Posted on 03/12/2004 3:19:27 PM PST by det dweller too
The problem of off shoring jobs isn't fixed by limiting free trade, the problem is fixed by changing our tax STRUCTURE that is causing an UNSTABLE economic condition. By our emphasis on the income tax to fund government, we have put the burden on US residents to pay for ALL the costs created by government activity. Those costs become folded into our cost of living and become part of the cost of anything made here. Meanwhile some businesses have figured out they can avoid all those costs and keep their prices low by going outside of our borders.
In 1913, after much struggle and debate, congress got the income tax incorporated with the passage of the 16th amendment. Prior to that, almost all federal revenue was from tariffs. We also had a bad experience with commodity taxes before the revolution [remember the Boston Tea party and “no taxation without representation”], and the tariff was causing trade wars. But the final straw was that the tariff-based system just wasn't bringing in enough money for those politician’s plans.
And the initial income tax rate was very mild, just 1% starting at 5X the median income. So even after the income tax was incorporated, the majority of the revenue still came from tariffs on imports. Interestingly in 1913 the Federal Budget was only about $1 Billion! Today it's about 2,500 times bigger.
Today 90 years later those horrible tariffs are gone, the nanny state is huge and expanding rapidly and virtually 100% of the cost of all this is born by the US taxpayer. By a cruel twist of fate, none of these costs are born on products and services that are sold here as long as those things are NOT made by any US citizens or residents. This is outrageous! The income taxes, corporate taxes, regulations and lawsuits drive the cost of living and producing products and services HERE through the roof and make it nearly impossible for us to produce anything HERE that we can sell HERE.
This is where the problem solving should be done. Shift some of the taxes from income to commodities.
..........TAX PRODUCTS ........... NOT PEOPLE!!!
If there is a tax on commodity sold in this market, and it is the SAME tax rate regardless of where it came from, then nobody can complain. This is fair because it costs something to keep this market here. There are no open sewers on the side of the streets, or thugs with machine guns in pickup trucks roaming the streets, or government officials demanding payoff. This is a peaceful, well ordered and the most profitable market to sell in. Remember, they are coming HERE to sell. It is entirely within our rights to expect ALL merchants selling HERE to pick up some of the costs of having access to this market.
Some will argue that sending jobs overseas has been going on for a long time and the net effect is good, that those are all low tech low pay jobs and that this change opens up opportunity here for the better jobs. Well it looked like that was happening for a while because the technology here could make productivity and quality advantages that could more than offset the cost advantage of going overseas, but nothing stays static. Flush with money from the increased business over the last many years, overseas operations have made quantum leaps in productivity, quality and service. Add the effect of broadband internet connections that put a supplier in China only one mouse click away and you have a situation where a foreign company can match any domestic source for quality, service, selection, delivery, etc. and overwhelm them with low pricing.
An analogy may make it easier to see. Suppose you have a big department store in a town that was very popular. This store offered a place for the local clothing and goods suppliers to sell their products, and in return asked for a 30% cut for the store. Now this system worked fine for many years, then one day some suppliers came in from out of town and, because of a quirk in the contracts, didn’t have to pay the store their 30% cut. At first these out-of-towners only made a few lower quality, inexpensive products and nobody was very concerned about them. After a while though, these out-of-towners started to improve. They slowly got into the higher priced and higher quality products and because they didn’t have to give the store a cut, they could beat everyone on price. The local suppliers worked feverishly to compete by cutting costs, then wages, then staffs, then products, but they couldn’t overcome the advantage the out-of-towners had on pricing. Then the store told the remaining local suppliers that they had to increase their cut to the store to 40% to keep it open. Soon the local suppliers were so financially weak that the out-of-towners could get any business they went after and the local suppliers started to disappear. In the end, the out-of-town suppliers had nearly all the business, and the store went bankrupt.
