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Old 11-17-2009, 08:54 AM  
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Chasing Corporations out of U.S.

We were warned; looks like it's happening. Article from Investors.com

Chasing Corporations Out Of The U.S.
By ROBERT J. HERBOLD AND SCOTT S. POWELL
Posted 11/16/2009 06:16 PM ET


Unemployment is foremost on everyone's mind today. Yet jobs can continue to leave the U.S. because of the threat of new taxes, the convergence of technology, the ease of digital collaboration and ready access to abundant foreign engineering talent.

Multinational corporate executives may have to move R&D, product development, management and manufacturing overseas when there is no longer a comparative advantage to staying in the United States. A shocking thought for sure, but it's the new reality.

After Japan, the U.S. has the world's highest corporate tax rate, and there is seemingly no willingness by Washington to bring rates down.

In fact, the Obama administration recently proposed taxing the foreign profits of U.S.-based multinationals even when those profits were not repatriated, but backed away when executives threatened to move offshore. Obama aides acknowledge that the administration has set aside the idea for now, but plans to revisit it in a broader tax overhaul sometime next year.

This ambiguity and the threat of new taxes from Washington, such as cap-and-trade, have already prompted 11 major U.S. companies to move offshore in the past year.

Tyco International, Foster Wheeler, Weatherford International, Nabors Industries, Noble Corp., TransOcean International, United America Indemnity, Cooper Industries, Covidien, Ingersoll-Rand and Accenture have all completed or taken steps to change their domicile of incorporation, with Switzerland and Ireland as the most popular relocation destinations.

Commenting on his company's decision, an Accenture board member asked, "What shareholder would ever vote to incorporate in a country that taxes your worldwide income?"

But it is not just taxation that is chasing corporations out of America. Another top consideration is access to talent. The U.S. now spends more per capita on public education than any other OECD country, but its students test in the bottom decile.

The U.S. Government's National Assessment of Educational Progress generates the "Nation's Report Card" annually. For the last 10 years, less than 25% of American high school seniors achieved a rating of "proficient" in either math or science. In August 2009, the ACT test service announced that only 23% of this year's high school graduates tested adequately in reading, writing, math and science to succeed in college. This is a national embarrassment.

Everyone understands teacher quality is the key determinant of academic success. However, teachers' unions don't allow performance appraisals and merit pay. So, many top-performing teachers get frustrated and opt out, leaving behind the less competent who keep the bar low.

Washington forms commission after commission to find solutions, but nothing much happens. Why? Because no one wants to take on the teachers' unions, which are a major source of re-election campaign dollars.

With the scarcity of technical talent in the U.S. resulting from failing schools, many corporations try to recruit foreign students. But with anti-immigrant regulations and sentiment imposed by Washington, many corporations find the easier course is to just hire abroad. Recently, Bank of America, among others, had to rescind job offers to dozens of foreigners because it had received federal bailout money.

Another major concern for American multinational executives is the increasing political risk in the United States. They now worry about the high cost of uncertainty associated with excessive government activism and a hostile culture.

A culture that turns a blind eye to government failure, but is quick and unrelenting to blame society's ills on business, will naturally and subliminally embrace socialist solutions. The problem is that when one intervention fails, the government attempts to fix its errors with yet more intervention — a sort of creeping socialism that results in a compounding of waste and inefficiency.

So the nationalization of General Motors was followed by Cash for Clunkers and successive bailouts of GMAC. The TARP rescue of banks was followed by government micromanagement, wage controls and punitive salary caps for highly paid talent.

Unfortunately, this kind of populist government meddling in our financial sector is sure to drive talent offshore. In fact, Deutsche Bank CEO Josef Ackermann recently commented "we can't wait to get our hands on all that top talent."

Americans must realize that the geese that lay the golden eggs can take flight. Most U.S.-born multinational board members and executives want their native country to be successful. On the other hand, their fiduciary duty requires that they face reality and respond to global competitors who increasingly have an edge in taxation, access to educated talent and a more supportive political and cultural climate. Taking no action and losing out to the competition breaches their duty to shareholders.

Washington needs to wake up and see the big picture. Now more than ever, it is all about keeping and creating jobs. We can't afford to chase multinational corporations out of the United States.

• Herbold is the retired chief operating officer of Microsoft Corp. and managing director of the Herbold Group.

• Powell is managing director of Alpha-Quest and a visiting fellow at the Hoover Institution. Both live in Bellevue, Wash
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Old 11-19-2009, 08:02 AM   #91
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Spot on. My wife has been teaching for 25 years and now parents, rich and poor, are advesaries, not allies, when it comes to holding their kids accountable for their behavior and their grades.

It's easier for politicians, mostly conservatives since the NEA is pretty much a democrat lock, to blame teachers.

Holding parents accountable is way more complex and probably unfixable . . . so make teachers jump through hoops so it looks like you're trying to do something.
The system needs an overhaul including how teachers are taught. This is also a reason why parents are not as involved or even able to help—they're a product of the same system. The govt likes it that way so they can indoctrinate the kids the way they want.

Example: Florida has virtual online classes for school subjects. My daughter is doing it for Biology at home. The course is loaded with political correctness and environmental activism. The left-wing agenda is laced through various subjects. Her recent assignments were to: plant a tree for bio-diversity and write a letter to her congressman on green issues. It's also full of global warming claims, something my daughter doesn't accept but I told her to give them the answer they wanted. At her last private school she did her science fair project on a sub-topic related to GW regarding the expansion of water which disproved that related point.

