Re: [ee_shoppahs] Andy Grove on outsourcing jobs
- From: don phillips <hdphillips@xxxxxxxxx>
- To: ee_shoppahs@xxxxxxxxxxxxx
- Date: Mon, 5 Jul 2010 21:40:34 -0500
James,
That is an excellent illustration of what's wrong with our tax system. Both
the direct and indirect taxes contribute to produce a non-competitive
environment for US manufacturing industries on the world market. I agree
that removing all the present direct and indirect taxes and replacing them
with a single broad tax is desperately needed to produce a competitive world
market for us products.
I agree that a VAT tax is not the way to go. A better way is a consumption
tax, such as the Fair Tax that has been proposed for many years. Important
aspects of the Fair Tax are:
1. As a consumption tax, it would not discriminate by source of the
product being purchased - domestic and foreign products would fair the same.
Since imports may have foreign taxes builtin, US products will have improved
competitive position in the domestic market. Removal of all direct and
indirect production taxes allow for a lower offering prices on products.
2. US exports would not be taxed domestically (all direct and indirect
production taxes no longer exist) - thus exported products achieve a much
improved competitive environment on the world market compared with the
present environment.
3. Government operating costs could be significantly reduced - IRS could
be abolished.
4. Business operating costs could be reduced. No longer a need to keep 2
sets of accounting books. Investment risk analysis would not need to
consider income tax implications.
5. Individual tax payer record keeping could be reduced along with no
more concerns about IRS interference in personal decisions.
Just dreaming, I guess!!!!!
Don
On Mon, Jul 5, 2010 at 7:13 PM, James Coghlan <jcoghlan@xxxxxxxxx> wrote:
> OK, time for another one of my soliloquies . . .
>
> Ages ago I was impressed by a paper that came out of Japan entitled "A
> Japan that can say No". I just finished reviewing the topic in Wikipedia and
> realized I must be referring to a totally different paper or I my
> interpretation was totally different.
>
> My primary thoughts at the time was as follows:
>
> (1) After the end of WWII the US was the sole manufacturing super power.
> Everybody else had much of their homeland in shambles. The rise of US
> manufacturing after the war was partially due to everybody else having their
> factories reduced to rubble - this included all of Germany, much of France,
> Italy, Russia and England. Anything rebuilt before the end of the war was
> manufacturing war-specific items.
>
> (2) With respect to trade and trade-wars. The US decided what was
> considered fair. Basically, with the exception of a few items considered of
> high importance to a country, it was fair if one taxed everything (imports
> and exports) and unfair if one only taxed imports.
>
> (3) Much of the federal, state and local tax systems in the US is either
> indirect or after the fact. This makes money appear to be easier to earn.
> However it ends up putting US manufacturing at a disadvantage.
>
> The biggest example would be automobile manufacturing. If some politician
> decided we would placed a 7.65% tax on every hour of labor associated with
> imported automobiles (or imported parts and/or sub-assemblies). Everybody
> knows that other countries would cry foul. This would be in violation of
> treaties we signed in good faith.
>
> Now consider we modify the FICA laws slightly . . . place a tax of 7.65% on
> every hour of labor associated with all automobiles sold in the US and use
> this tax in lieu of domestic manufacturers matching FICA contributions. What
> would be the result? For US manufacturers, the net result would be a wash.
> Non-US manufacturers would end up paying the tax. Off-shoring manufacturers
> would end up supplementing social security. Under the rules of "what is fair
> and what is not" since we are taxing everybody, then it is fair.
>
> I am being specific to the automobile industry although the concept applies
> to all forms of manufacturing. Just go one step further. Calculate all the
> indirect taxes applied to US manufacturing. The real estate taxes, the
> school taxes, the electric taxes, the water taxes, the sewer taxes, the
> gasoline/diesel, and whatever other taxes. Heck even add on the income
> taxes. If one calculated all those taxes and divided it into the cost of the
> end product we could in theory have a system in which all the hidden taxes
> are removed and replaced by a special sales tax. For the portion of the
> vehicle manufactured in the US, the net result would be nada ... nothing ...
