16 replies on “Jeff Sachs: Stop this Race to the Bottom on Corporate Tax”
Folks might also be interested in yesterday’s CBS transmission of “60 Minutes” which took a look at Ireland’s corporate tax arrangements (and those of other countries) and the impact we have on US companies that choose to relocate outside the US. Clearly we are a “tax haven” in CBS’s view.
The programme reminds us that it is not just the grabby Germans (fronted by the French) that want us to change our tax rates.
Thanks Jeff. Move us to the middle of the North American continental landmass, why don’t you, then we’ll talk about fairness and unfairness.
One wonders whether Jeffrey would have chosen to upbraid France, rather than Ireland, had he bothered to find out whose effective corporate taxes are actually lower.
Then again, Ireland is smaller, and we all know that bullies prefer to attack weak targets.
If American politics is owned by rich people, which is debatable, then perhaps he should campaign to fix American politics, rather than to cripple peripheral European economies.
Much that I agree with here.
@John McHale
Time to update your website on this blog to your neu er nuig one (-; ….
Let’s not forget the banking cartel: socialism for the rich, one-way bets, privatized gains and socialized losses. Playing Canute to globalization only diverts attention from where the real problem lies. End the Fed – and the ECB!
A well-written and persuasively argued op-ed piece, but the configuration of political forces required to give substance to his recommendations is totally awry. Obama is beseiged in the White House by the Neocons and their ‘useful idiot’ Tea Partiers; progressive Democrats are being forced to defend indefensible public sector baronies; and liberal centrists are prey to the wiles and snares of the Neocons. It is even worse in Europe. Previously dominant centre-right parties are struggling to hold back a populist, nationalistic, xenophobic tide (which is also eroding core left-of-centre support); left-of-centre parties are in the same bind as progressive Democrats in the US; liberal centrists are repelled by left-of-centre out-dated ideological baggage and attracted by the siren songs of the Neocons; and the woolly-brained Greens are riding on the post-Fukushima surge.
There seems to be no potential for the emergence of the progressive-centre/left-of-centre plurality that secured post-war economic governance in the developed economies until the mid-’70s. The rise since then to almost total dominance of the Neocons and of the top layer of capitalism seems complete and almost unassailable. We are forced to look to North Africa and the Middle East to see effective popular democratic demand for responsive, responsible governance, the rule of law, liberty and dignity, economic equity and social justice.
There is no substance in that Sachs article of any note.
Tax competition performs the same function between governments as price competition does between companies, i.e. it forces them to make the most of the resources available to them. Fixing the market for tax will lead to [more] inefficiency. The same argument holds true against the CCCTB / harmonised EU tax rates.
GE chief Jeff Immelt is head of President Obama’s competitiveness council.
This from the NYT last week:
General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress. company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
Micheal Hennigan
Exactly the big issue on corporate tax is not the corporate Tax rate it is the corporate tax rate paid by MNC’s.
Small and medium size businesses all over the world can only dream of the tax incentives and other large incentives these guys enjoy.
And what do the ones in Ireland do with these profits once they have creamed of a fair chunk for executive bonuses? They leave them sitting in the IFSC in order to avoid repatriation tax to the US.
Here is a question, where would have been a very safe place to invest these profits while sitting Idle in the IFSC? Government Bonds perhaps?
I admire this article’s spirit of social justice for the majority (and yes those Scandanavians seem to have got something right in their welfare systems, despite being a tad bit boring 🙂 ).
However, I think Sachs is way too idealist in his view that the EU-27 (or OECD countries) should uniformly co-ordinate fiscal and more specifically corporate tax rate systems to save us from such economic injustice and tyranny of the hegemony of global corporations. To prevent the latter, I think Prof Sachs is over-prescriptive and somewhat naive in this view that the OECD should asap:
‘convene a meeting of finance ministers to enunciate basic principles of budget fairness: that fiscal adjustments towards budget balance are needed for medium-term solvency but must be carried out in a fair way; that the basic needs of citizens need to be protected in this period of fiscal stringency; that recent trends towards unprecedented inequalities of wealth and income require increased, not decreased, taxation of higher incomes, including corporate profits; and that tax and regulatory co-ordination across countries are vital to prevent a ruinous fiscal race to the bottom’.
I think perhaps a tad too idealist … or maybe its me who is in my expectation ..?
