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Joss Delage

Why do US companies stay in the US?

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I'm curious what people think. I was listening to Jason Lewis ranting about the anti-Exxon feeling. He explained that Exxon pays as much taxes as ... I can't recall the number, but something like 70% of the US population.

In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees. What do people think?

JD

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Just to get an idea of where the top 500 companies in the world are located, take a look at this link:

USA 162

Japan 67

France 38

Germany 37

Britain 33

Note that these lists all include state-owned companies. China has 24 and it looks like nearly all of them are state-owned.

Taxation isn't everything. The fact that the US has the rule of law and a good property rights system in the civil courts is immensely beneficial. The fact that this rule of law and civil courts system has been relatively stable for the past 100 years is even more valuable. Businesses need stable laws. All of the top 5 countries have been free since WWII, with the exception of half of Germany.

Another issue is location. Many companies are headquartered in the country where they do their most business, because this is more practical for logistical or other reasons that I don't know how to explain. The population of the US (which means a large, wealthy market size) is also bigger than the four countries below it. A company may be hit with regulations or tarriffs if it is headquartered outside of it's main market (and the US is one large, wealthy market).

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In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees. What do people think?

Since the advent of Sarbanes-Oxley, many companies opted to go public on non-U.S. exchanges such as the London stock exchange. If you search on it, you'll also find many evasions (from Americans) on the part of those wanting to deny it as a factor. The disastrously bad American educational system hasn't helped either. Any modern company needs workers with knowledge and thinking ability. If those people can't move to America because of boneheaded quotas, the companies will go to them.

Hundreds of thousands of wealthy Americans have packed up and moved elsewhere with no intention of returning.

So, it's already happening, and it will accelerate as long as the U.S. proceeds on a downwards statist trend.

Additionally, there are wealthy people who might otherwise have moved to America who are dissuaded by arbitrary quotas and those same negative factors.

There's a certain arrogance on the part of some who believe America is "intrinsically" going to be #1 no matter what it does - the same sort of arrogance that used to be held by GM (and Ford) even as its dominant market share steadily shrunk year by year by those wanting cars that didn't cost them a fortune in money and time to fix, who bought Toyotas (and in 2007 surpassed GM in global car sales.)

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I'm curious what people think. I was listening to Jason Lewis ranting about the anti-Exxon feeling. He explained that Exxon pays as much taxes as ... I can't recall the number, but something like 70% of the US population.

In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees.

Such as where? The Heritage Foundation's Index of Economic Freedom (Top 10 here) puts the USA fifth, with Hong Kong first.

There's also the issue of cost of relocation. A very large company, with say 100k employees, could not expect to move the majority of them. How many would be willing to move their families from San Jose to New Dehli? If they pick up new employees en masse, there will be huge learning curves and lost know-how. Plus the culture of the company will change, perhaps in a fatal way. While it is fairly easy for a company in California to incorporate in Delaware or Nevada for tax reasons, it's far harder to move the company HQ.

It's easy to trade one currency for another, or buy/sell stocks, but homes and businesses are far less liquid. This makes their owners far less nimble in responding to marginal changes in property law, taxes, and regulation. I know small business owners in California whose state-mandated costs are bleeding them dry but remain here because it would cost too much to move across the border to Nevada.

So, if there were to be a mass exodus of large multinationals leaving the US (vs the post-SarbOx exodus of IPOs) there would have to be an enormous increase in the cost of doing business and a relative discount to doing so elsewhere.

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The per capita expenditure capacity of one's return on earnings is higher is still higher in the US than anywhere else for now.

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The per capita expenditure capacity of one's return on earnings is higher is still higher in the US than anywhere else for now.

Could you explain what this means? I'm lost.

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The per capita expenditure capacity of one's return on earnings is higher is still higher in the US than anywhere else for now.

Could you explain what this means? I'm lost.

To move a company to the Maldives where food is cheap, for the fewer legal constrictions and tax breaks means you still have to bring everything else in that you would buy in the U.S., and there would be at a high cost - laptops, highlighters and high chairs. In the U.S., your earnings buy a great deal per person, and your ability to access those goods and purchase homes of relatively decent quality is greater than elsewhere.

