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53 min reading time
You know, maybe the ones sticking American industry with the 2.3-percent medical device tax are our own members.
Take Abbott and Johnson & Johnson, for example.
As http://medgroup.biz/tax-havens reported, “Abbott and Johnson & Johnson are among the U.S.-based companies that park billions in offshore tax havens, according to a U.S. Public Interest Research Group study.”
Did you know there are zero income taxes for Cayman Islands-incorporated companies? More than 18,500 companies (not all medical device) use the same address(!) to register in the Caymans, according to the report.
This week, I ask group members familiar with policy issues:
Are the lobbyists just too strong to get these tax loopholes closed?
Or should profit-minded medical device executives follow Abbott and JNJ and seek tax havens of their own?
Who is going to pay for all of this healthcare?
Discussions this week:
One-click poll: Is ISO:14971 software worth it?
Devices to smoothly shift severely injured patients?
What regulates the relationship between a contract manufacturer and its customer in the absence of a contract? (28 comments)
How much equity do I have to give up?
If you didn’t have to worry about FDA, cash, or reimbursement, what medical device would you build?
Cash rewards for the best concepts at http://medgroup.biz/Dream-Device
Make it a great week.
P.S. The HIDA Distribution Event is one month away. Are you going? http://medgroup.biz/hida
It looks as though the business of lobbying is alive and well. See “GOP calls Obamacare: insurance industry safety net pure politics” – Los Angeles Times ow.ly/xdVcK
You are probably RIGHT in your “not the solution” answer….
I think that to elimiate all cost for offshore material and IP would be a good start. For example, you can make that shirt with labor that pay 3 cents an hour.. but when imported, we can set the cost as “ZERO” – and just tax it at normal percentages. That SOLVES the “off shoreing” game… same for IP bogus transfers…
For example – transfer that Brand Name trademark to Switzerland now… and you can PAY $50M a year for the “priviledge” to use the mark.. You get to discount the paymert – which is just banked overseas – completely. I advocate eliminating the “cost” entirely.. by all means, move that trademark overseas.. but it doesn’t shield a single NICKEL from being taxed at normal value…
Yes.. Ned Beatty fans…. the lawyers and accounts will truly “squeal like a pig”… that might be considered sad… but right now, the average person is picking up this expense and paying out.. perhaps our “squeal quota” could be reduced..
I think a lot of people here are trying to work through the Med Device related jungle and how to compete and play in it.. There isn’t one position and the best analogy I have is a “confused sea state”.
For those familiar with complex network analysis (Barabasi, eg), it makes a lot of sense to think of it this way…
What I see is in the “environment” is most related to my experiences of starting/co-founding multiple companies in non-medical areas. It stated as my dad explained how trade and international commerce worked – while he was on a union picket line in the 1960s. He had first hand experience starting in the 1930s and forward.
Having been in the computer and television type industries for 35+ years, I saw the the flow commerce shaped by the hand of goverment… and a lot of it was not to the advantage of an American worker…..
In the long run, destruction of the American economic market is against all of our interest – international or domestic. And this element has been in play for a long, long, long time…
You touch on a lot of points – and I certainly see things differently….
1 – People do the best they can – for the VAST, VAST majority of people in government.. It’s not hypocrisy if they aren’t perfect. I have experienced some of the “not perfect at all” parts, too.
2 – the rules structures are what companies by an large try to follow. Some companies feel that they DO NEED an additional edge, so commit fraud or cheat or DO NOT play by the sames rules that other companies in their field play by. I don’t think we talk about that here….
3. There are BAD APPLES… and it DOES AFFECT US ALL – I would particulary refer to device manufacturers here – when the BAD APPLES are rewarded and get away with their “evil deeds”. How much is the Medicare/Medicaid system being scammed for? How about evil actions that are actually fraud.. there are so many, many expamples this that almost all on this site can mention a few… And it’s not a SMALL AMOUNT of money….
4. WHAT I SPECIFICALLY rant (I think it is a rant… if not, then I should try harder or “even use CAPITAL LETTERS”) against is the ingenious evil of government constructed subsidies forcing business and companies offshore. If they government sets up an ingenious system of subsidy to force companies offshore, then that should be changed.
We have a difference of opinion on this point.. SO FAR… I assert that if it “looks like a duck, quacks like a duck, walks like a duck, and the DNA MATCHES A DUCK… ” then by golly, it’s a duck. SO FAR… you point that if the government code does not call it a duck, then it isn’t a DUCK!!
I like the idea of level playing field. I don’t like the idea of competitors having their offshoring subsidized.
If you WANT TO START up an endeavor, then these kinds of issues REALLY MATTER – especially if you are in the med devices area.
The lively discussion here may not be open to changing anyones mind however the respect for each opinion makes a difference.
In every case there are 2 or more sides to most topics, “Mine” “Yours” and the “truth” or “essence”. That is why pure philosophy is recognized as an intellectual pursuit AND was as valued historically as it was.
I think we can all agree on one thing here, Everyone has the best intentions in mind given their own frame of reference. And it seems that this group has that understandign in mind, that is what allows each of us to think and evolve in our thoughts.
However, it is unfortunate that we can’t seem to find many good people any more who are willing to put themselves under the fierce scrutiny of our partisan media and seem to be left with the Weiners and Spitzers to choose from..
Term limits doing away with career politicians and making sure they can’t use their influence and contacts for personal gain once they leave office would be a good start.
There should be no I in being an elected official representing,We the People!
I personally have no issue with “partisan comments.” If your own beliefs and views cannot withstand serious fact-based challenges, you should probably rethink them. As far as partisan comments being “close minded,” I presume that poster would exempt partisan comments that reflect their personal views. And so it goes.
