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Business and tax loopholes used for corps and the ultrarich are not going to encourage them to pay employees [that much] more. It may, however, cause them to s
by harshreality 5y ago
Business and tax loopholes used for corps and the ultrarich are not going to encourage them to pay employees [that much] more. It may, however, cause them to stay in your country, right?
Countries compete for businesses. Businesses try to optimize their costs and tax bills by pulling every trick the government allows.
The government's objective is to be among the most business-friendly countries, without losing money by being too much friendlier than the next one. If a government strays too far from that, while it won't happen overnight, businesses start leaving, UHNW individuals start leaving, employees follow, and the govt has a serious problem.
It's a tricky proposition to figure out how much govt can demand from corporations before they've had enough and move. Different companies with different infrastructure and employee requirements will make that decision at different levels of annoyance. Government policy probably errs on the too-friendly-toward-business side, but it's a game of imperfect information combined with non-linear effects and a disastrous endgame if govt chooses wrong.
To some extent companies already do this, by offshoring labor or by creative accounting, figuring out how to keep significant portions of their income legally untaxed by their home country, using shell companies and, in some cases, intellectual property licensing deals to funnel the money. Much has been outsourced to Asia or Mexico on the manufacturing side, and on the financial engineering side to Ireland. Stamping that out would be a choice govt could make, but the current negative side effects of those things pales in comparison to what happens if FAANG decides to move to Brazil or India and pays enough of their critical employees to move with them that it becomes viable.
- cedilla 5y agoI think this overstates both the willingness of businesses to move and the relative importance of taxes compared to other factors on where businesses will stay. Even with a negative tax, fast fashion wouldn't produce any clothes in the US while high-tech research labs thrive in cities with high taxes and labour costs. Meanwhile, the megacorp holdings already shift earnings, profits and costs around the globe in a way that turns competition into an unwinnable race to the bottom. How could the US ever compete on tax when Ireland is willing to tax Facebook's earnings at basically 0%?
- prox 5y agoA new way of that is to introduce bills for large multi nationals who want to leave, so the move costs equal or more than it gains.
- deleted 5y ago[deleted]
- prox 5y agoTo expound, the idea being that the success of the company is tied to the country they resided in the first place. So they “owe” the country they grew up in.
- bluecalm 5y agoWhen you're at it why not extend it to everyone? We will pay you peanuts and make it impossible to leave so you don't have other options. This is known as Cuban healthcare model. It works great as long as you use guns to keep your now cheap qualified workforce in place.
- ClumsyPilot 5y agoCompanies are legal fiction created to enable eco omic growth. Why should we inagine they deserve liberties like people do? Why should companies that enable economic decline be allowed to operate?
- sparrish 5y agoAnd the country will wonder why no one starts any new businesses there.
- ddxxdd 5y agoMoving is one of many concerns. Big businesses generally have a higher elasticity of demand for many goods and services, compared to the poor and middle class. This translates to big businesses being willing and able to raise prices, lower production, lower wages, lay off workers, move overseas, or have rich executives retire early in response to government impositions. I don't quite get why you would argue that taxes don't affect wages; taxes affect the return on investment for hiring employees, so it should affect how much a company is willing to pay for someone's labor.