I love reading the Economist. It motivates me to think in ways that I may not have, if I wouldn’t have read the articles. This week’s offering is no different. Two articles stood out to me. “The Missing $20 Trillion,” and “Who Can Save Italy,” both had me thinking about the problems we are facing as a nation.
The missing $20 Trillion discusses how large firms, and others, are dodging taxes. Amazon and Starbucks, both well respected companies in the United States, but are facing a backlash of negative press in Europe by their ability to use “accounting tricks to book profits in tax havens while reducing their bills in the countries where they do business.”
The article then discusses how corporations attempt to take advantage of tax havens all over the world. The Cayman Islands is the home of 18,000 companies. I’ve been to the island; it is not that big. I have no idea where those 18,000 companies are located. The fact is they are just calling the Cayman’s home because of its tax shelters. As much as we want to vilify the Cayman’s, Delaware is home to 945,000 companies due to its very friendly tax structure. Lets not forget Miami, London, Luxembourg, Ireland, and the Netherlands known for their low taxes. The amount of money being held overseas due to our extremely high tax rates is now well over $20 trillion. As the Economist notes, “Civilization works only if those who enjoy its benefits are also prepared to pay their fair share of the costs.” Our tax structure is a problem, but even more dangerous is our move to become more like Italy.
Mario Monti’s reforms in Italy have worked. However, there is so much more to do. Italy has a huge public debt, its GDP per person has fallen, and its economic growth is one of tot happy, the worst in the world. “In the global league table of growth in GDP per head, it comes 169th out of 179 countries over the period since 2000, beating only a handful of basket-cases such as Haiti, Eritrea, and Zimbabwe.”
The people of Italy are not happy with the situation, and may reelect Berlusconi, the previous Prime Minister. This man is a pervert, and the wrong man to lead Italy to the path of economic growth. Monti, who took over for Berlusconi, has been working to lead Italy back to economic health, trying to repair what eight years fo Berlusconi..
The fact is, Italy’s cronyism is unsurpassed. It can be observed in its “protected economic interests, from notaries to pharmacists, and from taxis to energy suppliers.” However, my worry is we are becoming like Italy with far “too many layers of government: provincial, regional and local administration that duplicate rather than replace the activities of central government.”
The fact is, and even Phil Mickelson recognizes, our taxes are too high leading those who can to find those tax havens. And if we continue to grow government my fear is we will end up like Italy having a sex-crazed leader who wants to party all the time. Oh wait a minute, we’ve had a few of those already. We are doomed.
And that is my thought for the day!