American Elephants

“Economic Patriotism” Is Plain Old Nonsense. by The Elephant's Child


Democrats are not happy with President Obama, and they are trying desperately to change the subject from things like ISIS, and Russia, and foreign policy in general, ObamaCare, immigration, the miserable economy, and jobs, and jobs and jobs.

Their natural inclination is to focus on those things which arouse people’s passions, so naturally they are freaking out about Burger King’s plans to merge with Tim Horton’s Canadian coffee and donut chain and move to Canada. “Economic Patriotism” they cry, and moral panic and sheer rage that an American business would consider relocating for the simple reason of paying taxes. Obviously it’s time for my favorite quote from Walter Wriston:

Capital will go where it is wanted and stay
where it is well treated. It will flee from manipulation
or onerous regulation of its value or use and no
government power can restrain it for long.

The business of business is to make a profit. Liberals always want to impose other rules on business. They are deeply suspicious of the whole idea of profits. They are outraged at CEO salaries. Proper people work in service jobs, like government, or for foundations, or righteous causes or universities. Liberals are really quite conflicted about business. They were outraged by the Citizens United decision. And even more so by Mitt Romney’s claim that corporations are just people. On the other hand, they get enthusiastic support from some businesses like Google, or Facebook, but that’s different.

The problem isn’t just that America has the highest corporate taxes in the world, but that America collects taxes on the income earned in other countries., though those other countries collect taxes as well. Because they distrust business in general, Liberals have little hesitation in finding new and better ways to tax business.

Total tax costs are 46.4% lower in Canada than in the U.S. Is it really a surprise that Burger Kind wants to move there? Burger King would still pay their full taxes on income earned in the U.S. but their taxes on income earned in Canada would be taxed at Canadian rates.

The number one issue among American voters is unsurprisingly — jobs. If you vigorously try to maximize the taxes that American businesses pay, they will hire fewer people. If you raise taxes on business, they raise the cost of the goods or services they sell, or reduce their expenses, by cutting the number of people they employ.


2 Comments so far
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The “liberal” view on such matters is not as monotheist as you make it out to be. (And outside the United States, an economic liberal is somebody who believes in the virtues of free markets; I would consider myself such a liberal.)

Perhaps you missed it, but some U.S. “liberals” — notably Robert Reich — have been actively advocating not just a reduction in corporate income tax but its complete abolition:

One can debate how to replace it (I don’t share Reich’s enthusiasm for the alternatives he proposes), but I hope it leads to some real debate in Congress about tax reform.

Just think: with no corporate tax to begin with, there would no longer be corporate tax loopholes. Armies of corporate tx accountants and tax lawyers would lose their jobs. Tax courts would be less busy. Elected representatives would lose one of their least-transparent ways to reward corporate supporters: creating tax breaks. Many forests would be sparred as copies of the U.S. Tax Code slimmed down.

Hmm. On second thought, it’s not going to happen.


Comment by Subsidy Eye

If we could just get it through people’s heads that corporations don’t really pay taxes, consumers do. The expense is just added to the cost of the goods or the services they offer. The current administration does not understand the relation between the incentives created by taxes or regulations and businesses’ ability to hire and create new jobs and expand. There is a reason why American business is sitting on large amounts of cash and robotizing as much as they can. We’ll see what comes of it. The IRS is going to have to cough up the emails.

There are, of course some liberals who understand economics and incentives and even consequences. They just don’t seem to predominate. We’re all human on both sides of the aisle, with all the flaws that acknowledges.


Comment by The Elephant's Child

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