The most idiotic statement I heard the other day was from President Obama stating that these "Business Inversions" going on, were a way for business to avoid paying U.S. taxes. Show me ANY company that pays government taxes. There are NONE! The tax is added on to the price of the product and THE CONSUMER PAYS THE TAX.
Basically a corporation makes widgets at a reasonable price, or goes out of business. There are all sorts of taxes the corporation has to collect and turn into the government. If the government decides it wants 26 percent of the company’s earnings and call it taxes, so be it; it is a cost of business and is factored into the price of the final product. So when you buy a new American car, built for 20K the selling price has a 26 percent markup just for the tax --- figure $25,200 with GM’s tax added in. Then figure profit for dealer and producer and the price hits $30,000 also envision all of the car parts from suppliers paying the same government tax. And add that on to what the car company has to pay to acquire parts to produce the vehicle. When done this way, the buyer has no clue to as to what goes into his 10 percent sales tax tacked on to his purchase price— he is paying tax on taxes already paid by the auto producer and his suppliers.
The President and Congress express the need for tax reform, and big business has figured out what that means, there won’t be any. Moving your mouth is not the same as rolling up your sleeves and picking up a shovel. This country wasn’t created because of religious freedom and voting rights, it was created over unjust taxation. People were tired of paying the King of England tribute taxes with no visible benefits. Obama thinks that it is our patriotic right to pay taxes. We fought a war to fix that 200 years ago and it looks like we are facing the same problem again.
All governments are incredibly stupid when it comes to taxes. The Great Depression of the 1930’s was greatly exacerbated by municipalities using the logic; “If we raise taxes, we will increase the amount collected.” People couldn’t pay the taxes and gave the city their keys to the property. The net effect, the tax revenues collected, dropped drastically. The politicians didn’t comprehend the cause and effect of what they had done, but that mattered little, they didn’t get reelected, so there was no lesson learned. The tax rate on the rich at one time was almost 90 percent and when the government dropped it down to 20 percent, there was no change or decrease in tax receipts, the rich now had more places to invest without being penalized. Changing the rate on the rich, in no way affected the amount collected. You can be stupid and poor forever, but you can’t be rich and stupid for very long.
The cost of running a business in the USA is chasing manufacturing off shore. Taxes are only one item; there is Obamacare, Social Security, unemployment insurance, workers comp and liability from ambulance chasing lawyers.
This country was settled by people voting with their feet. Corporations are now considered people, and they seem to be voting with their feet. Why do I get the feeling that the political logic doesn’t fit here? The real question that needs to be asked, is this: Why does government need more money to fix what isn’t broken, and at the same time, need less money to fix what is broken?
Common sense suggests that if it works in the USA, it will work a hell of a lot better in another country at half the price. Why does that seem like the wrong answer, but the right conclusion?