It’s said that Duhbya’s tax policies encourage U.S. corporations to outsource jobs to foreign countries. For example, computer related jobs are now being done in Inda or by Indian companies, and many customer support operations are in the Philippines. What specific policies support this? Tax loopholes? Something else?
The major tax loophole seems to be the fact that the effective tax rate in the US is often higher than in other countries. Corporations are able to pay less taxes by shifting the production of profit and keeping the investment overseas.
It’s been that way for many years, but the issue has grown larger over time as many more foreign locations are able to manufacture products and advances in communication and technology regarding the customer service etc.
This will probably end up in GD, but here is what factcheck has to say in Kerry Blames Corporate Tax Code for Shipping Jobs Overseas:
And, of course, the larger issue is whether or not offshoring is good or bad for the economy. Without getting too political here, you will find that most economists think it is neutral or good, and very few think it is bad.
Actually 60% of domestic corporations and 70% of foreign ones doing business in the US paid no income taxes at all in the last cycle, and in fact many of both enjoy massive taxpayer subsidy. “… most corporations that actually do owe taxes pay a rate less than 5%. So when you add the corporations that pay no taxes with those that pay tiny taxes, 94% of US-controlled companies and 89% of foreign-controlled companies paid zero to 4% in taxes.” The link has its own links to back up the data.
America is less attractive than some other places for American corporations because although we’re still below the industrialized world’s standards in wages, worker rights, some environmental regulation, and other costs to the employer, we’re still a much more expensive place to do business than the Third World.
Neither major party in all honesty is doing much of anything to reverse that, which would require a tightening of laws or taxes on profit repatriation/capital flight.
Bush is bad on the issue, sure, but the Democrats even showed their commitment to turn things around by outsourcing the Michigan challenge to Nader’s ballot access signatures to India.
A good source of general info on the related issues is Rescue American Jobs .
Much as I dislike W’s program and would like to lay the outsourcing (we used to call it runaway shop) at his door; I can’t honestly blame his policies exclusively for most of it.
Capital flows to where the exploitation of labor, in a scientific sense, is at its highest. It has mostly had bipartisan support, although Republicans are more enthusi astic supportes of the process. NAFTA and WTO assist the process. Tax policy is icing on the cake.
Kerry has no serious program to deal with this problem. I think he has proposed to “review” or “study” our trade agreements. He also wants to restructure tax policy to encourage corporations not to export jobs which is positive.
Unfortunately, most people are not ideologically armed to deal with outsourcing. A lot of effort has gone into brainwashing people. Most agree that business has to be efficient and “cut costs”. This is true, but it is demonstratably not *cheaper * to ship jobs abroad and then ship the product back here instead of producing it here in the first place. It is merely more profitable, which is not the same thing.
Now everyone is thinking: Which planet does this guy live on? I can hire an engineer in India for 10K a year!!
True, but you are still requiring the services of an engineer for a year. One skilled human’s labor for one year. That is the way working people have to start measuring the worth of themselves and people around the globe: by the amount of human *effort * expended, not by the wages that corporations pay in the US vs. the third world.
Forget money for awhile and just think of the world as composed of people and the things they make, distribute and use, because that is what it really is. Make human effort or energy your standard instead of money. When a product ceases to be made here in the good 'ol USA, what happens in terms of people?
First, the factory-say it makes washing machines- which represents the labor of those who built it and its machinery is probably idle or destroyed, which means that wealth is destroyed. Incidentely, this is probably where tax policy comes in. It is a “write off”, meaning the treasury (you and I) *pays * the corporation to raze its factory and replace American workers with Chinese workers because their labor is “cheaper”. (!)
Now a new factory has to be built abroad in China or Mexico. More human effort expended added to that accumulated human effort destroyed in the old factory.