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In the U.S., your earnings buy a great deal per person, and your ability to access those goods and purchase homes of relatively decent quality is greater than elsewhere.

There definitely aren't many places in the world where I can go to look at electronics on the scale of a Fry's store, as well as Costco and other megastores. And, America is still relatively young with a relatively low population density inside of the coasts, so there's still inexpensive land.

From my limited international travels (New Zealand, Singapore, London, Switzerland, Canada), I still feel relief and a sense of homecoming after returning to America, as interesting as other places have been, and continue to assist with the spread of Objectivism in America on the theory that there's hope for the country. Currently, there's no other place I would rather be, but I can imagine that changing if certain trends continue.

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In the U.S., your earnings buy a great deal per person, and your ability to access those goods and purchase homes of relatively decent quality is greater than elsewhere.

Is this documented somewhere? How is this measured? That would seem to be a real measure of wealth.

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In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees. What do people think?

Since the advent of Sarbanes-Oxley, many companies opted to go public on non-U.S. exchanges such as the London stock exchange. If you search on it, you'll also find many evasions (from Americans) on the part of those wanting to deny it as a factor. The disastrously bad American educational system hasn't helped either. Any modern company needs workers with knowledge and thinking ability. If those people can't move to America because of boneheaded quotas, the companies will go to them.

Hundreds of thousands of wealthy Americans have packed up and moved elsewhere with no intention of returning.

So, it's already happening, and it will accelerate as long as the U.S. proceeds on a downwards statist trend.

Additionally, there are wealthy people who might otherwise have moved to America who are dissuaded by arbitrary quotas and those same negative factors.

There's a certain arrogance on the part of some who believe America is "intrinsically" going to be #1 no matter what it does - the same sort of arrogance that used to be held by GM (and Ford) even as its dominant market share steadily shrunk year by year by those wanting cars that didn't cost them a fortune in money and time to fix, who bought Toyotas (and in 2007 surpassed GM in global car sales.)

Take a look at any relatively stable, low tax country, that respects property rights and has law enforcement well handled, and you'll see an increasingly rich country. I was in Dubai recently, and with the slight worry of death from fallout if Israel ever nukes Shiraz in southern Iran, it's a magnet for so many companies.

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Another issue is location. Many companies are headquartered in the country where they do their most business, because this is more practical for logistical or other reasons that I don't know how to explain. The population of the US (which means a large, wealthy market size) is also bigger than the four countries below it. A company may be hit with regulations or tarriffs if it is headquartered outside of it's main market (and the US is one large, wealthy market).

The term taught in my high-school "business studies"/economics classes was "localization of industry."

The rise of the World Wide Web has freed certain economic players (in software and other service industries) of the need to be physically situated near partners and vendors. Yet, the overall geo-cultural context of a business is still very important, and the U.S. remains the world leader. I don't see this changing drastically in the next forty years. The biggest market of ideas is still the U.S., and I haven't heard of any fundamental, not-easily-reversible acceptance of capitalist principles occurring in any other part of the world. (If anyone knows differently, please correct me.)

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I'm curious what people think. I was listening to Jason Lewis ranting about the anti-Exxon feeling. He explained that Exxon pays as much taxes as ... I can't recall the number, but something like 70% of the US population.

In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees. What do people think?

JD

As technology improves and makes video phones practical and dependable, as file sharing technology goes mainstream in companies, and as companies themselves and their CEO's wake up to the fact that there are places that would welcome them, then they will move, far more quickly than before. This is especially the case for information based companies and I think the pace of change in the next two decades will really catch some politicians napping as their Atlases head for lower tax, lower regulation, lower intereference, safer, more free areas.

We saw this in Britain in the 1970's when a high taxing Labour government drove away technologists, the media labelled it the "brain drain" and it wasn't until Thatcher reversed these policies that the drain was stemmed. We are seeing it again, but it is to some extent being hidden by high net immigration from the new EU member, Poland. (Incidentally, to show you how politicians don't have a clue on this one, they predicted Polish immigration at 30,000 per annum, it is in fact ten times that).

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The answer, I think, is that they are moving - as much as they can. This is the root of the "outsourcing" phenomenon, just like the "sweatshop" phenomenon before it. Companies have massively moved out their manufacturing, their customer support and are in the process of moving out product development itself.

To a very large degree, companies (and more importantly, their capital) have left the US. The fact that they keep their corporate headquarters in the country does not mean that the actual production of values is there.

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In the U.S., your earnings buy a great deal per person, and your ability to access those goods and purchase homes of relatively decent quality is greater than elsewhere.

Is this documented somewhere? How is this measured? That would seem to be a real measure of wealth.

In the consumption-to-income ratio, which really is not the consumer price index alone. Meyer and Sullivan elaborate on this topic in this paper (.pdf version). The consumption-to-income ratio keeps going down in America such that the poor have a lot of the same things (HDTVs, BlackBerry Pearls, etc.) that the so-called rich have.

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In the U.S., your earnings buy a great deal per person, and your ability to access those goods and purchase homes of relatively decent quality is greater than elsewhere.

Is this documented somewhere? How is this measured? That would seem to be a real measure of wealth.

In the consumption-to-income ratio, which really is not the consumer price index alone. Meyer and Sullivan elaborate on this topic in this paper (.pdf version). The consumption-to-income ratio keeps going down in America such that the poor have a lot of the same things (HDTVs, BlackBerry Pearls, etc.) that the so-called rich have.

As to the per capita aspect, China's economy may have been reported at 11% last year so that 7.2RMB equals $1 USD (because the PRC won't let it appreciate any higher than that), but basic goods (and I'm referring to wheat stalk brooms here, not vacuums; this is at the most level) have inflated anywhere from 35% to 60% depending on which report and region you look at. The consumption ratio per capita still can't match America's despite the alleged growth due to population size. However, given that a mixed economy has to grow about 3% per year to maintain constant employment levels, we'll see what happens to the average individual consumption-to-income ratio in 2008-2010.

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I'm having some difficulty believing Ireland, an EU member, is so high on that list. Do they ignore their directives or something?

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Some income tax relief for income from patents helps, which Indiana copied over this year.

Interesting, I hadn't heard about that before. Now all that's needed is exempting patent income from federal taxes. :rolleyes:

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I'm curious what people think. I was listening to Jason Lewis ranting about the anti-Exxon feeling. He explained that Exxon pays as much taxes as ... I can't recall the number, but something like 70% of the US population.

In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees. What do people think?

JD

I think that they are moving out, to places like Japan and China. Everyone in my family is always complaining about it...well, we kind of did it to ourselves. Americans tend to take corporations for granted, and now we're seeing what happens when we demand $10 for sweeping the floor or doing dishes. Damn unions. :)

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I'm curious what people think. I was listening to Jason Lewis ranting about the anti-Exxon feeling. He explained that Exxon pays as much taxes as ... I can't recall the number, but something like 70% of the US population.

In any case, I have been wondering why some of the most abused companies not just pack and move. Surely there are countries that offer better legal and tax environment, for the companies and their employees. What do people think?

JD

I think that they are moving out, to places like Japan and China. Everyone in my family is always complaining about it...well, we kind of did it to ourselves. Americans tend to take corporations for granted, and now we're seeing what happens when we demand $10 for sweeping the floor or doing dishes. Damn unions. ;)

"You can't treat the working man this way. One day, we'll form a union

and get the fair and equitable treatment we deserve! Then we'll go

too far, and get corrupt and shiftless, and the Japanese will eat us alive!"

This is a quote from a worker in a Simpsons episode :)

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"You can't treat the working man this way. One day, we'll form a union

and get the fair and equitable treatment we deserve! Then we'll go

too far, and get corrupt and shiftless, and the Japanese will eat us alive!"

This is a quote from a worker in a Simpsons episode :)

I saw that. They were looking for Atoms he was smuggling out (They found 6). Very funny episode.

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