By Matthew Dunn
Taxes: we all hate paying them. We pay them when we buy things, we pay them
on our income, and we pay them on our homes.
Every year most of us hire some kind of tax expert to try and help us
save a few bucks on our taxes. We love
to complain about taxes and how high they are.
But as much as we complain, we always do it, partly because we want to
be good citizens, partly because we have no choice, and partly because we don’t
want to go to jail.
There
is one group of people that hates paying taxes more than any other group in the
United States though. These are the
people who are in charge of America’s corporations and large businesses. However, unlike the rest of us, corporations
have the ability to escape taxes.
Sometimes, they do this by lobbying Congress to change tax laws and
sometimes they do this by hiring highly skilled tax professionals. One way which has come under more scrutiny in
recent years, is that corporations move their bases of operation to places
which have much lower taxes, to so called “tax havens”.
This
was explored on a piece in 60 Minutes. Journalist Leslie Stahl visited tax havens
and also visited with corporate leaders to discuss this issue. In her report, she spoke to corporate
officials, and economists who thought that the corporate tax rate of 35% in the
United States was much too high. Companies
could move their bases to other countries, and pay a much lower rate. Stahl interviewed John Chambers, the CEO of
Cisco, and Chambers defended this practice.
He said that because corporate taxes are lower abroad, then companies
will move there. When this happens
unfortunately the United States will lose tax revenue and jobs.
This is
a view shared by a great deal of corporations within the United States
today. Recently, Apple CEO Tim Cook,
appeared before the U.S. Senate, and scolded the government for its outdated
tax system and its outrageously high corporate tax rate. Because of these tax conditions, corporations
move part or all of their operations to countries like Ireland, where they have
a friendly tax environment. However, not
all companies move abroad to gain favorable tax status. A lot of them move within the United States,
to Delaware, to get the same treatment that they can get at international tax
havens.
Delaware
is a very small state, both in area and in population. Besides current Vice President Joe Biden and
the fact that it was the first state, I can’t off the top of my head think of
anything that it’s famous for. However,
Delaware has been known in business circles for quite a long time. That is because Delaware has a long history
of creating favorable conditions for business.
The
number one favorable condition for business in Delaware, is the fact that it
has no corporate tax rate. This alone
would draw great amounts of business but it is not the only reason. Delaware also has no laws against usury
(loaning money at excessive rates of interest).
This is why almost all of the credit card companies are based in
Delaware. In addition to these
conditions, Delaware is famous for its Chancery Court. Delaware’s Court of Chancery, is considered
the leading court in The United States in matters of business law, and many
companies prefer to use this court in sorting out their business disputes. Delaware is home to many prestigious corporate
law firms so they can access this court system.
Because
of these conditions, Delaware has become a great state for doing business. Delaware has over 800,000 businesses
chartered. This is especially amazing
considering that the current population of Delaware is under 1,000,000. That makes as many businesses as 4/5 of the
state’s population. Besides credit card
companies, Delaware has been a favorite location of companies who package
complex financial instruments, which most of us first became familiar with
during the financial crisis.
So
Delaware has created wonderful business conditions, and in return many
businesses have opened up shop there.
Delaware has combated the so called anti-business policies of the U.S.
government and given business a place to thrive. However, although business in Delaware may be
thriving, many of the people who live in Delaware are not.
According
to the most recent study from the United States Department of Labor, Delaware’s
unemployment rate is 7.2%. This puts it
at the 31st highest unemployment rate in the nation. For young people who are hoping to enter the
skilled workforce, the only major state university in the state of Delaware is
the University of Delaware. The tuition
rate for Delaware residents is currently at $11,192 a year for state residents
according to U.S. News and World Report.
The University of Delaware is also ranked by the same report as the 75th
best college in the nation. In contrast
to the University of Delaware, UC Berkeley, long thought of as one of the best
colleges in the United States and #21 on the same list, had a tuition rate of
$11,767 a year for state residents. Add
to this, that Delaware does not have any public law or medical schools, and it
appears that Delaware students have a very limited and expensive options when
it come to professional degrees.
Delaware
also made national headlines in 2009, when their legislature voted to allow
gambling on sporting events. Although
this move, was criticized by some major sports leagues, Delaware saw it as a necessary
step to helping its fiscal woes.
Delaware had been running a large state deficit, and gambling was seen
as a way of bringing revenue into the state.
When states run deficits, they cut public services which negatively
impact many citizens of those states. So
even by creating a friendly climate for business, Delaware was not able to
solve its fiscal and employment problems.
What
might be seen as possibly the most troubling aspect of Delaware though is the
condition of its largest city, Wilmington.
Although Wilmington is one of the centers of business in the United
States, Wilmington has an unemployment rate that hovers around 10%. With these consistent high rates of
unemployment, Wilmington also has a great deal of problems with poverty,
health, and crime. Wilmington has one of
the highest rates of HIV infection, leading to a type of public health crisis
in the local community. In 2010,
Wilmington had 27 homicides. This may
not sound like a lot, but also consider that Wilmington is a city of only
70,851 people. This gives Wilmington a
homicide rate of 38.10 people murdered per 100,000. This homicide rate gives Wilmington a higher
homicide rate than Johannesburg, South Africa, considered one of the most
dangerous places in the world. Indeed
for reasons like this, Wilmington is considered one of the most dangerous
cities per capita in the country, and 98% of American cities are considered
safer than Wilmington.
Many
American states and cities seem to be starving for revenue at this time. Corporations complain that corporate taxes
are too high and they have to go elsewhere to employ people. However, states will not solve their
financial woes by catering to business’s needs.
Delaware, has about the most friendly business environment, and it still
has a host of problems. In fact,
Delaware is largely exploited by businesses and businesses generally just use
Delaware as an address without providing meaningful employment to the citizens
of the state. If state leaders want to
find solutions to their fiscal woes, then they will have to stop bowing to the
needs of wealthy businesses who always seem to be trying to get something for
nothing.
*Much of the information for this article was found in Treasure Islands: Uncovering the Damage of
Offshore Banking and Tax Havens by Nicholas Shaxson. This very detailed book provides information about
corporate policies and tax havens all over the world.
No comments:
Post a Comment