Now the new factory begins producing washing machines. Are Chinese or Mexican workers superhuman so that they can produce so much more than workers at home for the same effort? Of course not. Of course they can be forced to work long hours under terrible conditions, but that is doing two or three jobs. (This is “multitasking” in corporate-speak and is considered politive) This is extra human effort expended which, with the above costs, adds to the human costs of the product. And in the beginning, of course, they are all “trainees” which means that they probably expend *more * labor, at least iniatially, than that the now discarded workers at home.
Of course, the infrastructure of these countries is nowhere *near * as developed as is that of the US so the support services of the Chinese factroy probably require many more hours of work to keep it operating. Raw materials production probably consumes more effort as well.
Now the product is finally made and needs to come to the US; maybe some of it to the Wal-Mart of the old factory town in the midwest where the now unemployed workers are producing nothing in the shadow of their now abandoned factory. They represent an investment in education and training that doesn’t appear on anyones balance sheet. They get food stamps and the public also pays their medical expenses. Their children cannot go to college, thereby further diminising human capital. Their retirement prospects are bleak. They have no money and the town is drying up, creating more idle people. Collateral damage. Put that on the tab along with all the alchoholism, drug abuse, crime, and domestic violence produced. Think Flint or Detroit. I hear the state is building new prisons and hiring new guards. More effort indirectly connected to the cost of the Chinese washer.
But I digress.
The newly buillt Chinese washer now needs to get back here. Haul it to the coast. Build or expand dock facilities on both ends. Build ships to get it here: dragoon impoverished third world men from their homes to spend long months at sea away from their families. What is that worth in terms of human misery?
Put it on the tab, bartender, 'cause I ain’t got no money since they closed the washing machine factory. Guess I’ll just get drunk.
Damn, another digression.
Expand railroads, build trucks, more labor; employ people run them. Add up all the hours of labor required to do this and put it on the tab.
Now I ask you, which machine has cost more in terms of the only thing that really matters and that is the total effort of human beings to create material wealth and distribute it?
But wait, you say; this is simply division of labor. Surely the unemployed workers here can get jobs producing goods to exchange with Chinese workers for their washers. Sorry, but no. Chinese workers don’t receive a large enough portion of the value they produce to be able to afford any goods we may want to sell them. The two largest exports through the West Coast ports to China are waste paper and scrap metal. I guess if you have a job sorting the recycling left out at the curb, you are in clover. Have you checked out those jobs? $7 per hour, employing mostly recent immigrants from the third world.
Can you say “trade deficit”?
Corporations don’t want you to think this way. All they want you to see is how “cheap” the cornucopia of goods is at the Wal-Mart. They want you to think like them . Don’t. *These goods are not cheap! * Add it up.
What has been described above is the reason so many people are “working” and yet so many are poor. So much “work” creates no real wealth.
You may think that this way of looking at this situation is unrealistic or utopian. In fact, however, this is the way people have always thought when they had the freedom to do so. After all, you don’t go out into your back yard, dig a hole, and fill it back in and then claim that you have produced something, do you?
Or wait. If you are a “two income family” maybe you can work days digging holes in the back yard and your spouse will work swing or graveyard filling them in while you watch the kids. Now you have a claim on the net material wealth of society. After all you *have * been “working” and damn hard too.
*And * there is no commute!
Nice. A two career family.
Incidentaly, we have not even added in the almost certain extra destruction of the environment which needs to be put on the tab. What’s that worth?
How many extra cases of cancer and birth defects for humanity because of lax health and safety enforcement on the job. How many deaths from unsafe machinery. How many fingers and arms lost? Is this part of the human cost of production of the new shiny Chinese washer in that Wal-Mart which is so “cheap”?
If not, why not?
All of this so that corporations can collect the spread between what American workers are paid and what Chinese workers are paid, if you can call that “pay”; collect the difference between the cost of decent working conditions and slave labor conditions, environmental protection and none; and distribute it to their wealthy owners who *already * have mountains of loot.
We on the Straight Dope are famous for thinking outside the box and being receptive to new ways of looking at old things. See if this approach helps to make sense of the world of work.
After reviewing the above, I must apologise for posting this response in GQ. It arguably does not belong there. It just kind of evolved that way.
:smack: