Posts Tagged ‘taxes’

A Bigger Tax Bill For Google Helps Neither People, Nor Profits

shakedown-1It’s not uncommon to hear populist cries for companies operating under foreign subsidiaries to pay their “share” in taxes or even repatriate assets. What’s extremely rare, however, is a company’s own shareholders demanding they cough up a sizeable chunk of change to Uncle Sam. After all, such an action will ultimately decrease the company’s net asset value, thus penalizing the shareholders themselves. So who would insist on such shenanigans? A faction of Google stockholders.*

At the annual meeting of Google Inc. shareholders, several co-filers, led by the Domini Social Equity Fund, submitted a proposal requesting that the company’s board of directors “adopt a set of principles to address the impact of Google’s tax strategies on society.” Although the actual proposal states that “this is not a vote on tax reform, or how much tax Google should pay,” it goes on to list the following as grounds for the proposal itself:

  • Corporate tax avoidance threatens economic growth and innovation
  • Even if they are within the law, aggressive tax minimization approaches pose regulatory, reputational and financial risks.
  • Other companies have adopted tax policy principles.
  • Google’s tax strategy should be consistent with its stated objectives and policies on social and environmental sustainability.

The consumer group SumOfUs, whose slogan is “People not profits,” also filed an online petition seeking 150,000 signatures, claiming that Google owes $2 billion in taxes worldwide. Marginalizing the importance of the profit incentive undermines the value that Google and other businesses provide. It also overlooks the fact that these dubious profits are used to create jobs, fund research, spur innovation, and generally increase the quality of life for the “people” that SumOfUs seem so concerned about.

While the faction of Google shareholders calling for the company to pay more taxes surely believe themselves to be well intended, they couldn’t be operating further from reality. Corporate taxation itself is one the largest, if not the largest, threat to economic growth and innovation.

With the United States currently boasting one of the highest corporate income tax rates in the world, it’s easy to understand why so many companies flee American shores in search of tax shelters – one of the most basic laws of economics is that when you tax something, you’ll inevitably get less of that something.

Moreover, economist Steve Horwitz points out that a tax on a corporation is not the same as a tax on the wealthy. Individuals end up paying these corporate taxes regardless of wealth, with the working class bearing the brunt in the form of lower wages, higher priced consumer goods, and retirement portfolios of lesser value. Corporate taxes also encourage firms to waste resources on tax avoidance and utilize debt financing instead of equity as a means of decreasing tax liabilities, making the companies riskier.

Tax minimization posing regulatory, reputational, and financial risks is a dubious notion at best. Tax codes exist to subsidize an entire industry whose preoccupation is tax minimization. Google’s significant resources allow them to both comply with the law and achieve minimum tax liability. Simply because other companies, like eBay, have adopted tax policy principles and cost their shareholders billions of dollars doesn’t make it a smart maneuver. It seems as though Google shareholders have forgotten the “if everybody jumped off of a bridge” quip.

Would you toss half of your company’s annual profits off of a bridge?

But the real knee-slapping dose of irony comes in the assertion that Google’s tax strategy should be consistent with its social and environmental objectives. If the message from this faction of Google shareholders and SumOfUs is that paying taxes is somehow patriotic, perhaps it’s even more patriotic to avoid them. By insisting that Google pay more taxes to the federal government, this faction of shareholders is indeed saying that Google is in favor, or should be in favor, of:

  • Countless undeclared, open-ended wars
  • Subsidizing big business to the detriment of the little guy
  • Prosecuting a drug war that adversely affects poor minorities
  • NSA spying illegally on Americans

The list can go on for miles. Is this really the type of social and environmental construct that Google or its shareholder have such strong feelings about?

*I own Google stock and don’t want them to pay taxes, ever. In fact, I’ll be submitting a proposal to redeem every penny of tax they’ve ever paid.

This post originally appeared at The Libertarian Republic.


Let’s Not Forget How Federal Revenue Shortage Began

My post from earlier this week about big government Republicanism made it into today’s Wall Street Journal. Check it out.

The Growth of Government Since 1980

Celebrating the 30th anniversary of Milton Friedman’s Free to Choose television series, PBS is airing highlights of the series followed by relevant panel discussions. George Mason University Economist Bryan Caplan appeared on one such panel with, amongst others, former economic advisor to President Obama and current University of Chicago Economist Austan Goolsbee.

During the ensuing discussion, Goolsbee remarked that when Friedman’s series originally aired in 1980 he agreed that government was too big and intrusive; however, Goolsbee maintains that today it no longer remains the case. Yesterday, Caplan wrote that he was unable to fit a major point in during the discussion rebutting Goolsbee’s line of reasoning:

 …If Friedman was right then, he’s right now.  Check out Table 15.3.  (Update: Broken link fixed).  Federal spending as a percent of GDP in 1980: 21.7%.  In 2009: 24.7%.  Goolsbee emphasized the shift toward Social Security and health spending.  But so what?  Friedman’s critique is truer than ever.  Government continues to spends a ton of money on people who aren’t even poor.  Much of this spending – especially health care – is pure waste.  And the problem’s only going to get worse.