But this thread started by characterizing companies that acted in their best interests (“park(ing) billions in offshore tax haven(s)…” as “bad apples.” I took strong exception to that characterization because they are acting legally and in their interests. And then we read comment after comment about people and companies acting in their own best interests by buying cheaper insurance, eliminating benefits for spouses, and even buying books on Amazon. As I said, I guess it’s okay when you act in your own best interests, just not the other guy.
The real hypocrisy is condemning the very same behavior that we practice ourselves. In that regard, Washington, DC reflects us almost perfectly.
Jim Osborne- FACHE
As for your UPS driven scare tactic scenario, my wife and I have had separate High D/ HSA coverage for five years and it is the greatest thing since sliced bread. Our first dollar / No D is fabulous and highly incentivized for self managed wellness. Our out of pocket is pre-tax and markedly reduced, the premium money that we and our employers have saved goes right into higher employer contribution, better eye care, long term disability, etc…. and let’s not forget that the better plan’s HSA can be used for family Co-Pays.
I agree, I have seen this discussion turn into a sort of polite partisan soapbox. The point I made was that the original topic was a smaller symptom of a larger issue and any medical professional would be more interested in curing the disease and not just putting a “Band-Aide” on the symptom. It is however an interesting study into how even the better educated among us can be so ingrained and directed into their understanding of what is “Normal” that they loose sight of the overall picture.
Partisan comments are not evil or bad, they are simply put a closed minded focus on a small picture or frame of reference.
I am a conservative independent however, we seem to have devolved into a country that is no longer working together, towards the greater good, and to quote : Ask not what your country can do for you, but what you can do for your country – and I add: And for Yourself!
We have allowed both parties to suck us into their agendas and give up our freedoms and self determination for talking points.
For those of us who identify with NEITHER political party, we marvel that for every Nancy Pelosi there is a John Boehner. For every Harry Reid there is a Mitch McConnell. One side condemns the other for using exactly the same tactic they use when they are in similar positions.
The only phrase that comes to mind is “a pox on both.”
Erica Heath, CIP
I thought the evil doers were voted out of office already.
This discussion has been fascinating and should certainly keep going. But please remember that those of us on the “other side” believe we are right and moral and honest also.
My government outsources a lot of things. Just because they don’t outsource everything doesn’t make it wrong (or right). They should do what’s efficient and effective.
But the government outsources a LOT of it’s work… “Contractors” in Iraq and Afghanistan, Data processing services like EDS and HP, customer/support interface structures in many areas of government.. Beltway bandit and consulting companies crowd DC.
You could translate your observation to “there is a big difference in my job compared to your job”. I think that is a human nature thing, too.
My point was pretty simple here.. the rules applied to people working outside the government should also apply to people working inside or attached to government if at all possible. It’s not possible always, as we know…
But my case example was… “If OK to eliminate the textiles industry…. then why do these same rules not apply to congressional staff or associated/affiliated workers? ”
Failure to cover Detroit and Birmingham city workers with the same retirement program such as is provided by social security is a “Fail Spot” that illustrates just one point where there should not have been a difference…
They have very different objectives. Businesses are heavily impacted by competition and markets and their failure to respond appropriately is usually lethal. Conversely, government inefficiency and ineffectiveness is all too frequently rewarded. Can you name a failed government program or one that overran its budget that ever shut its doors?
Provided they operate within the law, businesses should be free to make their own decisions – right or wrong – to respond to markets and competition. Amazon and Netflix chose wisely, Barnes & Noble and Blockbuster did not. Companies will move off shore if their labor costs increase, they will incorporate overseas if taxes get too high, they will close factories if business is slow. They will hire more employees if sales are strong, pay more in wages if the labor market is tight, and invest in new assets if their prospects for growth are positive.
Even Karl Marx’s statement that Religion is the Opiate of the People has merit to it, as it relates to blindly following any belief or dogma, be they religious or political.
So…. those days are also bound into some of our problems today. When you trap yourself or your company into the cheapest location of hand manufacturing, such as Bangladesh, then it is difficult to dig out of the whole and raise people’s standard of living.. that is part of the danger of unrestrained or unreasoned subsidy and trade policy..
Texas has some funny laws (sure… you knew it.. but some of them are “very funny” indeed)…
Illegal actions by companies that do business here in Texas – but performed overseas – can be brought into court actions in Texas. In some ways – it extends US protections out of our national boundaries and makes moves it into a realm of coverage that US workers might expect…
I wonder how long it is before such worker actions end in a Texas court – and get some actual traction..
Congress is famous for not thinking beyond the end of their nose and so never seems to adequately index public programs for such things like increasing lifetimes, inflation, population changes or technology advances. You are right, it is not my fault for living longer. But it IS my fault (and everyone else’s) for electing representatives who fail to integrate such longer lifetimes into the assorted public programs.
Are medical consumers singularly to blame for electing incompetent representatives? No more than the rest of the population is. We can whine and complain about how THEY are causing the ruination of this country but as Walt Kelly so succinctly put it “We have met the enemy and he is us”.
If we can but prevent the government from wasting the labours of the people, under the pretense of taking care of them, they must become happy.
My reading of history convinces me that most bad government results from too much government.
Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.
A wise and frugal Government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.
When the people fear the government, there is tyranny. When the government fears the people, there is liberty.
Unfortunately, his generation did not ‘crush it in its birth’. Now they’re not ‘[bidding] defiance to the laws of our country’, they’re writing them.
Tax is the most “public” of the aspects… and that is STRONGLY set up by governments and liability structures…
You as “a company” take advantage, as the best you can, of the opportunities available. You – “being that company” – most likely did not set up that systems of how commerce is structured, taxed, or allowed.
And the system is MOST THOROUGHLY RIGGED Against the average person, as it almost has to be….
The thing is, if you think about it, it is PERFECTLY FINE to offshore (and subsidize) the jobs of 1 million textile workers and such.. BUT.. IF WE TAKE THE SAME STRUCTURES and apply it to other areas, then it’s not ok…. Where is the “level playing field” that Adam Smith would so prefer?
How about offshoring about 90% of congressional staff? Their work could be done cheaper offshore than in Washington, after all. Imagine the advantages of a 24 hour call center for your government issues… Why not offshore all “beltway bandit” work to a less expensive location? Why buy your military hardware in the US? we could save a lot of money by specifying and buying almost all of it in China. Cut the military budget by… half? well.. a real analysis would point out the cost saving… not my 5 second snapshot..
Why do we need a complex government structure? centralize to counties and eliminate all local city structures… Like Nashville/Davidson County.. How much could Boston save? Ditto for school districts…
The are obvious reasons not to do most of the things I mention above.. But if it is OK to eliminate the Textile Workers, or TV makers – then WHY IS IT OK to not apply these “fair” rules to other areas of business?
And really.. just what exactly are people “saving”? How does this help us in the Future…
My point – just to really be clear and not diffuse Paul too much – is that we should QUIT SUBSIDIZING the OFF-SHORING JOBS and INDUSTRIES… Level playing fields are actually NICE to work in…
I do remember… Add to that buying at Aldi’s and shopping at Target….
I look at the labels, too. Don’t buy at BestBuy… but you can add Amazon and Newegg…
As someone with long experiences in electronics design, it is VERY ACUTE to me how this whole offshoring structure can work and play out…
I have focused on the SUBSIDY side of this process… it’s not a level playing field….
Marshall L. Perez
Funny how you mention the local television and appliance stores we used to see….
There is a serious story about US Television makers that should be told – and how that industry evolved….
A PART of it is that there *actually* WERE US TV makers at one time… They are all GONE NOW.. and that lesson was talked about a lot as modern film, video, and PC editing systems were built..
The story involves the DOD, political decisions to offshore entire industries, and government backed decisions related to strategic economic and military decision making.
I am not commenting or taking a position here.. It’s not the right place.. But I do see Pharma headed down the same path. I have been curious for YEARS how this will play out in the long run…
Again, I must take issue……
If UPS were lowering cost by 12% to remain competitive, then you might expect that UPS would lower it’s charge structure by 12%…. or thereabout…
I don’t think we will see that happen…
Perhaps they will free up more funding – which can be use for offshore expansion or internal automation expansion. These are really good things, and may make the company more competitive in the long run…..
But I do, absolutely, agree with your observation of the negative “unintended consequence” effect we are going to see…. I think you are right in that those consequences will be many, bordering on “stupid”, and not help people at all…
When a company offshores, as one company I noted did, then they “give up” promotion from within and essentially any ability to innovate or “ride the tech waves” that are coming… In some ways, that makes it EASIER to build up an innovative startup and compete….
As a pratical matter… ALL of tht $70 billion (and more) that Apple stashes offshore – was not here in the US being generated – and the people to build devices did not exist… they were not “learning the trade” here, as it were… So for Next Generation Device development, they loose some ground in internal training of the new generation… Those people that might innovatively “replace” Jobs… there are FEWER possibilities…
If you have a company here and people work there… then the money they earn goes here, too… schools, roads, infrastructure – all get “something”. When the “offshored” good comes in – over roads to tax abated/tax free warehousing… these costs are not paid…
If you took that “theoretical company”… and figured out where EVERY PENNY WENT – and tracked the journey of that money…. (ie, money to an employee… who pays taxes or buys something.. taxes of which might pay for roads or infrastructure… food which might be grown in the US…..
Yeah… The Subsidized Import does have a RIPPLE effect.
So I am not speaking really against trade… just our subsidizing of imports.
It’s not due to “least cost” of offshore goods/services either… that is a real error to make…
In Nathan’s startup… I would expect that they have identified niches to compete – where the slowness of thier competitors or small volume innovation techniques can come into play….
In a “confused sea state” – and the business seems to be.. there are going to be lots of effective, successful strategies…. good luck Nathan.. and I hope you prosper!
You do not have to look any further than today’s headline that UPS is eliminating health care benefits for their employees who have working spouses and are covered under another company’s plan. So if the husband works for FedEx and the wife for UPS, they can no longer take advantage of the better benefits, they must each be covered by their own employer’s plan. This is just one of those unintended consequences of the Affordable Care Act.
But there is a bigger point that is particularly relevant to this thread. UPS will be LOWERING their costs. Should their competition not follow suit, their costs will be HIGHER and as such, they will be become less competitive. That is certainly their right, but because price is a huge factor in the selection of freight and logistic services, they will have a difficult time competing.
So this new regulation – well intended – has created a situation where businesses will seek the lowest cost so they can remain competitive. And so it is with labor. If your competition is moving to Costa Rica, you maintain production in Long Island at your own peril. That may be unfortunate, but you make the same buying decision everyday when you go to Costco and Walmart or shop on the internet. You don’t pay more if you don’t have to.
The cold hard truth is that the primary objective of business in not employing more an more people. It is to make and maximize profit for their owners. You do that by being competitive – offering better value to your customers than your competition.
Some very good points. I would also add to your last thoughts that many if not most CEOs are also poorly versed in how to properly market their products and services, being educated as to the real needs of their customers and how to properly engage them.
Many think it is a Field of Dreams where they simply need to; “Build it and they will Come” and do not properly invest in their marketing, have people running that department who have little knowledge or real experience and who delegate it to an outside group, with even less knowledge of their products and potential customers.
I know this is somewhat off track but still just another nail in the coffin.
My point earlier was….
There are a LOT of reasons to work with offshore companies. Good ones.. and I think that is a great resource to make us all better off.
It is expensive to go offshore.. In the coming “mHealth” environment, I think a lot of those subsidies will “evaporate” as just the higher cost comes into play of sending things offshore.
It is worth considering that if you send all your “potential” new and skilled workers elsewhere, then there is no one “here” to create the innovative technologies that you will need to compete in the future… Case example is Jobs and HP. If Jobs had no HP experience – the there would be NO APPLE TODAY… and the HP of today is CERTAINLY not a place he could learn.
Businesses relocate jobs to other areas because there is some advantage to do so – it could be costs, expertise, resources, logistics, etc.
That’s why I try to use the phrase “friendlier business environment” because it encompasses all of those factors.
The subsidies serve to confuse logical decision making even more – but seem almost necessary to consider – if you want to start or grow an mHealth type business.
One point made is that going offshore was done for cost reasons. For many things I have done, it was not cost – but absolute excellence that made the decision. The best environments for many things are no longer in the US at all.. So it isn’t cost, but excellence, choice, and performance that make the decision. When can play in this arena, then we can do things in the US….
As to the comment on “running government like a business”. I have been in the design & manufacturing business for 30+ years and have interacted with government agencies for over 20 of those years. The tired axiom of “if we ran government like a business all the world’s problems would be solved” is a false promise. There are numerous problems with that theory not the least of which is that businesses regularly fail so business principles are not perfect by any stretch of the imagination. But more important is that government is NOT a business. The same restrictions and rules don’t apply. For example, you don’t get the option to not serve some customers. You don’t get the luxury of operating in a region of “acceptable risk” because the people demand zero risk in all that government does. How many successful business leaders have entered government service only to find that the same rules don’t apply? How do you think your business would succeed if every customer were a stockholder each with one share? I’ll bet that the resulting board would start to look a LOT like government. So I think we need to put aside the so-called promise of running government like a business. You can’t run a car like a pair of hedge clippers. Two completely different things with different rules.
And, yes, some of the population believes that bigger government is not necessarily a bad thing. Others think it is. But the military, social security and medicaid didn’t get as big as they are in a vacuum. The populace wants those things. Yes SS and medicare were, originally, safety nets but they grew to what they are today because the people wanted them to grow. If the people didn’t want them, we wouldn’t have them. In some respects, this is the primary flaw of representative government. The representatives ultimately reflect and pander to the electorate. People want stuff and they don’t want to pay for it. Personally, I believe it is the responsibility of the elected official to be the “parent” and demand fiscal accountability. And if he gets voted out, then the next guy has to be the parent. But this creates an oxymoron: political morality.
I agree to a degree with the Wanting comment, however if the government was actually run like a business and we had people who looked at government revenues as such, we would have ample $$ to pay for many if not most of the NEEDS of our country! Most of the WANTS have been sold to us by the politicians.
For example, obama just proposed adding $5 to every cell phone monthly bill’s TAX to pay for laptop computers in every school. I don’t WANT it and the schools DONT NEED a national TAX to pay for such as they work locally for such if they NEED it! Who WANTED THIS? probably some teachers union in Chicago came up with the idea and he got a nice contribution in 2012 to push it this year!
Our politicians have turned America into thinking they WANT what the Government WANTS them to have by brainwashing them!
That being said, do we NEED a strong Military? YES! However we certainly don’t NEED to be fighting many of the wars we have been engaged in. The Government has also allowed the Big 3 as you state to grow into much more than they were intended. SS was supposed to be a safety net, not a full retirement fund! medicare the same, but for votes they morphed into the monsters they are today!
All this being said, bring in the OUTSIDE accountants, and I bet we could trim trillion$ in PORK and abuse, leaving plenty for what we really NEED!
The US does subsidize the process and costs of importing goods to the US. This does have the effect of eliminating jobs. I gave the one example of Harbor Improvement – to just pick one example.
Until the effect of the rules changes, jobs will keep being off-shored. Who knows what will be left?
The bottom line – in my opinion – is that the real answer to the whole can of nasty taxable worms is; until we find a way to reign in our OUT OF CONTROL government, spending, increased control of everything we do and trampling of our constitution, where every special interest on both sides of the aisle are competing for the use of our tax $$s, to either get paid off in votes, subsidies, gov jobs, etc. We will never solve the problem.
We need to reduce our government on every level, especially the growing dependence they are forcing upon the American people by regulating and taxing everything they can find, or we will be here in 20 years ranting about the same B>S>!
Until the American people start taking control of their own lives, rather than buying the line that our government (made up of mostly self serving, corrupt career politicians) knows better what we need than do we, stop believing the talking points and we can get more than 58% of ELIGIBLE voters to actually turn out, we can try to get back to WE THE PEOPLE not THEY THE POLITICIANS!
I have seen the enemy and the enemies is ourselves!
Such a claim is factually inaccurate. We do not subsidize moving jobs overseas. US companies move jobs to Ireland for the very same reason our California jobs move (ironically) to your home state of Texas. It is a friendlier, less costly place to do business.
I do appreciate the thoughtful and respectful reply, Jerry!
I don’t think we are talking past each other…..
You stated that “Companies will always make decisions in their best and selfish interests” – and I disagreed. I assert that Corporations and Companies are legal structures. It is the people who act with corporate authority – that actually do something and make decisions.
Some people, with corporate or company authority, make bad, illegal, criminal, flawed, selfish, or inappropriate decisions. There are vast numbers of people making corporate decisions. Just a few making bad choices can give the rest problems.
Therefore your assertion that “companies will always make decisions…….” is inherently incorrect, as that it is people making those decisions…
Yes I do assert that Government Subsidies have resulted in massive numbers of US Jobs being eliminated or offshore.
