As sovereign citizens of a self-governing nation we have a complex relationship with the corporation.  First and foremost, the corporation as a legal entity exists at our sole discretion.  Because we are our own sovereign we have the right to insist (our ability is a different matter) that if we allow the corporate form of entity to be created and to operate in our midst that it do so for our sole benefit.

Our “sole benefit” is complicated because as a citizenry-sovereign we own corporations, work for corporations, supply corporations, live next to corporations, and buy from corporations.  When we, as a citizenry, calculate whether or not corporations are working to “our” benefit, we have to be careful to see only the value that they create for “us” as the sovereign, not the value that they simply move around from “us” to “us”.

Corporations create value best when they are forced to compete in order to be rewarded.  While there are many bases on which to compete, only competition on quality and productivity create value for “us”.  Other sorts of competition, such as bombing each others headquarters, buying government influence, or compromising the safety and well being of their employees reduce the need for companies to compete on quality and productivity.  This reduces the amount of value they create for “us.”

The promise of capitalism is that it forces companies to innovate with quality and productivity.  When companies compete in ways that do not require them to do this, the promise of capitalism goes unrealized.

As citizens, that promise is made to us.  And as citizens it is up to us to require that it be delivered.

Every year America’s government loses $90 billion to off shore corporate tax avoidance schemes¹ based on totally abusing transfer pricing laws. These schemes are well enough known and documented to have fancy names like the “Double Irish”.² This transaction involves three foreign subsidiaries, two of which have no employees and no office, and one of which, in finance parlance, is called the “Dutch Sandwich”.  In Healthcare debate terms that is a budget busting $900 billion tax shelter.

The downside to the companies that employ these schemes is that they end up with billions of dollars marooned outside the country. If they bring it in it gets taxed at 35% like it should have been in the first place. Well, that’s not entirely true. Companies can deduct the taxes they paid to countries like Ireland and Bermuda while they were cheating.

That 35% (less the 12% Ireland got and whatever percent Bermuda got) is why the companies that employ these swindles (Including Cisco and “Don’t Be Evil” Google) are lobbying for a tax holiday.  They would like to complete their heist so they can actually have the money they sent around the world to avoid paying their fair share of taxes on.

It’s obvious why companies would want to do this. But why should we as citizens and taxpayers?  The argument is that all this money would be like a stimulus package the government didn’t have to pay for (except for the third of it the government would give up in taxes). With all this money corporations could invest at home and create jobs.

There are two problems with this argument. The first is that when this was done in 2004, while companies brought back $315 billion they didn’t use it to invest in anything that creates jobs. Almost all of it was used to buy their own stock back. In fact, Hewlett Packard brought back $4 billion in almost tax free profit while they were laying off 14,000 employees³.

The second problem is that US corporations are sitting on a record $1.9 trillion in cash⁴ already. Access to cash is not what is keeping companies from investing at home and creating jobs. The whole reason all our supply side recession fighting programs aren’t working is because we don’t have a supply side problem. We have a demand side problem. Nobody can afford to buy the stuff that would be made with all those investments.

Meanwhile, cities and states are laying off teachers and policemen and we’re being told that unions are the source of our problems.

1. “How Offshore Tax Havens Save Companies Billions,” NPR, March 17, 2011, http://m.npr.org/news/front/134619750?singlePage=true

2. “Google Uses the ‘Double Irish’ and the ‘Dutch Sandwich’ to Avoid Billions in Taxes,” New York, October 21, 2010, http://nymag.com/daily/intel/2010/10/google_uses_the_double_irish_a.html

3. “How Offshore Tax Havens Save Companies Billions,” NPR, March 17, 2011, http://m.npr.org/news/front/134619750?singlePage=true

4. “Businesses stockpile record $1.9 trillion in cash,” Chicago Sun-Times, March 11, 2011, http://www.suntimes.com/business/4251618-418/businesses-stockpile-record-1.9-trillion-in-cash

When Republicans say that unions have abused employers, they are right. But they should admit that employers have also abused employees.

The fact of the matter is that when either employers or unions have too much power over the other… abuse ensues.

This shouldn’t be justification for getting rid of unions any more than it is justification for getting rid of employers.  What it should be justification for is FAIR regulation that is designed to maintain balance, minimize abuse, keep the playing field level, and force the parties to work toward agreements that promote the well being of businesses AND their employees rather than either one at the expense of the other.