Copyright © 2002-2008
Lionel E. Deimel, Ph.D.
All rights reserved.
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June 17, 2002 |
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Unpatriotic?
Much has been said of the plan of The Stanley Works’ plan to reincorporate in Bermuda. The plan reputedly will save the company $20,000,000 or so per year in corporate taxes. Stanley, headquartered for the moment in New Britain, Connecticut, has been making tools in America for more than 150 years and is justly viewed as an American institution. Many, especially politicians, however, have called its planned move unpatriotic. On the other hand, one doesn’t have to be too cynical to suggest that using the laws of the country to make more money for your company is very much the American way!
For sentimental reasons, I would hate to see Stanley go. (The move actually involves few jobs—it may actually create some—and no manufacturing is to be transferred offshore.) The wonder, however, is not that Stanley wants to make this move, but that more American corporations are not doing the same. Perhaps Stanley will start a trend. In any case, the Stanley plan is a predictable result of the oft noted but never fixed double taxation that we impose on corporations. We tax corporations, and then we tax dividends they distribute. Partly, I think, this happens because we have declared corporations to be “persons,” and persons have an obligation to support the functions of government. I don’t want to deal with this notion in detail, except to say that Microsoft has neither the same ability to enjoy the fruits of liberty nor the same moral obligations of citizenship as does Bill Gates. We all know this, as we do not let corporations vote. (Well, not directly, anyway.) Moreover, one can certainly imagine revenue-neutral tax schemes that would transfer the burden of what corporations currently pay in taxes to shareholders, bondholders, and ex-shareholders who enjoy capital gains from the sale of stock. The corporate income tax has not been eliminated for two reasons. First, corporations can, through legislation, manipulate the tax system to benefit their operations or to penalize those of their competitors. This activity corrupts the political system and distorts the economy. The other great “advantage” of the system is that it makes it appear that corporations, and not individuals, are being taxed. This makes politicians happy because, as noted earlier, corporations don’t vote.
The Stanley case illustrates yet another way that tax laws can distort the economy. Does anyone think that The Stanley Works has any rational (i.e., not tax-related) reason be being headquartered in Bermuda? It is past time to consider seriously the elimination of the corporate income tax. Owners of corporations (stockholders) and owners of corporate debt (bondholders, etc.) can be taxed on their profits, at a high rate, if necessary. The biggest objection to this idea, other than pure inertia, seems to be that foreign companies can operate in the U.S. and export profits with impunity. Well, perhaps. But we live in a global economy, and few significant foreign firms are without U.S. stockholders or debt holders. Moreover, eliminating the corporate income tax would provide an incentive for foreign firms to come here, where they pay local taxes and create jobs. The biggest advantage of the elimination of the corporate income tax, however, would be the freedom it would give corporations to act with economic rationality, instead of distorting their actions to take advantage of tax laws. After all, money paid to lawyers, accountants, consultants, and auditors to avoid taxes is fundamentally wasted money. It produces no goods or services that contribute to human happiness. Even in the best of circumstances, determining whether a corporation has made a profit depends upon judgement and accounting rules; it is not clear-cut. Dividends and interest paid and capital gains earned, on the other hand, can be identified with great objectivity. The plan might even help keep politicians honest. Well, maybe not.
Posted by
Lionel Deimel at 10:58 AM
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June 11, 2002 |
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Homeland Security
President Bush has finally decided to ask for a Department of Homeland Security. In his speech to Congress back in September, I thought he was proposing a cabinet-level office, but he merely established the tight-lipped but feeble White House office headed by Tom Ridge.
I have an open mind as to whether creating a new federal department is a good idea. It is, in principle, I think, but the devil is in the details. What I am certain about—as I was in September—is that “Homeland Security” is a horrible name, perhaps even an un-American one. Americans may talk about their “home,” but not about their “homeland.” The word “homeland” sounds very foreign, and suspect. The Nazis could appeal to citizens to protect the German homeland when an appeal to defend the Nazi government would have been ineffectual. However fond we are of “America the Beautiful,” it is our way of life that Americans want to defend; our homeland could be on the Arabian Peninsula and our feelings for the nation would be essentially the same. (We might vacation differently.) In fact, before September 11, 2001, asking a citizen where his homeland is, would likely have elicited a response such as “Italy,” or “Ireland,” or “Africa.” America is an idea, rather than a place.
So, what alternative names are available for a cabinet department? The most obvious choices are Department of Internal Security and Department of Domestic Security. Department of National Security would be a good choice were NSA being folded into the department, but it isn’t. “Homeland Security” is no doubt supposed to sound friendlier (and less fascist) than, say “Domestic Security,” but the word “security” itself has certain heavy-handed connotations in a political context. Perhaps Department of Domestic Defense or Department of Domestic Safety would be more acceptable to civil libertarians. Anything but Department of Homeland Security.
P.S. Does anyone on the planet believe President Bush’s assertion that his government reorganization will cost no more money because each agency will simply be doing what it is doing now? And, if every agency is simply going to be performing the same job, why should we take comfort in the fact?
P.P.S. (Admission) When I did a site search on “homeland,” I was reminded that I had used the word in my poem “11 September 2001.” As indicated in the annotation, I was under the influence of President Bush’s September 20 speech when I wrote the poem.
Posted by
Lionel Deimel at 10:01 AM
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