Race to the bottom

I was reading through this infographic/cartoon over at The Big Picture and started thinking about the race to the bottom we see with state tax laws.  Here in Washington, of course, we’ve done our share of corporate shoe-shining to keep certain large companies in town (which employ a lot of people, to our state’s benefit), but obviously taxes for incorporating in a state are another matter.  If I incorporate my billion dollar LLC in Delaware to take advantage of the cheap taxes, but I don’t actually locate my physical business there (maybe there’s isn’t enough room in Delaware for a large warehouse, e.g.), then Delaware isn’t trading tax revenue for jobs, it’s trading no tax revenue for some tax revenue, at the expense of another state.

It’s always bothered me that companies can simply open a Mailboxes Etc. account in Wilmington and suddenly reap all sorts of tax benefits, and I can’t understand why other states let them do it.  Fred Clark had an interesting observation the other day, that we know Wal-Mart doesn’t pay $12/hour because if they did they’d be fighting for the minimum wage to be set higher.  After all, if your competitors are paying less than you, then you can hurt them by setting the pay floor right at your company’s level.  So why not apply this to the states?

Maybe every state out there (other than the obvious tax havens) should get together and pass an Amendment to set a corporate treatment floor.  Maybe have a new inter-state body (doesn’t have to be federal, because I don’t want to get into that analysis) that sets things like minimum effective tax rates, incorporation restrictions, etc.  Allow states to be treated fairly by their own citizen-companies instead of begging for any scrap that they’re willing to part with.

About nickgb

Computer programmer, lawyer, and aficionado of many dorky things that, in reality, you probably can't be an "aficionado" of. nickgb is a fanboy of Whedon, Sorkin, Gary Cole, Matthew Perry, and anything that brings together casts of his favorite shows (which, by definition, were all canceled "way too early").
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3 Responses to Race to the bottom

  1. Pino says:

    Maybe have a new inter-state body (doesn’t have to be federal, because I
    don’t want to get into that analysis) that sets things like minimum
    effective tax rates, incorporation restrictions, etc.

    Could it instead be better policy just to simply admit that taxing corporations is a losing bet? Find the revenue elsewhere ot, perhaps, simply learn to live on less.

    • nickgb says:

      And then every single person with make a personal corporation and shield all assets through it, and there will never be any taxation on anyone! Yay! We could also avoid messy problems with law enforcement by getting rid of criminal laws! People could enforce the laws themselves, or simply learn to live with less security.

      I’d be fine with corporations not paying taxes as long as they promise not to use a single public good. No using our roads to ship goods, no using our police to investigate theft, etc. Otherwise, you’re asking every taxpayer to subsidize the wear and tear that corporations put on our infrastructure and resources.

  2. Karl Kahn says:

    Fred Clark’s observation stops working as soon as you consider that labor supply is a thing.

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