Home > Economy, Politics, Trends > America’s Turncoat Corporations: Yes On Foreign Trade; No On Tax Dodging

America’s Turncoat Corporations: Yes On Foreign Trade; No On Tax Dodging

March 29, 2011


Currently, U.S. multinationals have more than $1 trillion in profits stashed in overseas accounts.

– Fiscal Times, March 23, 2011

I received a comment in response to my post: America’s Turncoat Corporations: 600 in Ireland Avoid Taxes and Employ 100,000 Workers. James said I missed some “key facts”. Let me redress his concerns.

A U.S. multinational company is any U.S. enterprise, called the “parent,” that holds at least a 10 percent direct ownership stake in at least one foreign business enterprise, called the “affiliate.” In 2007 there were 2,202 U.S. multinational parents that controlled 24,755 majority-owned foreign affiliates.

– How U.S. Multinational Companies Strengthen the U.S. Economy

To be sure, I am for localization parallel to globalization. But, I am not an isolationist, nor do I suggest the U.S. become one. I am not against foreign trade, nor American businesses having branches in foreign countries so long as labor laws protect the workers, workers are paid fairly, there is a safe work environment, environmental regulation protects the environment, and these businesses pay their taxes in full at the current rate. The issue here is tax dodging by multinational United States corporations. The mighty 600 American companies who have gone to Ireland are doing so primarily because it is a “business friendly” country – meaning less taxes to be paid back to the United States. Annual tax losses to the United States are estimated in the billions. The Fiscal Times just reported that multinationals have $1 trillion stashed overseas. That is unacceptable.

When American businesses do not pay their tax obligations as required by law, our country suffers and its people suffer for it. First off, it’s a crime. It’s called tax fraud. Second, the tax burden shifts to the everyday worker who becomes the primary revenue source to support our government administration and all the related departments (Commerce, Defense, Education, Environment, Interior, Homeland Security, etc). Social programs are impacted. Research and development is impacted. NASA, NOAA, National Weather services all impacted. That’s just on the Federal level. State tax revenues are critical to maintaining healthy state and local economies. Bottom line: Less tax revenue means a less robust country and a weakened government. It is my government and its Constitution that guarantees my rights that I care deeply about, not capitalism, and certainly not global capitalism.

Tax dodging, as described on CBS 60 Minutes, is something I see as disloyal behavior. These companies made their bones here, in the United States. They got their opportunity here. Now that they are wealthy and successful, they are all up on their heels. They have forgotten where they came from. They have tossed aside their allegiance to their own country and their countrymen. They are skirting their obligation. Their actions are hurting this nation. It is criminal and like the Wall Street banksters, who caused the 2008 global collapse, they deserve prosecution. It is tax fraud pure and simple.

As to your idea that “market access” strengthens the U.S. – that is very arguable. We would still have market access if American companies were headquartered here and had branches over there through simple supply and demand business economics. The fact that many U.S. companies are relocating their headquarters overseas so as to skirt U.S. taxes is reveals their true motive. On the other hand, if you are suggesting that the EU or Britain grants the U.S. market access as a privilege, then that is an obstacle that can, and is addressed through trade agreements and diplomacy. I doubt that is the case, but I am throwing it out there. We have strong NATO ties and doing business between the NATO nations has a history of fifty-plus years. As an aside, perhaps the argument could be made that countries like China view market access as something to be won, or a privilege, or a bargaining chip. In that case, there are indeed real deep cultural and ideological barriers. But, that’s the game China plays and many American businesses have said yes to playing that game with China as they are hungry for more and more profits while leaving their own countrymen behind with no jobs.

And I am assuming you are from Ireland as your email looked to have that extension. How is your country doing these days? Not so good. All that tax savings by U.S. companies…it is not in your banks — it’s in Switzerland. Oh, and the Swiss are not part of the EU, nor NATO. Ireland just about lost it sovereignty this past year as it is broke and beholding to Germany who has been calling the shots in implementing the bailout loans and austerity terms. Here is the reality: the multinationals are self-interested entities. That’s what a global capitalist is – self-interested. They use foreign markets to expand, gain market share, boost profits through cheap labor, pay low taxes, operate with little regulation, and offer no allegiance to any government. That my friend, is corporatism. It is infecting countries all over the world and leading to oligarchy. And oligarchs control the capital flow. The two work hand in hand. They just as soon work in an autocracy as a democracy. Sweat shops? Hey, it goes with the territory to turn big profits. Terrorism, that appeals to the war profiteers. Droughts and storms that appeals to the futures and commodities markets. It’s all part of the “free market” game to these people.

