Your Boeing argument: based on wrong info on effective corporate tax rate?

HELP me win argument with my conservative boss! I argued your point from recent video about Boeing choosing to make airplane parts in European countries, where corp taxes are higher. Doing this because of the benefits of those taxes -- better-educated workers, better infrastructure, etc. But he says it's not true that corp taxes are higher in Europe. And I think he might be right, though I can see from my google search there is a lot of fog on this point. The EPI says effective corp tax rate in US is 27%, in line with most European countries. How do I respond to this? thanks.

Official response from submitted

More than ever, corporations have learned how to use globalization to evade taxes. This makes good numbers very hard to come by. Here is what we know. The US tax rate on corp profits = 35% but with deductions and exemptions, the EPI and others calculate an average effective rate closer to the mid 20s% which is not very different from calculations of what average Europeans pay. However, averages are deceiving, when corporations from the US relocate to Ireland, Netherlands, etc they can wrangle far, far lower rates or take advantage of public rates that are far lower than mid 20s%. Boeing likely went to Europe for multiple reasons including better tax deals, better relations with final customers in Europe, and so on

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  • Donna Knipp
    commented 2017-04-11 22:46:25 -0400
    Wait — I think I know what happened. You left out some of the OTHER costs of doing business in European countries, that Boeing does willingly absorb.

    For instance, wages are higher, and Boeing (and other companies) have to make bigger contributions to employee pensions.

    So if the effective corporate tax is roughly the same, the higher labor costs in Europe would logically present a barrier to Boeing putting factories there.

    Yet they do locate there anyway. Probably for all the reasons you cite in your video — because they get a better deal in putting factories in those countries.

    I will use this argument on my boss! I think you were on the right track in your video, you just failed to mention these other costs of doing business.

  • Donna Knipp
    commented 2017-04-11 21:02:28 -0400
    Thank you for your answer, but doesn’t this contradict your original point in the recent D@W video?

    You said then that Boeing makes airplane parts in Europe IN SPITE OF HIGH TAXES in France, Germany, etc., and they do this because the high taxes pay for worker education, health care, and so on — in other words because they get good value for their money.

    But now you’re saying that’s not correct — Boeing and other corps are wrangling deals with European countries and don’t really pay high taxes there.

    So I have to conclude that your argument in the video was not based on the facts. When you said that Boeing makes its parts in Europe in spite of high taxes, that was wrong, because they don’t actually pay higher taxes there — right? They put their factories there because they can negotiate a low tax bill.

    I’m disappointed because that’s the corporate/capitalist argument — the big corporations say they will go to wherever they can pay the least tax. And you’ve corroborated that. (And the next point they invariably make is, the US should cut its corporate tax rate to keep them here!)

    I am disappointed that the argument you made in your video does not bear out. I’m not going to blindly accept your word for things anymore! Sorry, I do like your videos but I don’t think you researched this one, and I’m sorry I trusted your argument and adopted it myself. I have frequent debates with my right-wing boss and I lost this one!
  • Richard Wolff
    responded with submitted 2017-04-11 17:48:12 -0400
  • Donna Knipp
    published this page in Ask Prof. Wolff 2017-04-11 13:23:56 -0400