I agree that the VAST MAJORITY of the time… (my opinion, here) – that IN THE US TAX CODE or other US LAW – that these subsidies may not be labeled as such….
But… old ‘Bill Shakespeare might bring up the point about a “rose by any other name…. ” here at least it smells, but perhaps not sweet.
I certainly don’t blame politicians or bureaucrats for doing what they have been effectively asked to do. But offshore pointed subsidies are having a truly damaging effect to our economy and our future (again, my assertion).
I don’t think that such subsidies are to the long term benefit of any of our international trading partners, either. (my opinion)…
Is your mortgage interest deduction welfare? It is clearly subsidized by renters? How about that tax deduction for your children which is subsidized by people without kids? Or that pre-tax health insurance premium paid by your company that self-employed people pay with after-tax dollars? Isn’t that a subsidy? What about those charitable deductions you take that simply send tax dollars to a church, mosque or organization instead of to pay for roads and schools?
Some of us are for eliminating ALL subsidies – be they for big business or individuals. Some of us abhor welfare whether it’s for Archer Daniels Midland or Archie Smith.
Perhaps that company wants to bring foreign earnings back to the United States to build a new facility (which does not qualify as jobs) or to purchase new machinery (which might create jobs at another company). I know, you’ll modify the regulation to include those as “jobs.”
Congratulations, you’re now a lobbyist trying to write law and you’re just a few words away from a perfect regulation.
Here’s an idea… why not just let companies and individuals decide how best to reinvest or distribute the profits they legally earned?
I’ve never faulted people for seeking favors. It is has existed since Adam and Eve and we all seek to advance our own selfish interests.
I do fault elected officials (and I used to be one of them…) who sell the rest of us out for a few campaign dollars.
I appreciate your thoughtful reply. I’ll keep my response brief because we appear to be speaking past each other.
Your headline comment was an incredible claim (in my opinion) that our government subsidizes the off-shoring of jobs. Despite my requests, I’ve yet to receive even a single example from you of a government subsidy that “promotes” moving jobs overseas. There are none in our tax code. And I’m not sure how examples of criminal behavior is responsive or relevant to the fact that companies legally choose to move to lower cost environments.
The fact that another country provides a more attractive environment in terms of cost (taxes, wages, etc.) is not a subsidy by our government. I can’t be more succinct than that without being patronizing or sarcastic.
It is not the “Tax Code” that is awarding perks, it is ultimately our elected officials that are writing those perks into the code. Lets make sure we apply blame to and demand action from the right place. If your elected official is opposing the kind of tax reform you want, then DON’T VOTE FOR THEM! If that means changing parties, then so be it. Politics is not religion. You really CAN jump back and forth.
You (rightly so!) bring up that I made a number of points. You also suggest that I did not get into heavy detail on any one point… These are both very valid points to make and accurate. That really highlights – without stating such – that there are multiple forces at work – and they interact.
We have a limited space to make our points here – and it is not an academic paper place to write. That is a (thank God!) good thing!
So to address your observations.
1 – “Companies will always make decisions in their best and selfish interests”.
Companies are legal constructs and don’t “do” anything. People acting on a companies behalf – whether management or other official company staff make decisions and perform actions.
Sometimes those decisions are “bad” or criminal.. It happens…
a – a supervisor at Florida’s HCSN was sentenced to 10 years in prison for a $63 million Medicare and Florida Medicaid Fraud Scheme.
b – Joel Steinger, top executive at Mutual Benefits Corp. is being tried for a massive fraud scheme in which some 34,000 investors lost more than $800 million
These are just examples that it is the actions of people – not a legal construct of a corporation – that make decisions and cause actions to happen.
2. You might make a clarification. Are you REQUIRING that a specific piece of TAX CODE say “this is a subsidy” or are would you agree that the “EFFECT of Tax Code” to create a subsidy is sufficient? Kind of a big issue here…
a – I pointed out the role of Government Funded payment of Harbor Improvements for IMPORT Containers in Long Beach. Would you call that a subsidy?
b – If imports are shipped via container over tax payer supported roads to warehouses that have tax exemptions and abatement, would you call those “subsidies”?
Would you recognize that US Tax code has a long tradition of awarding “perks” without labeling them as “subsidies”? Yet in actual fact they are?
Just a matter of nomenclature….
Jim Osborne- FACHE
As percentages of income are concerned, we are not the most taxed western nation in the world; not by a long shot. Yet we still maintain 17% of our GDP for Defense in order to protect ours and all of “their” interests abroad.
Regardless; the western world is grossly overtaxed and we (the U.S. citizens) are paying dearly on the the future of developmental skill sets, education and healthcare . With that being said, we are still outpacing the rest of the world in many of the automation to production technologies hence potentially and gradually negating the cheaper labor pool impacts altogether.
I believe that the disincentive to overuse of overseas sources in all aspects is an issue of national security and economic stability. Currently our Defense and Healthcare industries together account for over 33% of our current national GDP. Need I remind you that number is nearly the size of the entire #3 or #4 global GDP’s (Japan and Germany). I hope that got your attention as this is all an indicator of how big the animal is that needs to be fed……I believe they call it an infrastructure. In case some haven’t noticed that infrastructure which has been so richly provided for us by our forebears is crumbling under our feet.
Maybe we should send a bill to China….Bangladesh….Japan…. The Marshall Plan?
We are overtaxed but taxes are a necessary evil and they need to be greatly apportioned as a result of use and physical depreciation. Medical device companies are no exception lest we move to a more practical flat tax method of doing business.
Jim Osborne- FACHE
Very innovative thought process. I think you may have something here!
So, that would raise $5 billion annually, about twice what the medical device tax raises, and the $5 billion should be directed to pay for the Affordable Care Act. Another $20 billion in social security and payroll taxes would get pumped into the treasury, not to mention $80 billion a year into the local and regional economies.
