. You need to change rather than try hopelessly to bring a dead horse back to life. What happens when other economies steal your jobs and grow as a result? Their demand patterns shift, and they won't likely be able to fulfill them on their own. Find out what those other things are and offer them. In the case of North America, this is increasingly knowledge, technology, and services. There is much growth in domestic services as well.

---------- Post added at 06:29 PM ---------- Previous post was at 06:25 PM ----------

Much of what I would suggest as answers lies here: Mixed economy - Wikipedia, the free encyclopedia

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

Derwood

calling our economic system purely capitalist or purely socialist is silly. there are many systems in place that "hamper" pure capitalism, and we aren't even in the team photo with socialism right now

ratbastid

I prefer to think of those systems as generally "helping" pure capitalism. Or perhaps "compensating for the staggering weakness of pure capitalism to serve the needs of the general public".

But you're right that they soften the pureness of pure capitalism.

Baraka_Guru

Pure laissez-faire capitalism has never existed.

Capitalism has proven to work, but it needs to be humanized or it will come crashing down.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

Derwood

If "pure" capitalism is defined as "making as much return on your investment as possible", then things like OSHA, the EPA and Minimum Wage are all systems that hamper it. I'm not sure many would argue that those are bad things

Infinite_Loser

A fair number of companies would.

__________________
I believe in equality; Everyone is equally inferior to me.

Derwood

which is exactly why those systems are in place

Willravel

Soon you'll be weight down by a metric ton of white guilt! Muhahahaha!!!