I wish that Joseph Stieglitz would flesh this idea from his op-ed at CNN out a little more:
Is there anything that the world’s corporations can do about this scourge that threatens the political, social, and economic sustainability of our democratic market economies? The answer is yes.
It begins with a simple idea: pay your taxes. This is the first element of corporate responsibility. Don’t resort to shifting taxes to lower tax jurisdictions. Apple may feel that it has been unfairly singled out on this score; it only did a slightly better job at tax avoidance than others.
Don’t make use of the secrecy and tax havens, onshore or offshore, whether it’s Panama or the Cayman Islands in the Western hemisphere or Ireland or Luxembourg in Europe. Don’t encourage the countries in which you operate to engage in tax competition, a vicious race to the bottom where the real losers are the poor people and ordinary citizens around the world.
It’s shameful when the president-elect of a country appears to boast that he hasn’t paid certain taxes for nearly two decades — suggesting that smart people don’t — or when a company pays .005% of its profits in taxes, as Apple did. It’s not smart: it’s immoral.
Notice that’s he not saying that people shouldn’t evade paying their taxes. I would think that goes without saying and we should all agree that’s immoral. He’s saying that they shouldn’t take advantage of legal ways to minimize their taxes. That tax avoidance is immoral.
What’s the threshold for that? And what’s the moral argument for declaring one? At what level of inequality does income inequality become immoral? Is perfect equality the only defensible moral stance? How is that to be accomplished?
Does Dr. Stieglitz deduct home mortgage interest from his 1040? Is it immoral for him to do so?
Everyone except the genuinely poor in the United States is in the global top 1% of income earners. A family income of $32,400 per year is enough for that.
If income inequality within the United States among its residents is a grave moral ill, isn’t the income inequality between Americans and Chinese or Indians that much worse?
I think there are economic, political, and social reasons we should want incomes within the U. S. to be more equal. How we can accomplish that while admitting large numbers of immigrants without skills wanted by employers is unclear to me. That trade-off alone suggests to me that there may not be a moral issue at stake.
But I also think that Dr. Stieglitz’s tacit assumption, that without other reforms that can be accomplished simply by the top income earners paying more taxes, is suspect.
The obligation to pay taxes is a feature of positive law, and law should be made more moral. He might as well argue the corporations have a moral obligation to give charity to the government.
I think that is what he’s arguing.
Government gives charity to business, why shouldn’t business return the favor?
It is immoral to be a free rider. If you’re three people drinking beer in a pub and everyone buys a round and you don’t? You’re a dick.
“Does Dr. Stieglitz deduct home mortgage interest from his 1040? Is it immoral for him to do so?”
And does he clip coupons, buy items on sale, tip the car salesman an extra 10% for his Mercedes or throw in an extra $20 to the clerk who sets his gas pump? All moral acts in someone’s eyes. Tax policy is a wildly imperfect science, like making sausage. If he’s so damned moral let him throw in an extra $100k in his tax return out of the goodness of his heart and stop lecturing others………..but don’t hold your breath.
It seems that oftentimes “morality” is based no more than on whose ox is being gored, or whose pocket is bring picked by the elected party creating the rotating whims and will of public taxation policy .
I agree that it’s loutish but not everything that is loutish is immoral. That’s why I wish that Dr. Stieglitz would expand on his thinking a bit.
Behavior operates on different planes. There’s the legal plane, the moral plane, the realm of the Platonian ideal, and etiquette, just to name a few.
I agree that paying no taxes is not nice. It’s bad manners. Not being nice, being rude, or not behaving in an ideal way but within the requirements of the law is not necessarily immoral. Again, that’s why I’d like a little more detail so that I understand the moral argument.
I wonder if he has kids. Kids taught me a few things about persuasion:
– Positive incentives work pretty well
– Moralizing rarely works by itself
– Coercion works in the short term, but diminishing returns kick in quickly.
Policy people mainly focus on moralizing and especially coercion which I think is strange – so much could be done simply by aligning incentives.
That’s true. What strikes me is that Dr. Stieglitz’s complaint is actually against Congress and he’s not complaining about tax rates but about how income is calculated under the law.
That’s something that I think many people miss. Tax rates are less important than how you calculate income. I first heard that noted by John Kenneth Galbraith.
Maxine Udall, the Girl Economist (now dead) used to write interesting things about economics, business, ethics and community. Once upon a time, most of our business leaders grew up part of a community. They understood at some gut level the importance of the community in which they lived, and their role in the community. (You get bits of this if you read Adam Smith’s other book, but boy is it a slog.) Now, not so much.
Most business leaders try to carry out their responsibilities to their board and shareholders. Many try to take care of their workers. However, not that many feel that they have any responsibilities to the broader community. So, while the goal used to be to make money by providing a better product at a better price (that nearly always betters the community) it is now OK to make money by hiding stuff in the fine print. (You actually need to pass laws to keep credit card companies from changing rates without telling their customers.) By misleading advertising. Etc.
Add in not paying taxes to that list. Perfectly fine for the community around the business to pay the taxes that provides the roads the business needs, and have the business not pay any taxes. Perfectly OK if the community has to pay to have work sites cleaned up or bear the costs of pollution generated, while that company pays no taxes.
Mind you this is all legal. Of course as most of us know, big businesses help write the laws and regs by which they work. So, is all this immoral? I don’t know what the correct word is, but I think it clear that the idea that everyone acting to maximize their own self interests will result in the best possible outcome is incorrect.
Steve
“Tax rates are less important than how you calculate income. ”
So true, and even tax rates are discussed in terms of marginal rates instead of effective rates, which are world’s apart in most cases.
Steve,
“Most business leaders try to carry out their responsibilities to their board and shareholders. Many try to take care of their workers. However, not that many feel that they have any responsibilities to the broader community. ”
I think “business leaders” needs a little more fidelity in your analysis. If you’re talking about globalized multi-nationals your description has some truth, but that isn’t most companies.
Andy- Thanks. I was really thinking of the larger national and multi-national businesses. Smaller businesses just by their nature, are more tied into the community. You still have the exceptions like the small drug companies that find drugs with a single manufacturer, then buy the drug and jack up prices, but I am not really sure that is more common than it used to be. It might, but I just don’t know.
Steve