@Jillian,
I don’t think Sachs is too idealist; nor do I think you are in your expectation. We need more people to believe in what is possible. We have been here before. Sachs’s apparent idealism is solidly grounded in historical experience. The post-war economic order (both domestically and internationally among the developed economies) was driven by the progressive consensus forged by FDR in the US, the Atlantic Charter and the Bretton Woods Agreements, the enormous contributions of Beveridge and Keynes, the far-sightedeness of the Marshall Plan, the emergence of Butskellism in the UK, and the vision based on competiition, co-operation and solidarity of Monnet, Schumann, Spaak and Spinelli that has become the EU.
But, inevitably and not surprisingly, it broke down under internal and external pressures in the 1970s. Keynes naively believed that governments would manage demand responsibly in the short run; and all would be well in the long run. But governments, subject to popular pressures to do more and more, failed. Keynes might have won the argument in the short run; but in the long run Hayek won out.
The last 30 years from the late ’70s have seen the establishment, advance, dominance and disintegration of the reaction to Keynesian demand management and, more importantly, to a liberal, progressive consensus. The cycle of history is turning again, but it seems that the torch has been passed to the peoples of North Africa and the Middle East.
@Paul,
Well said and thanks for nice synopsis!
“The last 30 years from the late ’70s have seen the establishment, advance, dominance and disintegration of the reaction to Keynesian demand management and, more importantly, to a liberal, progressive consensus. The cycle of history is turning again, but it seems that the torch has been passed to the peoples of North Africa and the Middle East”
I am sorry but that is absolutely wrong. There has been no torch passing. Throughout that time you speak of there has been a singular class of people who have continued to prosper throughout, while more and more are pushed to the margins. They are still profiting off the situation unfolding in the MENA countries. Follow the money and the truth will reveal itself.
Has the last three years taught us nothing?
@roanpeter,
I beleive that the Neocon ascendancy has taken a hit and is struugling to reassert its hegemony. The liberal, progressive consensus is fatally fractured. Those on the left are in an ideological time-warp or seeking to defend the indefensible; those in the liberal centre are prey to the wiles and snares of the neocons; and both are losing support to the woolly-brained Greens and to populist, nationalistic, zenophobic parties.
The biggest challenge facing countries emerging from tyranny is to establish competing political blocs formed along social and economic lines. I agree that the Neocons will seek to subvert this and restablish their hegemony in these polities. I can only hope they will fail as we in the EU seem to have lost the ability to organise politically to defeat them.
16 replies on “Jeff Sachs: Stop this Race to the Bottom on Corporate Tax”
Folks might also be interested in yesterday’s CBS transmission of “60 Minutes” which took a look at Ireland’s corporate tax arrangements (and those of other countries) and the impact we have on US companies that choose to relocate outside the US. Clearly we are a “tax haven” in CBS’s view.
The programme reminds us that it is not just the grabby Germans (fronted by the French) that want us to change our tax rates.
http://www.cbsnews.com/stories/2011/03/27/60minutes/main20046867.shtml
Thanks Jeff. Move us to the middle of the North American continental landmass, why don’t you, then we’ll talk about fairness and unfairness.
One wonders whether Jeffrey would have chosen to upbraid France, rather than Ireland, had he bothered to find out whose effective corporate taxes are actually lower.
Then again, Ireland is smaller, and we all know that bullies prefer to attack weak targets.
If American politics is owned by rich people, which is debatable, then perhaps he should campaign to fix American politics, rather than to cripple peripheral European economies.
Much that I agree with here.
@John McHale
Time to update your website on this blog to your neu er nuig one (-; ….
Website
http://web.business.queensu.ca/faculty/jmchale/index.php
Let’s not forget the banking cartel: socialism for the rich, one-way bets, privatized gains and socialized losses. Playing Canute to globalization only diverts attention from where the real problem lies. End the Fed – and the ECB!
A well-written and persuasively argued op-ed piece, but the configuration of political forces required to give substance to his recommendations is totally awry. Obama is beseiged in the White House by the Neocons and their ‘useful idiot’ Tea Partiers; progressive Democrats are being forced to defend indefensible public sector baronies; and liberal centrists are prey to the wiles and snares of the Neocons. It is even worse in Europe. Previously dominant centre-right parties are struggling to hold back a populist, nationalistic, xenophobic tide (which is also eroding core left-of-centre support); left-of-centre parties are in the same bind as progressive Democrats in the US; liberal centrists are repelled by left-of-centre out-dated ideological baggage and attracted by the siren songs of the Neocons; and the woolly-brained Greens are riding on the post-Fukushima surge.
There seems to be no potential for the emergence of the progressive-centre/left-of-centre plurality that secured post-war economic governance in the developed economies until the mid-’70s. The rise since then to almost total dominance of the Neocons and of the top layer of capitalism seems complete and almost unassailable. We are forced to look to North Africa and the Middle East to see effective popular democratic demand for responsive, responsible governance, the rule of law, liberty and dignity, economic equity and social justice.
