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this post was submitted on 26 Oct 2024
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Sure, they can relocate. But you could structure the law so that you can't sell anything then. Apple is free to leave the US and not pay taxes, but then they are not allowed to sell anything in the US, have any offices in the US or hire anyone in the US. Of course such a law would never happen. But it's absolutely possible in theory.
So, why would they sell anything? What incentive does a corporation have to do business in a region where taxes are punishing? Why not just focus their efforts in Europe, South America and Asia?
It would be like Cuba. If you want a car, you can buy one... but it's going to be a Franken-car built from the parts scrounged together from the last time there were car companies operating in the country.
The incentive is to make a profit. It would just be enormous profit instead of an unimaginable one.
Plenty of companies concentrate their efforts in places that are the most profitable and ignore areas that are less profitable.
Just look at how many companies are only available in the US and not available in Europe, Asia, even Canada. Sure, they might get around to the US eventually, but it would be lowest priority since it's the least profitable territory.
Being a huge market is still a major factor. A company would still prefer to do business in a 300M population English speaking country with a 10% profit margin, than a 10M population country with a 30% profit margin. But you are correct, companies that don't want to pay taxes would leave. I say good riddance.
Right now, a lot of companies start in the US because the US is the best place to start. 330 million people, one language, good profits, etc. But, a punishing tax might mean that the profit margin is much less than 10%. 10% is a huge profit margin for most businesses, so it might drop from say 5% to 1%. At that point, Europe looks a lot more promising as a place to start. 450 million people, for the most part it's one regulatory zone, you do have to have things in multiple languages, so that's a bit difficult.
Then, after Europe there's east Asia: Japan, Korea, Singapore, Taiwan. Then slightly poorer countries like Indonesia and India. Maybe South America next.
The US would be near the bottom of the list if it was the only country with a punishing tax rate.
They'd still be profitable... At the end of the day the workers create the wealth. All we'd be doing is putting that wealth towards what we collectively agree on before anyone can take it as profit. But, there'd still be profit left over.
They'd still be profitable, but less profitable, so they'd be lowest priority.
If you're American, you may not realize this, but there are a lot of products and services that are only available in the USA because that's the most profitable place for them. The companies have plans to eventually expand to Canada, and then maybe Europe, but the focus is now on the US because that's where the profit is.
If the US had extremely high taxes for those companies, they'd focus elsewhere. Sure, eventually they'd get around to the US once they saturated the European, Asian, Canadian, Mexican, South American and African markets, but it would never be a priority. And, for a lot of companies, "getting around to serving the US market" just wouldn't happen.
Well I'd hope those other places would follow suit. But also, the free market would still allow others to fill the shoes of the companies that left. And whether a company pays a worker who then pays taxes, or whether we cut out the middleman and the company just pays the taxes directly, it's the same amount leaving the company. But also, if corporations actually had to pay taxes maybe they'd start pushing on each other to stop gouging the government.
The Free Market would also allow them to set up their business in Europe and go for that market instead. And, since they make a much bigger profit in Europe than in the US, that would be their focus. The only companies that would set up in the US are the ones that are not able to make the bigger profits available in Europe.
This is basically like the car market in the USSR after WWII. The major American, European and Japanese automakers didn't operate there, but of course that didn't mean there weren't any cars. It just meant that there weren't any good cars.