Tuesday, March 17, 2009

Fair Or Fowl?

There seems to be an assumption implicit in the plans hatched to increase government revenues by raising taxes. It is that the individual or business who is going to be pinched is not going to change their behavior in any meaningful way in the face of being asked to pay more (usually described as "paying their fair share"). While those who propose increased taxation usually acknowledge that what they consider major changes to taxes levied would influence behavior, they seem to view the situation as far more static for what they consider smaller changes. The goose might not like it if they take a couple of more golden eggs, but it'll always be there to pluck.

Last Sunday, we had dinner with my parents. Before my dad retired, he worked for a local, family-owned manufacturing company. He's still good friends with one of the family members who runs the firm today.

The company's history is a classic American success story. It was literally started in a garage behind the founder's house over sixty years ago. Since then it has grown to become a highly regarded supplier with an impressive local headquarters/manufacturing facility and a global presence.

Some years ago, in order to be able to better supply and compete in the EU market, the company decided to open another manufacturing facility in Europe. After considering several options, they settled on Ireland. At the time, the Celtic Tiger had not yet begun to roar. But the Emerald Isle offered the company an educated workforce, a common language (for the most part), and a corporate tax rate of around 10%. So they set up shop there and the operation has been quite successful in the intervening years.

So back to our dinner conversation. My dad recently spoke with his friend and learned that his company is not happy with the way things are shaping up so far in the Age of Obama. I should add that this friend of my father's is not a man known for hyperbole or exaggeration. He's soft-spoken, unassuming type. If you met him on the street, you'd probably never guess that he runs a multinational company. Not a table-pounder or chair-thrower he.

Anyway, he told my dad that if the Obama administration lives up to their promise to end tax deferral on profits companies make overseas (essentially imposing a double tax on US companies and impacting their ability to compete) and if The Employee Free Choice Act a.k.a. card check becomes law, the family will pack up their corporate headquarters and move to another country. With them will go the jobs, the tax revenues, and all the other benefits that the local community, the state of Minnesota, and the country receive from having the company based here. Knowing my dad's friend as I do, this should not be considered an idle threat.

So to summarize, in the interests of "protecting American jobs," increasing tax revenues, and helping "working Americans," our government is planning to take actions that will in fact have exactly the opposite results (at least in this case, which I imagine is not unique). In today's globalized, connected world the danger that the government will kill the golden goose is probably not nearly a great as that its actions will cause the bird to migrate to more friendly climes. The geese do have wings.

No comments:

Post a Comment