Leaving the effects of regulations and lawsuits aside for now, If we want to have a stable society again, what we need to do is reduce personal and corporate income taxes and add the equivalent in commodity taxes. The net tax burden on US citizens and residents would not change, so it will be a tax shift and not a tax cut. But for the first time people who bring imports to the market will contribute to the cost of having that market there. The products and services made in this country will be more competitive, economic stability will return and costs will go down, and EVERYONE will be PAYING THEIR FARE SHARE!
So, your solution is to stop stealing from my right pocket, and begin stealing from the left one?
In effect, you want foreign companies to come and build factories on US soil, thus working within the advantage of your system...the Toyota USA model...bringing about the inevitable: rather than employing foreigners overseas to gain a sustained competitive advantage in the world stage, we will instead sell our native market to foreign corporations, who, by virtue of their ability to sell their wares to the rest of the world unemcumbered by competition from US manufacturers, will have far greater financial resources than US industries and the wherewithal to build factories State side.
End result, rather than employing foreigners to work for us, we will be employed by foreigners.
Yeah...that will save America.
So, people can either program software or flip burgers?
How come those are the only two jobs you all can see in the American economy?
As long as that regime is Republican or Democrat. And by the time that the people decide it's time to change, if they ever decide that, it will be too late to reverse the trend.
Since there is no such thing as free trade (otherwise there would be no fight for it) prove that the free trade theory works. Give us an example of free trade and how it benefits all. Not an explanation of the theory but rather a concrete example.
So, making more doctors available for our people is a bad thing?
Maybe, but if he is he is barking up the wrong tree. A Vat tax is applied at every level of production from raw material to assembly. Thus there would be WAY more taxes bundled into a totally domestically created product as opposed to a competive foreign product that could only be taxed at the final retail sale.
I thought he meant a federal retail sales tax, but actually I'm not sure he knows just WHAT he means.
Naturally, it goes over big in Europe.
It's not that simple. Many offshored jobs are "blended" with jobs onshore. For instance, with call routing through IVRs, the next available agent is given the call, whether here or in India.
The cost of a project may involve programming offshore with project management onshore.
Your tariff scheme would be an absolute nightmare, both for the companies trying to track the source of their services, and the auditors who were trying to enforce compliance.
Yes, but first you put money in that left pocket that used to be taken from your right. Then you look around and see the guy that was putting you out of work has to take money out of his left pocket too! And he has to take more money out if he is selling more than you. Suddenly you feel the tightness in your chest letting up and you can breathe again.
As far as foreign companies coming in and setting up plants here YES YES YES! The Toyota and Honda plabts in Tenn and Ohio are wildly successful for the local economies where they are located. And China is not stupid. They had GM build a plant and train the workers before they would agree to a trade contract. Now they hav a plant and a trained work force. Watch for those vehicles showing up here sometime in the future.
First off, it is NOT a tariff scheme! Its a commodity tax that EVERYONE pays equally.
As far as tracking and auditing, well how do those companies get paid today? Billable hours, additional programming or consulting, whatever they invoice for services here will get a portion deducted for government overhead. Maybe we can call it an invoice tax? I'll have to think about that a little more. Either way there will be a lot of accountants who used to track income looking for work also.
I could go for that, coupled with Retail Sales Tax (RST).
If you're talking about a national sales tax (a tax on goods and services at the point of delivery), I don't see how that would stop offshoring, unless you're saying that we tax offshoring MORE. If that's the case, then my "blended" argument holds even more.
Some of that stuff is simply not traceable, or a company can offset the additional tax by offshoring MORE.
Come-on guys, this is not that hard. There is a charge when you invoice for the product or service, but FIRST FIRST FIRST get this: You take off of domestic products the overhead cost from personal and corporate incone tax. Now every product will have a commodity tax added to cover the burden of selling here. This will then be the elusive level playing field everyone always wanted to find.
The cost of labor is still less in India than in the United States.
It will be a little simpler for me if you state that know you know the difference between a a VAT and an RST and then tell us which one you are talking about.
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