Why should profits that are earned from sales of products in Europe or any other region of the globe, profits that have already been taxed at those rates, why should any company then have to pay an additional tax so that the U.S. gets a cut that totals 35%? The U.S. did not have anything to do with how those profits were generated. What we know is that companies are never going to bring back those profits if they get taxed by U.S. authorities. Even Bill Clinton in his book Back to Work wants repatriated profits to be returned to the U.S. at a low rate.
No other nation on earth has such a policy.It’s maybe the best economic development tool for Ireland, Costa Rica and Mexico has – second, of course, only to the 2.3 percent tax on gross sales of medical devices in the U.S., the dumbest economic policy idea since Diocletes thought wage and price controls were a good notion, with death as the penalty for those who violated those rules. .
Jim Osborne- FACHE
It may be stated and agreed that there are and will continue to be plundering initiatives of greed and abuse. However, if the global perspectives of taxing individuals for disposable earnings “one time only” are practiced on a global basis, allowing for the corporate “non- human/ business vehicle” a free market modus from which to operate, all of these convoluted and wasteful agendas should become moot.
Truly , if the proper incentives are in place and all proper taxes are paid one time immediately vs. allowing a corporate structure to be used as a tax manipulation tool, most all of the avenues for fraud, plundering, slavery like labor, unsafe devices and other abuse should become disincented to a point which would be in accordance with Milton Friedman’s vision of pure competition for quality and value and global growth economics.
You throw out a lot of broadsides such as “…One can start with the elimination of government subsidies to offshore jobs and activity offshore.” No such subsidies exist. I’ve asked you several times, you’ve failed to name one subsidy in the US tax code.
You deflected to a post titled “Massive subsidies” noting “…Are you familiar with the “Double Irish Accounting” trick? and the expansion thereof? If you compete in the Med Products or Devices business, then you MUST UNDERSTAND how these subsidies work…” The double Irish accounting trick isn’t an accounting trick at all. It is a tax haven afforded by the Ireland’s tax code which attracts business. And, of course, it has nothing to do with the US “government subsidies to offshore jobs and activity offshore.”
You then deflected to the inequities about CEO compensation – which has nothing to do with the subject at all or the collapse of the garment industry (which I also know reasonably well since most members of my family were officers in the Amalgamated Clothing Cutters Union in New York City). But I’ll refrain from further criticism of this tangent.
My point is that just like you and me, companies will always make decisions in their best and selfish interests. They are not evil for making products in China or locating in Ireland any more than you are for taking every available deduction on your tax returns.
And if you want to blame anyone for this predicament, blame our politicians for creating such a mess with taxes and regulations that our best and brightest companies find it necessary to flee to other countries for relief.
I made a number of different points, but am not changing the subject or topic.
There is no deflection on my part.
I stated that subsidies directly and/or indirectly created by the current tax code (a) force jobs offshore, (b) support offshoring, and (c) work against people having jobs here in the US.
I am for international trade and have experience there.
You – yourself – erect a few straw man fallacies in your comment.
If you find it necessary, we could always discuss ONE POINT AT A TIME.. and see where it takes us.
There is more to a discussion than saying “you’re wrong” in a convincing fashion.
You were the one who asserted that our tax code “subsidizes” off-shoring employees. Some of us have run and filed tax returns for multi-national operations so we know, first-hand, that there nothing in our tax code to subsidize moving employees to foreign lands. Nothing. You were also the person who invoked “the Double Irish” which has nothing to do with our tax code and subsidies for moving jobs off-shore. The double Irish is simply taking advantage of a lower cost, lower taxed environment. It’s no different than you shopping for the lowest interest rate on your mortgage or the lowest price for your insurance. No different.
The simple truth is that money and jobs flow to the cheapest resources. We do that as a matter of survival. You can choose to keep making shoes in New Hampshire (where there was once a thriving shoe industry) but you will quickly find yourself priced out of the big markets.
The reason we move jobs to low cost, low tax regions is because we need to remain competitive. If we don’t our competition will put our lights out. And it has nothing to do with the US tax code.
Feel free to continue with your deflections but your assertions are absolutely false.
But they are also, to give a deserved credit, trying to make a go to manufacture here in the US as well…
Perhaps you mean someone else, as there are lots of “candidates” for your description..
Medicare/Medicad could reimburse prescription/medical device costs for those items INSPECTED by the FDA and SOURCED from US/US territories. Period.
This works, for example, in the shipbuilding industry…
If you want to get your ‘junk from outside the US, feel free… but it must be inspected – cost to be born by the importer….
A simple rule.. easy to do…
I suspect that there would be a serious “gnashing of teeth”, I suspect.. and it works from SEVERAL fronts….
I don’t think our Tax Code is full of sections called “loopholes”, “Tax avoidance schemes for GE”, or “offshore bankers relief act”… But the effects are real… and smart, highly paid people write the massive amount of tax rules that get enforced…
I think you are correct… the “double Irish method” and “Double Irish with a Dutch Sandwich” methods are NOT Tax Code names for schemes to cut taxes 90% or more.. if you offshore… But then so what… WHO CARES about the actual technical name for a scheme – or set of schemes?…. The effects are what matters…
What are the effects? What are the tax schemes that ALLOW for the effect? and WHO BENEFITS from the effects…
Lower cost is NOT the driver… Slavery, after all, is “said to be cheaper”… no pay or benefits at all… no compliance with US Labor laws…. And I DON’t think you are encouraging it because it a lower cost way to produce some goods. In the long run, it certainly isn’t.
Tax code – as I am SURE you will agree, is written to achieve an effect. The commonly stated “Labels” are just so we can keep track of which trick is which….
