December 13, 2017

Corporate Robbery

For some time I have been concerned about the consolidation of industries and in what may result. An obvious one is competition will decrease with prices rising as perhaps quality deteriorates. This decrease in quality can be partially offset by competition coming from overseas.


The recent reduction in corporate tax rates brings to light a bigger, riskier problem for the country. BLACKMAIL BY CORPORATIONS.


As Industries consolidate we become more dependent on fewer entities for job creation and growth.  With more dependence, comes more power to these entities. Power to control wages, taxes even our politicians. With control over politicians they control our laws. They could become so powerful they could end up controlling their own tax rates.


Some say government will, before this happens, step in to assure corporate tax rates remain high enough so the average citizen will retain their high standard of living. I am not convinced.


The world has changed. All nations have recovered from the devastation of World War II. Modern transportation, computers and the internet effectively has made the world smaller. Buick produces more cars in China than in the United States. Europe is presently the largest consumer market in the world. In a relatively short time Europe will be replaced by Asia as the largest marketplace. There are new innovations on the horizon that will make the world even smaller.


Another result of lowering corporate tax rates is wealthier individuals will use corporations as a tax planning tool. By owning a corporation one can effectively lower his tax rate to 20% and build wealth that much faster. When you need personal income you declare a dividend and transfer funds to your personal account.


As corporations consolidate they gain more power and influence. With nations competing for jobs, corporations will pit one nation against another reducing the nation's wealth at the expense of the consumer. Political power further transfers from nations’ capitals to corporate board rooms.

I foresee a day when a large, multinational company threatens to move jobs overseas if their taxes are not eliminated. This will be possible because of technology including the advances in transportation.

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