Totally bogus. I just bet this stuff is in the other courses, except math
( well they do have the new fuzzy math).

I've also ordered school social studies textbooks in the past for summer work when she was in her former school and had to return some for blatant false hoods about America. It's left wing indoctrination in public school.
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Old 11-19-2009, 08:03 AM   #92
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TOur public schools work quite nicely, sorry yours suck.
California?
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Old 11-19-2009, 08:12 AM   #93
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Interesting. But that's not an accurate reason why even if it appears to correlate. The tax cut was followed by the largest tax increase in history a year later. So the cuts never stayed. That's not noted in your image. Therefore something else led to the increase in revenue. Inflation unexpectedly died down and RR resorted to a Keynesian stimulus fix which heated the economy and brought in the revenue.
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Old 11-19-2009, 08:39 AM   #94
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If you'd rather look at those tax cuts as causing economic growth and only secondarily increasing revenues instead of increasing revenues directly, I'm OK with that. The purpose of supply side tax cuts is to unbridle the economy. That's why they're also called growth oriented tax cuts. We need some economic growth right about now.
No Pat. The economy moved back to growth which is what drove the increase in revenues. Raygun's tax cuts had no discernible effects. If tax cuts were the surefire thing you say they were then we should have seen a massive increase in economic growth over the bush years however that's not what happened.
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Old 11-19-2009, 08:53 AM   #95
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I would say that it is exactly 'everyone's attempts' that causes the economy to go in and out of recession
No, the economy, and capitalism based economies, have a natural boom and bust cycle. You can go back as far as stats are recorded and clearly see that. We had recessions before the Fed was created. People have attempted to repeal the business cycle and prevent recessions but that has proven to be a fool's game of epic proportions. A natural vacillation between growth and contraction is healthy for an economy. Excess has to be shaken out from time to time to keep everything from getting overheated and eliminate inefficient players.



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This totally contradicts your first statement. If the economy was simply coming out of recession, Volker's lowering of the interest rates is not causation either.

I would be interested to know what you think will pull us out of the current recession? Lower interest rates won't do it. They are essentially zero now. Government spending? Nothing?

To think that chopping the federal tax rates in half had nothing to do with the economic boom in the 80's seems ridiculous. Why would tax rates be cut if not to ignite the economy?
I didn't say Volker's lowering of rates was the cause of the economy returning to growth. It is a factor but most importantly Volker created conditions for the economy to resume steady growth due to breaking the inflation trend from the 70's. The absolute level of interest rates is quite meaningless in reality. What matters is where those interest rates are relative to other economies' interest rates. If someone can borrow at 10% and still make a decent profit they are going to do it. Also, it doesn't matter if that borrower has to pay 10% interest if everyone else in the world has 12-15% interest.

As far as the current recession is concerned, there really isn't much we can do to "pull" ourselves out of it. We have to wait for the economy to get back to equilibrium and while that may be painful it is necessary. In the meantime, our policy makers were put into a precarious position due to the massive drop in spending so they enacted the stimulus to prevent that drop from being a negative feedback loop which would have thrown us into a depression.

Also, as far as the current recession is concerned, I think we are nearing the end of it. I think we're going to see a slight double dip but I think we should be finished bottoming out sometime around the end of Q2. Now, I don't think the economy is going to rocket off of that bottom but I think we'll hit a steady state and after a few quarters of that we will see a return to growth. When we do return to growth I don't think it will be the trend line growth we have seen in the last 20-30 years but more along the lines of PIMCO's new normal thesis which says that we will have growth but it won't be as robust as before.
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Old 11-19-2009, 01:52 PM   #96
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No Pat. The economy moved back to growth which is what drove the increase in revenues. Raygun's tax cuts had no discernible effects. If tax cuts were the surefire thing you say they were then we should have seen a massive increase in economic growth over the bush years however that's not what happened.
I didn't say anything was surefire. That's as stupid as saying that supply side economics are a hoax and that tax cuts haven't led to tax revenue gains.
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Old 11-19-2009, 02:05 PM   #97
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Competing with slave labor in a global economy puts us at a disadvantage. It's that simple.
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Old 11-19-2009, 02:47 PM   #98
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Competing with slave labor in a global economy puts us at a disadvantage. It's that simple.
That is why it is important for US companies to invest in technology to equalize the disadvantage. Of course, that re-invest money is a limited resource being drained by taxation.
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Old 11-19-2009, 05:43 PM   #99
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Originally Posted by BucEyedPea View Post
Interesting. But that's not an accurate reason why even if it appears to correlate. The tax cut was followed by the largest tax increase in history a year later. So the cuts never stayed. That's not noted in your image. Therefore something else led to the increase in revenue. Inflation unexpectedly died down and RR resorted to a Keynesian stimulus fix which heated the economy and brought in the revenue.
You're having the same problem the KC Native is having. You're lumping all tax policy into one amorphious blob and assuming that every tax cut/increase affects economic activity in the same way. They don't. Taxes on ice cream sundaes will have a major impact on the ice cream sundae business but probably won't have much impact on how people choose to invest their money, for example.

The 1982 tax increases were on such things as excise taxes and unemploment insurance taxes. They didn't really have much if any effect on the marginal tax rate on productivity (e.g. income tax rates) which is the key feature that supply siders point to when they suggest that a tax cut will lead to growth and increased tax revenues.

The 1983 tax increase was on Social Security. Again, this didn't affect the marginal tax rate on productivity.

Reagan slashed marginal tax rates not once, but twice during his administration. It wasn't until after he left office that some of those cuts were reversed.
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