I agree with George Soros on freemarket ideologues: “First, that they think that markets have an in-built tendency towards creating a stable situation through supply and demand being in balance, while this is not the case. Second, that they preach that the market is the best way to regulate all human activities.”

See that last part….regulating all human activities. Global capitalists and oligarchs are intent on running the world and largely do already. But they want to regulate how we live and that rubs me the wrong way. But, there is a catch.

Growth Economic and Globalization
Here is the downside of growth and globalization: it is unsustainable. It is a theory of unbridled expansion in a finite world which makes it unsustainable in the short run and in the long run. Growth economics is a theory foisted upon the U.S. public and the world. It is touted as the assumed way to go. But in less than 100 years we have seen rampant destruction of our Earth’s resources, Peak Oil, excessive greenhouse gas in our atmosphere, climate warming, and wholesale destruction of indigenous peoples, languages, and cultures. It works on consumption which is exploitative by nature and ultimately, destructive.

If globalization is so wonderful, why is U.S. poverty at 44 million? If you are stating to me that market access strengthens our country, you are unaware of the poverty level, plus the 25 million unemployed and underemployed in the U.S. The decimation of our steel industry in the 70s, the deregulation in the 80s, NAFTA in the 90s, wars for oil in the first ten years of the new century, all have contributed to failed domestic economic policy due to the outward business focus on growth and expansion, i.e. globalization.

While U.S. corporations are sitting on nearly $3 trillion here and our banks on $2 trillion, GDP was announced today as being below 3% and likely to stay there for the rest of 2011. That is because we have a jobless recovery because there is little investment. And no jobs mean no taxes – jobless people do not pay taxes. Our tax base is largely supported by the employed and businesses. With no new investment the jobless situation will remain the same. And, it seems we are entering into a stagflation stage according to one analyst today on 1070 LA Business Hour.

It is imperative that everyone pays their taxes. I refrain from using the term: “fair taxes” as that is a debate no one can win. Work, prosper, pay your taxes, support your community, state, and country. Taxes may not be fair, but that is a fair proposition.

Fact is, market access is primarily a function of business expansion and increased trade; what you call, “going both ways”. But globalization in its current form creates specific social problems such as tax dodging. Also, when I pay my local business for a haircut, they keep the money and most of it is spent locally by the owner — who themselves is an employee — for food, housing, sundries, and overhead. He may purchase supplies manufactured overseas, but the lions share remains local and in the community as a whole. That’s where I live – locally.

The entire development of globalization is not something anyone voted on. Many Americans do not like it. We like having our say in our country. Corporatism and oligarchy has crept into our country while many people were busy working, raising families, and paying their taxes. Now the next thing happening here in our states is privatization, union busting, pension raiding, attacks on financial and environmental regulation, and even public education. There is great change going on in our country that the world does not see as our news is all owned by large corporations who filter what is shown.

A few last comments:

The major policy challenge facing the United States today is not just to create jobs of any kind. Rather, it is to create high-paying private-sector jobs that can foster sustained long-term economic growth. It is U.S. multinational firms that tend to create precisely these high-paying jobs involving knowledge creation, capital investment and exporting. To climb out of the great recession to sustainable economic growth, the U.S. economy needs to create millions of the kinds of jobs that U.S. multinationals tend to create. Accordingly, U.S. economic policy on all fronts should be encouraging job growth in these important firms.

United States Business Roundtable, Spring 2009

Fiscal Times: Obama Denies Tax Holiday to Corporate Giants

Business Roundtable: How U.S. Multinational Companies Strengthen the U.S. Economy

Categories: Economy, Politics, Trends
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