Is Romney's company ,Baine, part of the lay off problem in America, playing a major part in outsourcing jobs?
- 8 years agoFavorite Answer
Yes, Bain is part of the problem. The problem is our low tax rates. Higher top marginal tax rates favor capital intensive firms, as they have ample deductible avenues to sink their gross profits into. "Capital lite" firms are finance, professional services, media stars as they don't really produce anything, and don't use much capital to produce what they do. So, the corollary is true that low taxes favor these firms, and high executive salaries. We used to have 70% top tax rate on income exceeding $200k, from Kennedy into Reagan.
Since Reagan cut top tax rates, and capital gains, it simply made it easier to liquidate capital (selling off factories, off-shoring, out-sourcing) which corp executives could profit on the spike in profits in the short run. In the case of higher rates it's harder to justify selling a plant when you get taxed on 40% of the profits, versus the 15% tax today. I suppose you can also see how low taxes increase flipping, and speculation, as capital gains discourages seeking profit this way.
But, that's not the only way cap. gains works, capital (physical infrastructure, equipment, machines, robotic fabrication) ages, and as it ages a firm gets to write off or depreciate that loss of value. That write off is depreciated at the cap gains rate, so a firm can get 40% of their value lost to aging as a tax credit, versus 15%. So, the higher the cap gains rate, the advantage goes to more capital intensive firms.
The same is true for small businessmen and entrepreneurs, they're hard to tax cause they have so many things they can invest in, or co-mingle. If I have a great year, I can buy a new "company" truck for me to drive, and my gross profits are reduced by that expense. Other deductible expenses are hiring, employee benefits, bonuses, training, R&D, upgrading tools, machinery, and equipment. The higher the nominal tax rate, the greater the incentive to divert gross profits into deductible avenues to reduce my net profits, which is the rate firms large and small pay taxes on.
Now, a backwater country, or Confederate state might need to lower taxes to attract business, but the US has the greatest consumer base on Earth. Higher tax rates won't cause firms to flee; to the contrary, it will cause firms to produce more here, to seek those capital expenditures to reduce their net profits. The cost of our labor, are discounted by the tax rate. (Just as when one "writes off" a meal, they sort of get a discount at the top nominal tax rate--so at 35% (the current top rate) you essentially get to keep that margin, just as at a higher rate, you get that discounted at that higher rate.
So, firms like Bain are part of the problem, but they're in many ways a symptom of low tax rates, which encourages the financial games they capital lite firms play, that has elevated the share of finance from 15% when Reagan took office, to become 40% of the economy today. These firms don't add a dime to GDP, as they don't make anything, they and lawyers, accountants, bankers, even corp execs, don't make anything, they hopefully make the economy function more efficiently. But, if we suppress their salaries, with a high top marginal rate, say 50-66% on income exceeding $1million/yr, they will presumably generate those same efficiencies, but for a smaller cost to the economy.
GE and GM were manufacturing powerhouses domestically, who saw fit to create generous pensions for their employees. High taxes did that. And, since Reagan, both firms have ended their pensions, shuttered much of their manufacturing, executive salaries have skyrocketed, and both firms are increasing financial firms as domestic producers. Finance is 40% of the economy, and as such a very real "tax" on the economy.
- SocratesLv 78 years ago
Only if you look as having a job as Communists do, as a right. Romney's company, Bain Capital, would provide capital for troubled companies, restructuring, firing and lay-offs were necessary to fix them. 80% of those companies returned to profitability. Bain is like an ICU for businesses. Like a real ICU, some just don't make it.
The real problem with corporate outsourcing is that the US now has the highest corporate tax rate in the world. Changes in the tax code under Bush allowed business to take advantage of outsourcing in dealing with corporate taxes. The unemployment rate, with outsourcing during Bush was as low as 4.4% in 2007. Unemployment had been dropping steadily from 6.3% starting in 2003. Outsourcing had little effect in American unemployment.
- Anonymous8 years ago
That question has been asked, and researched, and the answer is that there is no evidence whatsoever that Bain outsourced any jobs.
- JayLv 78 years ago
A major part? No. GE outsources more jobs than Baine ever did.
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- MikeLv 78 years ago
No. The liberals, unions and trial lawyers caused outsourcing. This is the unpalatable truth. It wasn't corporate greed that caused it, it was the only way the companies could survive in such an anti-business environment the the liberals have created in the United States.
- Anonymous8 years ago
Barack Hussein Obama's jobs czar Jeff Immelt's company General Electric is.
- BadWolf63Lv 78 years ago
On the other side your messiah's friend (and Job Czar) IMMELT and his GE...
"For those unaccustomed to the loopholes and shelters of the corporate tax code, GE's success at avoiding taxes is nothing short of extraordinary. The company, led by Immelt, earned $14.2 billion in profits in 2010, but it paid not a penny in taxes because the bulk of those profits, some $9 billion, were offshore. In fact, GE got a $3.2 billion tax benefit."
- Anonymous8 years ago
high cost of doing business is the layoff, outsourcing problems in America.
- 8 years ago
In my area, one of those "green companies" we heard so much about made a lot of promises and then laid everybody off. Funny thing is, though, all the big guys got bonuses. How'd they work that out?