Gongol.com Archives: July 2014

Brian Gongol

July 25, 2014

Business and Finance President Obama calls businesses "corporate deserters" for using international mergers of convenience
A number of American companies have used (or considered) mergers with foreign companies as a strategy for reducing their tax burdens. The President finds this an appealing subject on which to score political points by talking vaguely about things like "economic patriotism" instead of actually fixing the problem, which is that America has the highest official corporate tax rate in the world. This official rate isn't the one that gets paid -- the effective rate is lower because so many companies chase loopholes, credits, tax breaks, and other exceptions in order to reduce the actual amount paid. The international mergers of which the President speaks are just an especially visible method of tax avoidance. ■ It's not really a matter of patriotism (or un-patriotism) -- it's that the companies are behaving rationally (trying to reduce their tax rates) within the boundaries of a tax system that is completely irrational. But actually fixing the problem rather than grandstanding would require the President to stop capitalizing on anti-capital rhetoric, and he's not about to do that. He's not a Communist, but he and his team are terribly anti-capital. ■ The payoff (in political terms) is quick and easy -- it whips up voter enthusiasm against "fat cats" and "big corporations" -- while the consequences are hard to see. But the consequences are real: Every corporation is owned, in the end, by individual people. If the profits of the corporation are taxed directly at the corporate level, and again at the individual level when paid out as dividends -- both times at high rates -- then people are going to make other decisions. ■ Anything short of a 100% tax rate won't halt investment completely, but high rates have at least some effect that discourages investment at the margins. Investment, in turn, is what keeps businesses afloat, and that keeps people employed. Nevermind, though, because the explanation is far less viscerally satisfying to some members of the left wing than villifying those who have accumulated capital and blaming them for what goes wrong.

Threats and Hazards "Now Americans and Europeans have definitive proof of what motivates a Soviet-style post-Soviet dictator"
A very compelling argument on the nature of our relationship with Putin's Russia -- less Cold War 2, more Mafia-versus-Feds

Science and Technology Johnson County (Iowa) deliberately legalizes driverless cars
The home of Iowa City and the University of Iowa wants to become a test site

News But how will they agree on the temperature?
Dubai plans to build an entirely climate-controlled city

Science and Technology Three cheers for innovation prizes
A group including Google and others is offering a million dollars for someone to build a better power inverter. Prizes for defined outcomes are probably the most efficient way to get really interesting public (and sometimes non-public) goods developed.

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