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Attention US government. You're not very bright. By having a high corporate tax rate, you are pushing jobs, profits, patents, executives, research, and operations of US companies overseas. (And, as an aside to all you state governments, businesses will leave your states if tax rates are too high. Duh.)

Yes, government is in bed with many big businesses. But not all. There are plenty of American companies that want to stay in the US and bring $1.2 trillion home but have limited motivation to do so in a country that coercively takes more than one-third of what they earn. The government is losing billions in tax revenues specifically because they are keeping the tax rate so high. High tax rates are also resulting in lost jobs that idle Americans desperately want. And, to top it all off, if you're of the mindset that fiscal policy should be to maximize government revenue, the higher you make the tax rate, the less in taxes you will receive.

Fact: lower corporate taxes lead to economic growth. As Murray Rothbard said, "[c]uring deficits by raising taxes is equivalent to curing someone's bronchitis by shooting him." And WOW! Even the academic elites from Harvard to the University of Chicago to the London School of Economics can no longer ignore the empirical evidence that reducing taxes is the only way out. "If this consensus holds, it will mark a turning point in economic history." (Of course, Paul Krugman still doesn't get it.)

Do you agree with these premises? Why or why not? Is there a moral argument to be made for tax havens? Do you, personally, have a moral imperative to pay more taxes than you do now? If your conscience doesn't lead you to pay more in taxes, why should companies? Should companies be more "generous" when it comes to taxation than individuals? What would you advise the US government to do?


Our government is in knots over ways to lower the federal budget deficit. Well, what if we told you we found a pot of money - over $60 billion a year - that could be used to help out?

That bundle is tax money not coming in to the IRS from American corporations. One major way they avoid paying the tax man is by parking their profits overseas. They'll tell you they're forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move their businesses out of the country...

"You have a proposed legislation that a company will be taxed not based on where they file some pieces of paper, but where their decision makers and management actually resides and makes decisions," [60 Minutes" correspondent Lesley] Stahl remarked.

"Let them pay the same way that other Houston-based companies pay. And so if they have their management and control are there, they ought to be paying here in the United States. I think it's fair," [Texas Democratic Congressman Lloyd] Doggett argued.

We found that faced with the mere threat of Doggett's legislation, Transocean and Weatherford both recently packed up their top brass and shipped them to Geneva.

We were told Transocean's top ten executives live in the Geneva area, and work on the top two floors of a Geneva office building - everyone from the CEO to the chief financial officer, to the vice president of taxes.

They wouldn't talk to us on camera, and neither would Weatherford. They also moved their CEO and CFO to Geneva. And so now we're beginning to see a jobs exodus from the U.S. of top management...

Congress tried to put a stop to that with a law passed in 2004, mandating that any company that wanted to move offshore would still have to pay the 35 percent. But because of loopholes in the tax code, companies can substantially lower their taxes by moving chunks of their businesses to their foreign subsidiaries...

"I think many companies in the U.S. would like to keep the jobs in the U.S. if they could, but they also need to keep their shareholders happy. And they are in the U.S. in a corporate tax nightmare because it's the highest tax rate in the world," [Swiss tax attorney Thierry] Boitelle explained.

With Japan slated to lower its rate in April, the U.S. will soon have the highest corporate tax rate in the developed world.

"We are dealing with a tax system that is a dinosaur," Cisco CEO John Chambers told Stahl.

One CEO who would talk to us was Chambers. Cisco is the giant high tech company headquartered in San Jose, Calif. He says our tax rate is insane. It's forcing companies into these maneuvers, especially when many other industrialized countries including Canada are busy lowering their tax rates in order to lure our companies and our jobs away.

"Every other government in the world has realized that the U.S. has it wrong. They're saying, 'I'm going to have lower taxes, period.' That's what you see all across Western Europe, that's what you see in Asia in the developed countries," Chambers said...

Economist Martin Sullivan says it's standard operating procedure for companies like Cisco. "U.S. multinationals are shifting their research facilities, shifting their manufacturing facilities, and shifting some regional headquarters into Switzerland and into Ireland. And those are massive numbers of jobs," he told Stahl.

Sullivan says Ireland taxes corporations at just a third of the U.S. rate, so no wonder the outskirts of Dublin look like Silicon Valley. Many well-known companies are all but obliged to go abroad.

"Well, if you have a 35 percent rate in the United States and, for example, a 12.5 percent rate in Ireland, there's a incentive to move your factory to Ireland," he explained.

"Six hundred American companies are in Ireland and they employ 100,000 people," Stahl pointed out. "Those are jobs that aren't here. And they moved to Ireland because of taxes."

"The U.S. Treasury in effect is subsidizing investment in Ireland," Sullivan said...

"We do what makes sense to the shareholders," Chambers said. "We go where there are incentives in countries that say, 'We want you here, we're going to give you tax advantages, and we want you to add jobs here, etc.' We can no longer in America say, 'This is how we do it, therefore you must do it.' We've gotta change, or we're going to be left behind."

...An increasingly popular way, particularly pharmaceutical and hi-tech companies like Google avoid paying the 35 percent is to shift their patents, computer code, pill formulas, even logos from their U.S. bases to their outposts in low-tax countries...

So now these companies have profits accumulating overseas in places like Zug.

If they bring the money home, it's taxed the full 35 percent. If they leave it overseas, the IRS can't touch it. In other words, the tax law all but forces companies to keep their money out of the country, indefinitely.

"We leave the money over there. I create jobs overseas; I acquire companies overseas; I build plants overseas; and I badly want to bring that money back," John Chambers told Stahl.

Chambers told Stahl Cisco has almost $40 billion overseas that could be brought back to the U.S.

The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.

A look at the world's new corporate tax havens. Lesley Stahl explains how U.S. corporations are cutting their tax bills by moving business overseas


Original posting by Braincrave Second Life staff on Mar 31, 2011 at http://www.braincrave.com/viewblog.php?id=516

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