Goolsbee also emphasized that Social Security and Medicare enjoy strong public support.  Right he is.  So were most of the programs Friedman attacked back in 1980 – and he explicitly admitted it.  Friedman’s point then, and my point now: The public is wrong.  Indeed, the public is delusional.  It’s crazy to tax everyone to provide “free” pensions and health care for everyone.  And it’s logically impossible for benefits to permanently grow faster than GDP.

Goolsbee also argued that government growth isn’t so bad if it’s only temporary.  I wish I’d asked him, “And isn’t ‘temporary’ precisely what price controls on energy were supposed to be?  If Reagan hadn’t been elected, price controls could easily have been as long-lived as rent control in New York.”  I’m afraid the new regulations and spending that the U.S. embraced in 2008 will work the same way.  You can call them “temporary,” but unless a staunch ideological opponent somehow gets elected, the new statism here to stay.

Image via flickr user PeterGuo

Progressive Tax and Alexander Hamilton

My letter to the Sun-Sentinel on Alexander Hamilton and tax policy was published yesterday.  It only took them six weeks to print it.  Better late…

War Is Big Government at its Biggest

Over at The Atlantic, Conor Friedersdorf laments the hypocrisy of those who fear big government creep in domestic matters, yet turn the other cheek when it comes to the state waging war.  He implores Tea Party types who see Obamacare as the greatest threat to liberty and even the Obama backing left to turn their attention to how the state greatly expands its power during wartime.  Friedersdorf ably makes his case by pointing out just what policies the government has implemented over the past decade:

[W]e’ve created a new cabinet level super-agency, the Department of Homeland Security. We’ve waged foreign wars whose ultimate cost will easily reach into the trillions of dollars, all of which will be born by taxpayers. Fourth Amendment protections against government searches without due process have been significantly weakened, as has the expectation of privacy enjoyed by the average citizen. Traveling on an airplane is now deemed just cause for agents of the state to look underneath our clothes and to feel our genitals, making thousands deeply uncomfortable. The president himself now asserts that he possesses the unchecked power to put American citizens on assassination lists if he deems them to be a terrorist.

Much as I am opposed to Obamacare and the ever-expanding regulatory state, what Friedersdorf lays out above, to my mind, is a far more egregious expansion of government power.  When states wage war, they move quickly to expand and consolidate power. As Gary Chartier recently pointed out:

State actors’ perceived need to mobilize and consolidate domestic support for war leads to the implementation of repressive measures, including censorship, propaganda, torture, surveillance, and due process violations of various kinds. Not only are these troubling on their own—they also are all too likely to persist after war’s official end.

…War-making by states helps to birth all-too-intimate relationships between politicians, military leaders, and economic elites happily dependent on the money provided to pay for military equipment and other resources. The wealth siphoned off by these elites is often misspent even from the perspectives of those who favor war in principle, given the wastefulness and inefficiency of war production undertaken in tandem with the state. But it also gives them more access to and more influence over politicians, enabling them both to press for non-war-related privileges and also, and even more troublingly, to push for continued preparedness for war during peace-time and even, all too frequently, for new hostilities.

State-made wars are funded using taxes extracted from the unwilling—which ought to be troubling because nothing entitles the state to claim anyone’s resources at gunpoint.

While it may not seem like it at face value, the state’s decision to wage war permeates all aspects of society effecting both civil and economic liberties.  Now, this is not some new revelation, as James Madison succinctly put it in 1795:

Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes … known instruments for bringing the many under the domination of the few.… No nation could preserve its freedom in the midst of continual warfare.

Image via Flickr user abudoma

We All Don’t Benefit

Here is a letter to the Sun-Sentinel:

Mr. Kaufman asks, “What happened to our wonderful country?”  It’s not as simple as altering tax policy (Roll back tax codes to the good old days, August 7).  Decisions made by the federal government over time, intended or not, encourage anti-competitive behavior on several fronts.

While we benefit from education, we don’t benefit from education monopolies.  Since the inception of the federal Department of Education, we’ve spent nearly $100 billion.  And yet test scores are stagnating, people lack school choice, costs are up, and teachers’ wages remain in question.  The one-size-fits-all approach does not work for education, and we don’t all benefit from it.

Access to affordable healthcare for all would indeed be a great benefit, but we certainly don’t benefit from healthcare monopolies.  Current laws protect insurance companies from competition, facilitating perpetual cost increases, and guarantying the industry 300 million clients.  Government protectionism does not work for healthcare, and we don’t all benefit from it.

Knowing the certainty of American military protection, other industrialized nations eschew costly defense spending and instead provide their citizens with nationalized health care and pension plans through massive borrowing and taxation.  Some of these countries, like Greece, are experiencing the blowback of unsustainable promises to its citizens.  Top-down central planning does not work for retirement pensions, and we don’t all benefit from it.

Mr. Kaufman longs for the tax code of “the good old days when our country prospered;” however, taxes are a short sided distraction from the problems that we all don’t benefit from.


Craig D. Schlesinger

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