If you DON’T have to produce a US Tax Return, then you DON’T have to have an associated line item for “workers, US, eliminated”, then – do you?
There are RULES about the use of PRISION Labor and Child Labor and more… in our import guidelines… You also CAN’T import massive amounts of Cocaine, for example… We CAN control our borders and eliminate import subsidies.
Again, I’m not aware of any line item on a tax return that encourages off-shoring workers. Lower costs move workers and production out of the United States, not tax credits or deductions.
Jim Osborne- FACHE
Paul M. Stein
They then wake up and wonder why their FREEdom’s have been replaced by a few FREEBIES and they are all of a sudden living in a Banana Republic. Yum, that apple was so delicious…
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”
From a constitutional standpoint the founding fathers in their wisdom also left their decendants a restart button so to speak. As a People we need to use it. If its use is blocked in contrary to constitutional right only then is a true revolution warranted.
The choice belongs to everyone. I believe in America and the core of what it stands for I however do not believe that congress and the entrenched interests that control it are acting in the best interests of the population.
Jim Osborne- FACHE
This is a discussion that needs to be had and it is a symptom of a much larger issue I believe. Here is one way to solve it.
1. Flat payroll and capital gains tax of 15%. A graduated 7.5% to those earners making $60K or less joint w/ families and $30 K or less for singles. No more need for debate on capital gains or estate taxes as long as the money is not disbursed as disposable income and stays in the growth investment pool. When investors pocket their dividends or heirs pocket their inheritance to disposable income out of the investment pool it is taxed at 15% and they get .85 of the dispensation. The bank sends the rest to Uncle Sam that day.
2. No Federal corporate tax to any domestic corporations headquartered in and paying local taxes in the US while manufacturing 80+% of content on US soil. Allow the states and local communities to compete for their business and HQ/ Mfg. locations on American soil through abatements , resources , amenities, etc…
3. NO LOOPHOLES PERIOD! The exception may be some form of primary and first home buyer benefit to be rebated the following year of interest payments after all taxes have been paid for the year prior. This would markedly reduce the kited paper value volatility of the past but still stimulate jobs.
4. All 15% taxable to be deposited immediately ; no holding , qualifying filing or waiting. The Gov.t gets the money now and is mandated to balance the budget at a debt ratio never to exceed 70% of the US/ GDP with exception to a national emergency session vote of congress and performed within the Constitution and/ or revised War Powers Act.
5. Immediate reduction of IRS staff by 75%.
6. Allow for low tax incentives for foreign manufacturers to produce in the US at an internationally competitive rate.
7. All other current Federal appropriations to states remain the same and are revised by Congress as is the current rule.
8. Over ten years, phase out Medicare and Medicaid altogether and replace it with the competitively driven full impact of the national PPACA whereby all citizens young , old , employed or not are covered by the base safety net in a Kaiser-like model and are free to purchase special coverages out of pocket and or as employee additional benefits from employers.
With this put into play jobs, a balnced budget and/ or a federal Sales Tax on medical devices should no longer be an issue of discussion.
Are you familiar with the “Double Irish Accounting” trick? and the expansion thereof? If you compete in the Med Products or Devices business, then you MUST UNDERSTAND how these subsidies work…
Do you know how the Foreign Trade Zones are use to escape paying ‘property taxes” in a massive fashion? If you compete against an importer, then it’s a subsidy….
Do you understand how an IP – such as a trade name can be “moved offshore” and massive royalties can be paid against IP use – against that trade name? Example… You are a company – the you form a brass plate entity in Switzerland. Transfer your company name to the Swiss entity… then pay royalty…. say $50M a – against that IP use.. to your entity in Switzerland… this scenario plays out in a MULTITUDE of ways…
I literally don’t have time to list just the most obvious – and legal – of ways in which this system of subsidies works to kill off US jobs and futures…
You are massively mistaken if you think that the sales of domestic goods and those from subsidized offshore entities are “equal”…
And the game is not just about “cost” either… EG>>>>> US banks buy roads and bridges in EUROPE… EU banks buy roads and bridges in the US… each makes a killing by how the tax system works…
Just a little bit of research into the system ought to do a good bit to open your eyes….
Doesn’t work there and isn’t working here!
Suppose we compare…
Hanes, for example, is headquartered in WInston Salem, NC. Founded in 1901, they used to manufacture here in the US… now they offshore. I had family with jobs at Hanes.. now they don’t.. have jobs….
A T-Shirt now made in Bangladesh, Pakistan, or China generally gets put into a shipping container. It passes through seas frequencies patrolled and watched over the by US Navy. A container ship might dock at a large CONTAINER PORT, such as in San Diego, Seattle, or LA.
The Port of Long Beach employs 16,000 people and is the busiest in America. The top trading partners in 2010 were
The development costs for the port were paid for or subsidized by taxpayers. Among the latest projects, was one of the nations largest: The Pier 400 Dredging and Landfill Program. Funding for development of $338 million came from the US Army Corps of Engineers.
Containers leave the port on trucks or rail. Trucks pass over roads and bridges subsidized or paid for by the taxpayer. Rail flat cars used to frequently belong to the US Army – and were leased out for container transport. Rail is subsidized differently from roads and bridges….
Destinations for these containers are frequently US Warehouses of major “big box retailers… FREQUENTLY, these larger warehouses are situation in “little to no tax” zones. FREQUENTLY the tax is abated on these warehouses, as well… that qualifies as subsidy to me… And it’s NOT A LITTLE AMOUNT…. it;s a lot…
You can make a much stronger argument about subsidies associated with air imports..
Do you know how a “Foreign Trade Zone” works… ??