There is no substance in that Sachs article of any note.
Tax competition performs the same function between governments as price competition does between companies, i.e. it forces them to make the most of the resources available to them. Fixing the market for tax will lead to [more] inefficiency. The same argument holds true against the CCCTB / harmonised EU tax rates.
GE chief Jeff Immelt is head of President Obama’s competitiveness council.
This from the NYT last week:
General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress. company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
Micheal Hennigan
Exactly the big issue on corporate tax is not the corporate Tax rate it is the corporate tax rate paid by MNC’s.
Small and medium size businesses all over the world can only dream of the tax incentives and other large incentives these guys enjoy.
And what do the ones in Ireland do with these profits once they have creamed of a fair chunk for executive bonuses? They leave them sitting in the IFSC in order to avoid repatriation tax to the US.
Here is a question, where would have been a very safe place to invest these profits while sitting Idle in the IFSC? Government Bonds perhaps?
I admire this article’s spirit of social justice for the majority (and yes those Scandanavians seem to have got something right in their welfare systems, despite being a tad bit boring 🙂 ).
However, I think Sachs is way too idealist in his view that the EU-27 (or OECD countries) should uniformly co-ordinate fiscal and more specifically corporate tax rate systems to save us from such economic injustice and tyranny of the hegemony of global corporations. To prevent the latter, I think Prof Sachs is over-prescriptive and somewhat naive in this view that the OECD should asap:
‘convene a meeting of finance ministers to enunciate basic principles of budget fairness: that fiscal adjustments towards budget balance are needed for medium-term solvency but must be carried out in a fair way; that the basic needs of citizens need to be protected in this period of fiscal stringency; that recent trends towards unprecedented inequalities of wealth and income require increased, not decreased, taxation of higher incomes, including corporate profits; and that tax and regulatory co-ordination across countries are vital to prevent a ruinous fiscal race to the bottom’.
I think perhaps a tad too idealist … or maybe its me who is in my expectation ..?
@Jillian,
I don’t think Sachs is too idealist; nor do I think you are in your expectation. We need more people to believe in what is possible. We have been here before. Sachs’s apparent idealism is solidly grounded in historical experience. The post-war economic order (both domestically and internationally among the developed economies) was driven by the progressive consensus forged by FDR in the US, the Atlantic Charter and the Bretton Woods Agreements, the enormous contributions of Beveridge and Keynes, the far-sightedeness of the Marshall Plan, the emergence of Butskellism in the UK, and the vision based on competiition, co-operation and solidarity of Monnet, Schumann, Spaak and Spinelli that has become the EU.
But, inevitably and not surprisingly, it broke down under internal and external pressures in the 1970s. Keynes naively believed that governments would manage demand responsibly in the short run; and all would be well in the long run. But governments, subject to popular pressures to do more and more, failed. Keynes might have won the argument in the short run; but in the long run Hayek won out.
The last 30 years from the late ’70s have seen the establishment, advance, dominance and disintegration of the reaction to Keynesian demand management and, more importantly, to a liberal, progressive consensus. The cycle of history is turning again, but it seems that the torch has been passed to the peoples of North Africa and the Middle East.
@Paul,
Well said and thanks for nice synopsis!
“The last 30 years from the late ’70s have seen the establishment, advance, dominance and disintegration of the reaction to Keynesian demand management and, more importantly, to a liberal, progressive consensus. The cycle of history is turning again, but it seems that the torch has been passed to the peoples of North Africa and the Middle East”
I am sorry but that is absolutely wrong. There has been no torch passing. Throughout that time you speak of there has been a singular class of people who have continued to prosper throughout, while more and more are pushed to the margins. They are still profiting off the situation unfolding in the MENA countries. Follow the money and the truth will reveal itself.
Has the last three years taught us nothing?
@roanpeter,
I beleive that the Neocon ascendancy has taken a hit and is struugling to reassert its hegemony. The liberal, progressive consensus is fatally fractured. Those on the left are in an ideological time-warp or seeking to defend the indefensible; those in the liberal centre are prey to the wiles and snares of the neocons; and both are losing support to the woolly-brained Greens and to populist, nationalistic, zenophobic parties.
The biggest challenge facing countries emerging from tyranny is to establish competing political blocs formed along social and economic lines. I agree that the Neocons will seek to subvert this and restablish their hegemony in these polities. I can only hope they will fail as we in the EU seem to have lost the ability to organise politically to defeat them.