Ah, Thomas Friedman -- how I enjoyed reading your books and columns. No longer. The warmongering wasn't good, but what was the final straw was a recent column about Intel's CEO asking for lower corporate taxes and you agreeing with him! The logic was that if only companies like Intel were given huge tax breaks in the US, then they could afford to become more efficient and somehow, eventually, this would lead to higher tax receipts. And then there'd be better airports in the US, because the local governments will be able to fix them up better.
Firstly, Intel's one of the few companies in the world which do not suffer from low cash flow. Maybe there are small and mid-size businesses that really can't afford to innovate, but Intel just isn't one of them. Their revenue and profits are gigantic, and if there's something that can help them make more money, of course they'll do it -- be it innovating or getting a government handout. Second, the theory that lowering taxes leads to more tax revenue has not been proven -- many countries have tried it, but it only ever worked for things like tax havens. And finally, the actual tax rate that most companies pay is much lower than the nominal tax rate. That's because companies figured out that it's very "efficient" to higher a bunch of lawyers and accountants for a few million to save hundreds of millions on taxes.
So what we really should be advocating is the simplification of the tax law to cut-out as many loopholes as possible.
Labels: tax, Tom Friedman