> no change. For foreign goods, they would get to pay a share of water, sewer,
> electric, school and whatever taxes. Actually, if one did change to that
> type of system for manufactured products then we would approach the Japanese
> system. In Europe this tax is referred to as VAT.
>
> The realization that dawned on me when I read that paper was much of our
> problem is due to way we collect taxes. We want to earn as much as possible
> - cheap money. Therefore there are all these indirect taxes on corporations.
> Taxing corporations used to be easy. They didn't vote, they invested to much
> in their physical plants to relocate, and it was easy for politicians to
> pick on them. Nowadays, corporations vote with their feet. If you tax it too
> much on the local level, they move to the next state. If you tax too much on
> the federal level, they move to the next country.
>
> I am not proposing we move to a VAT type system. Our deficits are caused by
> too much spending, not too much taxing. Unlike a sales tax in which one
> knows exactly how much you are giving the government, the VAT ends up being
> increased and hidden within the cost of whatever you are buying. In the long
> run, however, decreasing the indirect taxes and replacing them with a sales
> tax will decrease the advantage of overseas manufacturing
>
> James
> ------------------------------
> *From:* don phillips <hdphillips@xxxxxxxxx>
> *To:* ee_shoppahs@xxxxxxxxxxxxx
> *Cc:* J Fields <j.email.fields@xxxxxxxxx>
> *Sent:* Mon, July 5, 2010 6:27:55 PM
> *Subject:* Re: [ee_shoppahs] Andy Grove on outsourcing jobs
>
> Here is a followup on the semiconductor economy. It references Andy Grove's
> comments.
>
> http://danielnenni.com/2010/07/04/the-new-semiconductor-economy/
>
> <http://danielnenni.com/2010/07/04/the-new-semiconductor-economy/>Don
>
>
> On Sun, Jul 4, 2010 at 7:55 PM, <jheaven@xxxxxxxxx> wrote:
>
>> Interesting article although I wonder if the reason for it is that
>> Andy realizes the same forces that have been eating everybody elses
>> lunch are going after his too. Has Intel not benefited from offshored
>> labor? The data under paragraph "The 10X Factor" is disappointing
>> for the most of the US but probably not possible without a lot of US
>> corporate help. Andys remark that US manufacturing is undervalued is
>> obvious; the real question is why that is happening. The answer is
>> probably in our economic policy; there is no incentive to manufacture
>> in the US now except patriotism. Some theorize this will all end in a
>> US dollar devaluation. While this may be beyond the scope of this BB,
>> most contractors have prided themselves in understanding their market
>> better than most everyone else and profited from it. Things are different
>> now and it is dangerous to think that things will come back because they
>> always did before(although I am hoping they will). So let the ideas
>> flow.
>>
>> John Heaven
>>
>> for those with time: "Bad Samaritans" (H J Chang)
>>
>>
>> ---- J Fields <j.email.fields@xxxxxxxxx> wrote:
>> >
>> http://www.businessweek.com/magazine/content/10_28/b4186048358596_page_4.htm
>> >
>> > "The first task is to rebuild our industrial commons. We should
>> > develop a system of financial incentives: Levy an extra tax on the
>> > product of offshored labor. (If the result is a trade war, treat it
>> > like other wars—fight to win.) Keep that money separate. Deposit it in
>> > the coffers of what we might call the Scaling Bank of the U.S. and
>> > make these sums available to companies that will scale their American
>> > operations. "
>> >
>> > Kind of a long winded article, but says we need companies in
>> > USA. We tax US labor with income tax, property tax, etc.
>> > Goods manufactured outside USA, get not US income tax, property tax
>> > on the manufacturing plant, etc.
>> >
>>
>>
>>
>
>
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