John Kerry has referred in his recent stump speeches and debates to “Benedict Arnold” companies. He’s not always consistent about what he means – sometimes companies that move headquarters offshore , companies and CEOs who send jobs abroad, or relocate overseas.
I have some questions for Senator Kerry.
1. Are you concerned about jobs going abroad? Many jobs Americans used to do, now including computer programming and not just low-level manufacturing, are going to workers in other countries. Good for them, bad for us. Products that are cheaper to make somewhere else are going to be made there unless countries close their borders. Would you insist that all products sold here should be made here? That all countries be airtight compartments? If so, you should write yourself some more checks quick while Heinz still has “number-one or number-two branded businesses in more than 50 world markets.”
2. Are you worried about jobs being sent abroad? American companies are indeed having their products manufactured abroad and contracting for overseas labor. Would you sponsor legislation permitting only overseas-based companies to manufacture abroad while selling to US consumers?
3. Or are you really worried about companies moving their place of incorporation or headquarters to avoid U.S. or state tax? Why does this form of tax avoidance deserve the “Benedict Arnold” tag? Is it because other tax avoidance doesn’t involve leaving the jurisdiction, like Benedict himself did? But a corporation’s “move” for tax purposes is just as legalistic as any tax move, since a corporation is simply a legal entity and does not have a “real” existence in any particular place.
4. Is the real problem the whole idea of companies and individuals moving to the jurisdiction whose level of taxation and expenditures they prefer? Charles Tiebout argued that this is an important constraint on the power of government (A Pure Theory of Local Expenditures, 64 Journal of Political Economy 416 (1956)). Would you advocate a law that requires everybody to stay put and live with whatever level of taxes and expenditures local politicians and the majority of voters favor. This would certainly make things easier for politicians, although harder for long distance movers. We would no longer have to ask at cocktail parties, “Where are you from?” We would know: “From here.” Or would you let people and companies move for “good” reasons? Or just people, and not companies, unless the companies are sole proprietorships?
5. Do we need better CEOs rather than more laws? You seem concerned about CEOs who move jobs abroad. Maybe these CEOs were being too attentive to shareholders’ interests. We need CEOs who care more about workers and taxpayers. We might get such CEOs if the shareholders lost the power to elect corporate managers. We could give some of that power to workers, as in large German corporations. This would require a national law restructuring all large corporations. While we’re at it, we could give the power over corporate governance to the taxpayers. Companies wouldn’t move just to avoid taxes if government controlled corporations. Once these companies are under government control, would you propose a “Five Year Plan” for corporate production? We could let the Department of Agriculture decide, say, whether Kansas is as good a place for rice paddies as it looks.
6. Is it possible that there is something about the business environment in the US that is sending jobs abroad? Could this have something to do with legal regulation? In other words, before we shoot exiting companies for treason, should we ask why they wanted to go?
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