What Kind of Jobs Do They Want?

Miles White, CEO of Chicago-based Abbott Laboratories, explains corporate inversion, companies’ changing of national jurisdictions, frequently seeking tax relief:

First, inversion is legal. Period. It’s allowed in the tax code. The tax code even specifies the terms and conditions under which it may be done. Reference 26 U.S. Code Section 7874.

Inversion doesn’t change a company’s tax rate. A company pays the same tax rate in the U.S. after inversion as it does before inverting. A company also pays the same tax rates in foreign domiciles before and after inversion.

Inversion does not relieve any pre-existing tax burden. It does not reduce the tax that any company would ultimately have to pay on past earnings overseas that have been deferred under the U.S. tax system.

The tax law today views overseas earnings that have not been repatriated as part of the U.S. tax system, regardless of whether a company has inverted. Therefore, those past foreign earnings, if repatriated to the U.S., are still subject to full U.S. taxation.

What does change after inversion is a company’s access to its future foreign earnings generated outside of the U.S. tax system. Those future earnings may be used for any capital allocation purpose the company may have, including investment in the U.S., without the additional U.S. repatriation tax. Foreign taxes will have already been paid on those profits earned outside the U.S. It is the additional repatriation tax, imposed by high corporate tax rate in the U.S., that is not paid after inversion.

When a company changes its headquarters some portion of the jobs associated with corporate headquarters are inevitably lost.

For me that raises the question of what sort of jobs the Obama Administration actually wants? They clearly don’t want more corporate staff jobs. They don’t want more mining or logging or power plants or oil refining. They don’t want more heavy manufacturing. The tens of thousands of jobs for solar panel installers failed to materialize. We are so overbuilt in housing and infrastructure that larger numbers of new construction jobs are unlikely. States, their budgets pressed by tax revenues inadequate to pay their Medicaid bills and the pensions and benefits promised to past employees are reducing the number of present employees.

The economy isn’t like an army where you command and things happen but like farming. You prepare the soil, sow the seed, fertilize the crops, fend off predators and diseases. Nature (or God, if you prefer) produces the crops but the richness of the harvest can be influenced by the skill and effort you put into it.

It’s like the parable:

“Behold, a sower went out to sow. 4 And as he sowed, some seed fell by the wayside; and the birds came and devoured them. 5 Some fell on stony places, where they did not have much earth; and they immediately sprang up because they had no depth of earth. 6 But when the sun was up they were scorched, and because they had no root they withered away. 7 And some fell among thorns, and the thorns sprang up and choked them. 8 But others fell on good ground and yielded a crop: some a hundredfold, some sixty, some thirty. 9 He who has ears to hear, let him hear!”

We’ve been sowing among the thorns and on the stones for a long time. And yet, somehow, we’re surprised at the results.

8 comments… add one
  • ...

    Do you really think the people running the country don’t know what they’re doing? After all this time, does that seem credible? Is it possible for them to be as rich and powerful as they’ve become and have no clue whatsoever?

  • Guarneri

    Who “we,” kemosabe?

  • Unicorn groomers are wanted. They earn big bucks and are happy to pay 90% taxes. They also donate heavily to progressive causes.

  • mike shupp

    Actually, I do think the people in Washington (and elsewhere) are clueless. Remember, back in 2008-2009, the Conventional Wisdom among bankers, most economists, and other folks giving the Bush and Obama administration advice was that we had a banking crisis, possibly caused by large federal deficits, possibly caused by a glut in the construction business, possibly caused by a shitload of bad mortgages. But it was all easly fixable — we’d let some overextended financiers (Lehmen Brothers) go bankrupt to convince bankers to mend their ways, the Treasury would buy up some mortgages and other “troubled assets”, we’d give General Motors some loans to get it out of trouble, maybe there’d be some prudent investment in infrastructure to provide some stimulus, and some extension of unemployment for the truly needy. Big numbers of course, trillions of federal spending, but the underlying economy was also big and strong, and in a couple of years everything would be back on the pre-recession trendlines. Textbook stuff, Macro 101, and all the economists right and left could preach the same sermon.

    And of course, this turned out not to be. Obama’s people balked at the idea of a trillion dollar plus stimulus. Congress wasn’t happy with a smaller package either. The infrastructure proposals got nowhere, partially because conservatives saw them as useless deficit spending, partially because Tim Geither and others in the administration though making Wall Street happy was the essential thing, partially because starting up a batch of road and damn building projects just looked too damned complicated. And so on.

    And it took a couple more years before people started to worry about employment still being in the dumps, and for left-wing economists to start grumbing about income inequality increasing since the 1970s. And by then we had the Tea Party active, and Republicans were making a big deal about not increasing the deficit and not cooperating with Obama, and the people giving the sort of financial advice the White House wanted to listen to were still saying that the banks and financiers had to be made happy first and only then would employment recover, it really was all in the textbooks Mr President — some of the textbooks anyhow.

    And another four years has passed, and we’ve still got the Tea Party and we’ve still got Republicans mad at the 47% of the population who ruin things for everyone else, and we’ve Thomas Piketty and a lot of left-wing economists grumbling about the fraction of 1% of the wealthy who are taking over the world, and the White House is still preoccupied about making bankers happy.

    And unemployment still sucks, and it will basically until enough of the out of work folk give up job hunting and settle for Social Security. Or just conveniently drop dead. And till we have a nice responsible respectible white Republican as President and a nice Republican-controlled Congress, to make American politics “normal” again. Don’t hold your breath.

  • mike shupp

    Let’s get back to this, to the “question of what sort of jobs the Obama Administration actually wants?”

    And the answer is, They Don’t Know. They Don’t Care. And neither does anyone else, because that isn’t a macroeconomic issue. Modern economists aren’t interested in that kind of thing. Diddle with the deficit a bit, convince the Treasury to float a few more bonds or not, talk to people at the Federal Reserve about printing fewer or more paper dollars, and That’s All That Matters. The economy will respond, and people will find jobs. Period.

    Good jobs? Bad jobs? Jobs with some kind of future? Jobs that improve the trade deficit? Nobody cares. Just tweak the economy and get it back on track, and if things were sort of okay before the train wreck, then things will be sort of okay when they get back to normal. That’s all that can be said, and all that can be hoped for.

    You aren’t satisfied with this? You’ve got other issues? That’s nice, but they aren’t economics. They aren’t science. Those are political and maybe philosophical issues, which maybe a handful of academics rant about in unread journals and obscure web sites, but they aren’t the sort of things our national leaders have any interest in discussing. Or that most of the electorate wants them to discuss.

  • mike shupp

    Why does your website keep thinking I’m a spambot? Seriously. This wasn’t an issue a month ago, but now it’s giving me grief with IE 9 on Windows Vista, and with IE 11 and Chrome on Windows 7. I can believe I screwed up the settings for one browser-OS combination, but three?

  • Why does your website keep thinking I’m a spambot?

    You’ll have to ask AKismet (the spam control I use). They came out with a major revision a month or so ago and since then I’ve been deluged with spam. It goes into the spam folder but using the old version it didn’t even go in there.

  • mike shupp

    Well phooey. I don’t know if I can blame things on one piece of anti-spam software; I seem be getting totally blocked at all but half a dozen websites any more. Which is maybe a Good Thing; it saves me from wasting time commenting, and thus from wasting time reading as many posts. Probably a good thing, from a standpoint of my blood pressure, and maybe for the state of my soul ….

    Thanks for the message.

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