Preventing a one-world corporatocracy
by David Atkins
One of the many zombie lies told by conservatives is that if a municipality, state or government tries to raise taxes (or close loopholes) on corporations residing within their borders, then those corporations will take their offices, factories and the jobs that come with them to lower-tax havens. Similarly, we are told that low-tax incentives must be offered to companies to recruit them to locate in our neighborhoods.
Greg LeRoy's under-celebrated book The Great American Jobs Scam does a good job of disproving these lies. Companies tend to locate their factories and offices based on considerations far more important to their bottom lines and quality of living than minor differences between tax rates. Wage costs, education, cost of living, customer base (for retail) and myriad other factors tend (especially for non-finance businesses) the real drivers of where a company chooses to set down roots.
Still, it's true that taxes do have some influence on where many companies do some things. Things like put up inconsequential "offices" to avoid paying the taxes they should really owe. For instance, Apple corporation knows that California offers better talent, education and quality of life than Reno, Nevada. So most of their offices are stationed there. But Apple doesn't pay California taxes. Apple cheats. Here's what Apple corporation actually does:
Apple, the world’s most profitable technology company, doesn’t design iPhones here. It doesn’t run AppleCare customer service from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.
Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.
Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.
Almost every major corporation tries to minimize its taxes, of course. For Apple, the savings are especially alluring because the company’s profits are so high. Wall Street analysts predict Apple could earn up to $45.6 billion in its current fiscal year — which would be a record for any American business.
Conservatives would argue that California should bring its corporate tax rate to zero in order to keep the jobs of the handful of employees in Reno--even if it means losing the education, infrastructure and quality of life that makes California the place where Apple actually wants to locate its real corporate operations. Conservatives voters are too beset with loathing and ignorance to see how this stuff works in practice. But the big money boys know the game very well.
At some point, the states in the U.S. and nations around the world are going to have to decide whether it's better to play brinksmanship on taxes and wages with one another, driving to the bottom of the barrel at the behest of corporate overlords playing them all for fools, or if it's better to cooperate with one another to create a unified, cohesive tax and regulatory code so that corporations have to play by the same rules everywhere.
If nation-states don't band together to defend themselves from these corporate predators, then multinational corporations will dominate nation-states lock, stock and barrel. In which case the nation-state as an institution deserves its demise as the major organizing principle for the world's people. The corporation cannot be allowed to take its place as the mightiest organization on this planet. Many young people like me who would not lightly give our lives for the cause of a nation-state, would be more than willing to do so to prevent a world corporatocracy. The fact that the world has sustained a dominant organizational paradigm for 500 years or so, does not mean it must continue indefinitely.
.