Comments (6)

• Evans Munyemesha

• "[Tax]Competition will have the same effects on governments that it has on businesses — they will be forced to be more efficient, and to be more responsive to "customer" preferences."

  The effects of tax competition will in fact be more taxes and more restrictions on and involvement in private businesses---including possibly the banning of emigration of investors(just as some Monarchs banned emigration of 'their' able and fit young men so that they could serve as soldiers). Governments could never function as private businesses...

• Published: January 31, 2006 11:16 AM

• tz

• When municipalities competed using tax abatement for GM or other automakers, and then the automakers tried to pull out, the municipalities handed them a bill although there was no specific contract.

  The other half of the problem is that it is like preferring Canada because of the lower health care costs - they are paid by someone. Instead of lowering taxes, it makes Government better at hiding them. New user's fees, taxing at more stages, doing tariffs or licensing fees - all kinds of creative things. Instead of competing on rates, they compete on stealth.

  I don't understand why shifting the costs of socialism from large multinational corporations to smaller corporations or individuals is to any advantage, unless the policy is specifically to promote corporatism.

  The same thing can happen with easy credit - lower the interest rate in China and it will appear to be business friendly, and we will get a crack-up boom, but that will happen later. This is not a good thing.
  

• Published: January 31, 2006 2:40 PM

• adam

• "...this is a market mechanism to limit taxes, not a political one; tax competition effectively sets up a market for governments, who are forced to compete for "customers" (whether businesses or individuals)."

  evabs wrote "Governments could never function as private businesses..."

  unfortunately, they could never function as private businesses because the access to this market of governments is restricted...

  
  

• Published: January 31, 2006 2:56 PM

• RICH Truxel

• 
  Whether or not Nations should compete based on taxes, they in fact do.
  There are two separate issues here.
  1) The amount of tax revenue to be collected from corporations.
  2) The manner in which taxes are collected.

  A tax code that is more attractive does not mean it must collect less revenue.

  For example, we currently have a coRporate rate of 35%. We allow deductions for interest expense and depreciation of capital investments in order to attract capital investment.

  What if we were to eliminate deductions for interest, depreciation, credits, and change the tax rate to 10%?

  The U.S. would be more attractive vs. other Nations. Capital investment would be more attractive than under todays system because the government would not take as large a share of increased profit.

  Assuming this had no effect on investment or profit, corporate tax revenue would rise by over 40%.
  TODAY’S CODE
  (figures from IRS table for 2001 tax year.)
  EBITDA $2,430 Billion
  Interest $1,100Billion
  Deprecation $850 Billion
  Amortization $110 Billion
  Taxable Income $635 Billion
  Tax $220 Billion
  Foreign Tax Credit $41 Billion
  Misc credits $17 Billion
  Tax due $166 Billion

  UNDER THIS PLAN TAXES WOULD HAVE BEEN $240 BILLION

• Published: January 31, 2006 3:38 PM

• Michael A. Clem

• It's one thing if they lower their overall tax rates to attract businesses, but it's quite another thing when they offer special tax breaks and other incentives to specific companies to relocate, and shift that burden to the rest of the tax base.

• Published: January 31, 2006 8:20 PM

• Dewaine

• What organization is there to prevent tax cartels and tax monopolies?

• Published: February 1, 2006 12:23 AM