Sunday, January 31, 2016

World Can Be A Wicked Place; That's Good to Know

Here is an article that could not have made it into the NYTimes a decade ago, about TYCO moving to Ireland, but now the progressives are on the ropes, so a little honest assessment is indicated. The problem is the honesty is still impacted by bad economics... let me juxtapose sentences in from various paragraphs in the same article:
Johnson Controls said on Monday it was renouncing its United States corporate citizenship by selling itself to Tyco International, based in Ireland...Employees at a Johnson Controls plant in Beijing working on a seat assembly line. The manufacturing giant, currently based in Milwaukee,
Well, I am sure that is not quite how Johnson Controls put it, but the "scandal" certainly is a serial-bailout beneficiary USA company, that has subsequently moved manufacturing to China, is now moving it's "headquarters" to Ireland leaving the Milwaukee office to do what?
a deal struck in large part to reduce its tax bill, which it said should drop by about $150 million annually. ...
Until Washington lawmakers reform the tax code, we will continue to see an exodus of American companies from our shores in search of a lower tax rate...
And pushing for laws to bar companies from these deals seems increasingly quixotic. Every time a new tax law is enacted, the lawyers and accountants find a way around it.
Well, Milwaukee will be the USA design center for products which necessarily coordinate with the USA automaker designs, and tax compliance headquarters for worldwide minimization of tax liability, and coordination center for the bribery of venal politicians (I wax redundant).

So while as good socialists the NYTimes can get some facts straight, they lack the hard core communist's skill at getting all of the facts straight.

It surprises me that anyone would be offended at being called a communist, especially communists, when their claim to fame is to get the story right, the facts straight.  How else could they have won over half the planet?  Of course, the second part, basing policies on facts is another matter entirely, and that is when the bait and switch comes in.  Someone telling the truth is the bait, you own the audience, then you can do what you want.  Capitalists tell the most egregious lies straight to your face, and force a decision: buy the lie and thrive (short term), or reject it and flounder?  Be a shark or a minnow.

Anyway, the first reality is no corporation ever pays any taxes.  All taxes are paid by the end user.  When I buy a Hershey chocolate bar, when I bought it I paid all of Hershey's taxes, whatever they may have been.  The idea that Hershey ever pays any taxes is utterly absurd.  After remitting a tax liability, from funds gained by sales of product, Hershey is profitable.  That Hershey is still in business is because their customers pay their taxes.

Now, Hershey does not care one way or the other regarding tax rates, as the writer notes, any rule will be evaded.  But that misses an important subtlety. Tax regimes exist for a given purpose, and it may not  be a given in capitalism, but it is in democracy, that there must be wealth transfer, and wealth is best mulcted at the point of realization, for the last 40 years only the SME level.

Well, Hershey may not care about the taxes, but they do care that better chocolate is so expensive that it does not compete with Hershey, and Hershey cannot afford to pay any taxes when is competitors like Nestle pay no taxes.  The rules are written, and paid for, so that they do not.  Now, ostensibly a micro chocolate company may use the same written, engineered loopholes, but it is not economically viable to do so at such a small scale.  When you have a million in sales, you cannot afford the $500,000 in accounting fees to gain the benefits.  When you have a billion in sales, well, you can.

Here is a complicated example of a tax rule for everyone, that can only serve the 1%.  Expensive wine comes in from Europe at 8% duty, all big and small  must pay.  99% of the 8% paid in duty may be recovered (duty drawback) if it is re-exported.  OK.  But wait, wait.  In wine, it does not have to be the same wine exported.  Yes, you can take the worst red wine vinted (so to speak) in USA, Gallo's rejects, and export that to say China, pennies a litre, and regain 99% of the duty paid on fine wine imported from Europe to USA.  Now this provision is available to one and all.  But a small wine importer is not in a position to maintain a Hong Kong sales office for East Asia as Gallo does. A small importer is considering 99% return of 8% duty on $500,000 of imports is $40,000 or so, well worth pursuing.  But to earn it, he must export as many litres of USA made wine (note the rule, litres, not price).  Well, a small importer may be able to maintain a Hong Kong sales office to move say 50,000 litres of American schlock into China, but surely at a cost of around $40,000, making the whole exercise a wash, at best.  At the same time, the big boys can rock the loophole -

1. Gallo does not have to figure in the cost of its mistakes onto its saleable product, something smaller wineries overseas must include in their prices, of course ultimately paid by the usa consumer.  (USA wineries tell of Chinese buyers who show up waving cash and offering $2 a bottle, smart vinters give it to them, good and hard.  This stuff in "made in USA" bottles is the reason USA wines have such a horrible reputation in Asia, a direct result of USA duty rules.)

2.  In USA, wine is considered hazmat, so it may not be dumped in a field or down a drain.  Cheaper to fill a flexitank and sell it to the Chinese, even for pennies a litre, especially when there is a tax rebate on  the import side of the company.  Chinese rascals can then refill empty Lafite Rothschild bottles retrieved from fine restaurant dumpsters with Cal-plonk and get into the system at $12,000 a bottle, to be praised for its nose.

3.  Next there are layers upon layers of other subsidies and benefits in other areas which again, inure to the largest.  (Not to mention big gets "free" credit.)

In all cases all taxes are paid by the consumer.  The Hershey product has little in the way of taxes, and the reason that delicious, healthy chocolate is $60 an ounce is it gets no tax breaks, nor subsidies, they actually produce something that is a net benefit to society, as opposed to some 85% of the corn sold in USA, which is sold at a net deficit.  The Iowa caucus is all about first telling the Iowa farmer the subsidies will remain, he need never worry about working for a living.  Get big or get out!  Food as a weapon!  The welfare checks will continue.  Any politician who says otherwise will not advance beyond Iowa.

The power to tax is the power to destroy.  Tax codes a putatively fair, they apply to all biz, but in reality  The point of taxing business is to allow big business tax break while laying on the burden of taxes specifically on the self-supporting natural economy and its customers.

Now often these taxes are too much if they are too high for natural economy customers to countenance when naturally added to the cost of doing business.  When you add the unnaturally high costs of ingredients when bad ingredients chase out the good, plus the absurd tax rates, there is a point where the price is too high to sustain a viable small business.  Get big or get out, the policy of the USA government; cheat on taxes, a full employment guarantor for the tax collector; or lesson the quality with bad ingredients, a morale killer for the passionate entrepreneur.  Capitalism offers no alternative.  Democracy demands no less scorched earth. The entrepreneur goes out of business, and as the end user (since he has no customer upon which to pass the costs) he is stuck with the tax bill, true to form, the end-user pays all taxes.  A seized passport over unpaid taxes will now serve as fair warning to anyone who will consider self-employment.

A capitalist lie is capitalism is the apotheosis of all economic experience.  Given that lie as dogma, there is no countenancing there could be better. On the other hand, communism has as an article of faith the Christo-Islamic ideal of eventual anarchy, free markets, of which communism is merely a step-on the road to general peace and justice.

When in history has the hegemon not been a boor?  There is always the simple way to play in such an awful regime.  Small repetitive deals.  You can manage all risks by making all of your payments, even in advance, and in such regular small amounts that you have early warning that you are off track and you can shut down if need be, pay off minimal amounts, lick you wounds, and do it again, ever better at the task.

What is the alternative?  Invest in negative interest rate bonds?  Property? Bet the paycheck is not taxed more?  Figure your pension will save you?

Employees are saps, according to Harry Reid.  Ignore the interviewer, just listen carefully to Harry Reid, his argument is taxes are voluntary because you can choose to be self-employed and pay no taxes:

The idiot is the interviewer who cannot hear what Reid is plainly stating.

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