In my blog of December 9, 2010, I pointed out how our capitalist society suffers from dramatic up and down cycles that rob the middle class of their wealth and earnings. I suggested 10 points that would very much moderate these cycles and bring about a far better capitalist society.
This is the 9th of that series – part III.
In part II, I discussed how governments get revenue, how tax havens work, why corporations do this, and the effect on all of us.
Our idiocy is that in the name of free enterprise, we allow multitudes of corporations that supposedly exist in tax havens and funnel most of their profits there to avoid income tax, yet in reality their presence in the tax haven consists of little more than a sign on a door and a fax machine.
Far More Serious is What Happens to These Profits (REAL MONEY) Reported in Tax Havens
What most people do not realize, is that if a corporation claims that it earns most of its profits in a tax haven, the money from those profits has to stay out of this country. If it is ever repatriated, there will be large taxes in the home jurisdiction to pay. So the answer for the corporations is quite simple. Spend the money elsewhere. Never bring it home.
This is by far the greatest harm to our economy. Money that would otherwise be used to hire people, to build buildings, to do research and development and so much else, never comes home. Instead it enriches the economies of other economies around the world.
This entire system is so destructive to our economy, that it puts a huge dent in our living standard. We creates deficits for many reasons and I am certainly not defending politicians who seem to have zero morals, and zero concern for our future generations. But if these enormous sums of money floating around the globe were repatriated, many of the financial problems that we face would be eliminated.
Eurodollars
Do you remember Eurodollars? Twenty years ago, there was an enormous amount of cash circling the globe looking for a home. Much was written about this, yet because the problem was global, few rules or regulations come into effect.
Today, that amount is enormously greater, and finds homes across the globe, but never in the country that created the business corporation.
Tax Havens v Terrorists
Tax havens are respected. Terrorists are not. It is inconceivable to me that we allow persons and companies to make profits within our borders, and yet use supposedly legal means to avoid paying their share of income tax on those profits. This is an ENORMOUS and immoral drain on our society, yet it is politely respected.
Yet terrorists who kill or threaten a few people are hunted down with ferocity. If someone is boldly robbing our society day after day, and hurting millions of people, they are terrorists also.
What to Do About This Cancer on Our Society
Firstly, start understanding the magnitude of this enormous problem.
Next, make dealing with this nonsense a top priority in international treaties and understandings. Every developed country faces the same problem. The solution has to be a concentrated joint international effort.
Next attack the tax havens seriously. Make is expensive for them to continue so that they will think twice about flouting our well being. Charge any tourist going to a tax haven country a serious surcharge so that tourism drops and the tax haven feels the effects of a loss of tourist dollar.
Create everything from embargoes, to loss of favored nation status for any country involved as a tax haven. If they take dollars and capital from us in serious amounts, and give nothing in return, there should be a price to pay.
Make every country prove that their tax rates, while individually decided, are at least at a serious level.
Make it mandatory that any corporation doing business in North America, be forced as part of their tax filing annually, to report the amount of profit reported in every jurisdiction globally, and the amount of tax paid on that income reported in every jurisdiction individually. Any corporation reporting activities in a tax haven, should be forced to pay income tax in North America at normal rates on that income (less a credit for income tax paid to other jurisdictions).
The point here is that North America is an enormous market, and corporations will think twice when they have to make the choice between abandoning doing business here, or paying their fair share, after all legitimate deductions and benefits.
Let’s Make This Silly Debate About the Debt Ceiling Really Mean Something
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