Jigsaw puzzles and American corporate taxes

Some of my shorter and younger friends and I have been playing with jigsaw puzzles lately. We started with a few from Ravensburger. These are made in Germany. Every piece from every puzzle has been perfect. Then we moved on to a 550-piece puzzle from White Mountain Puzzles. The box is proudly stamped “Made in USA”. The price is about the same but the quality is ridiculously poor by comparison with “hanging chads” marring a lot of pieces as well as some delamination of the photo and cardboard. I thought “If I cared about making puzzles I would emigrate to Germany.”

This dovetailed with news reports of American politicians fulminating against multinational companies officially relocating from the U.S. to Ireland, Switzerland, England, and other countries with lower corporate tax rates. The language used is more or less the same as what I’ve heard from Third World leaders over the past four decades as various forms of currency controls are imposed in an attempt to stop capital flight. The main objection seems to be that the relocation is a sham and that the top executives stay put in the U.S. and run the company from here. I’m wondering if we wouldn’t ultimately be sorry if we got what our politicians say that we want.

Consider a multinational such as Procter and Gamble. Their executives sit in Cincinnati. The growth that they are supposed to be managing is mostly in Asia, Africa, South America, etc. The company might do better if the executives relocated to Dubai, for example, closer to growing markets, or to Switzerland, with its inherently international character. If we put a stop to corporate relocations where the top managers stay put in the U.S., pay U.S. income tax rates, pay U.S. property tax rates on their mansions, etc., wouldn’t the next logical step be a wave of corporate relocations in which the executives move as well? To save billions of dollars in corporate taxes would it be such a hardship to move from Cincinnati to Geneva? Just catch the company Gulfstream for a ride back to the high school reunion…



Philip Greenspun’s Weblog

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