How this works is something you should know. If you want to make something and sell it in America.. you MUST know how the system works – and why there is such a profound STACK of subsidized competition for you to worry about…
Roads and Ports.. are NECESSITIES – to the offshore subsidy process…
Of course the spin from our current administration is that the Big, Bad companies just aren’t paying “Their Fair Share”, when that fair share is going into THE BIG BOTTOMLESS ECONOMIC HOLE THAT IS OUR GOVERNMENT!
I would personally prefer to see the $$ given to share holders or anyone else, than an out of control, Tax addicted government, who only knows how to waste all of our hard earned tax $$, where ever they are coming from.
The reason a company moves jobs from Boston to Tijuana is because the cost of production – even with shipping – is less. It has nothing to do with taxes. Now if that company decides to make product in Ireland to sell within the EU, that’s a bit different… but it’s not a subsidy that’s encouraged by our tax system (by that logic, an expensive neighborhood would be a subsidy to force people to buy homes in a cheaper neighborhood, which is quite a stretchy).
I’m not aware of any tax subsidy in the US tax code that promotes off-shoring jobs. A sale within the USA by a USA corporation is taxed the same whether the product is made in Dallas or Jakarta.
I am all for making money… My FATHER began fighting this issue (offshoring) in the 1930s. It wasn’t a matter of moving the company offshore to make more money then or now.. it was all about how much money the senior managers or selected stockholders got to keep: how big was their piece of the pie?
I know that Apple makes their stuff offshore…. They USED to make computers here in Dallas… long, long ago..
Made in USA can work – and cost effectively. My family was in textiles for DECADEs – and they where “subsidized” and “forced” out of business.
Paul.. If what you say were really TRUE, then why shouldn’t the executives of a company ALSO be offshore.. Instead of a Highly Paid CEO, just move the position OFFSHORE to a skilled TEAM of experts..
QUITE OFTEN… the people bleating the most about the need to move their company offshore are ALSO the most highly paid (ie, most expensive) part of a company… those positions need to go, too… right?
The GOVT can PRINT money – and justify by BORROWING $0.40 or more of every $1.00 it spends… but…
when the companies you mention have OFF-SHORED manufacturing or what they pay… then they DON’T pay the WE part..
It’s going to take effects of disruptive innovation to change how the system works.. bubbles pop, after all…
All things being equal (and, of course, they never are), if the lemonade stand next to yours has a lower cost of goods, they’re going to beat you in the long run. Even that innovator your pointed out – glorious Apple Computer – makes their iPhones in China. There is a reason for that – they have to compete with Samsung and other manufacturers.
But that’s a cost issue, not a public policy (tax) issue. In the case of this thread, companies keep money off shore because it’s in their financial interests to do so. Companies are not in the business of making jobs, they’re in the business of making money.
Sure, WE could mandate rules that collects more money from you, me and US companies to pay for the healthcare WE require. While unpopular, it would address, but not solve the basic problem WE have with our existing healthcare delivery system. What is the problem WE have with our existing healthcare delivery system, you may ask? It’s simple; the current and future total costs of the healthcare WE require is greater than the money WE have to pay for it. The worst part is that the divide between costs of healthcare and payment for it, will only get wider. The current approach to delivering healthcare in the US is unsustainable. We will forever be chasing our tail, trying to catch up to ever increasing costs.
One can start with the elimination of government subsidies to offshore jobs and activity offshore..
Marshall, I think you miss the point.. The WAY that the “large companies” avoid the necessity to pay taxes – involves moving the assets or often the manufacturing offshore..
It has cost millions and millions of US jobs…
It’s not a matter of just “lowering taxes” – it’s a matter of justification of eliminating a company’s future.. (as well as US Jobs..) because a CFO or other officer can show a few dollars more profit now – and get a bonus or more money…
It’ not just tax.. that is the real point…
Example… Steve Jobs got a “tech job” at HP – when he was very young… he learned the ropes of the business and technology. LATER, he steered his company to being the MOST VALUABLE company in the world….
Follow the “example” of “paying less taxes” – such at Abbot or J&J… and this situation would likely not happen…
The TAX Consequences just pale into irrelevance when the true cost of “eliminating’ our future is considered..
When the PEOPLE working at a company are GONE.. who pays the taxes or for food then?
Bad Apples.. in a Rotten System..
Let me just remind you that SLAVERY and SLAVE PUNISHMENTS were once legal in this country, too. LEGAL does not mean either MORAL or RIGHT. LEGAL does not mean that an action is good for our children, grandchildren, or our country’s future, either.
Is there a better way? And is it within reach?
Marshall L. Perez
Oftentimes, I feel as though we can roll our eyes about these problems and little else. I hope I’m wrong, which is why I chose to have this be the point of discussion for the week.
Someone has to pay. In the case for medical devices, it’s us!
In my opinion, the real answer is to eliminate all deductions and loopholes. Not only those for ADM, Exxon and Bank of America, but those including those favorably impact you and I (such as the mortgage interest deduction that discriminates against renters, the charitable deduction that underwrites charities at the cost of Uncle Sam, and deductions for children that discriminates against those without kids).
All of them. In addition to a simpler tax code that doesn’t pick winners and losers, it eliminates the principal “product” that Congress sells (ie, favors in the tax code). That single change alone would do more to reduce the money in politics than any other law.
Zarmedic medical devices
This is a TRULY serious problem…
It is not just the “TAXES”… it’s that there is an entrenched core of “management” who see any penny or cost as a problem – not the key to future success… ANYTHING that stands between “them” and 100% of sales is a “problem” to be addressed… and that is 100% destructive for the next generation of product or development..
How many times over the past 100 years does one have to see this problem in ALL areas of US commerce to realize how destructive it is? how many times do you have to see US companies “bought out” with the idea that the new buyers will close US facilities and get rid of US jobs – to move offshore where there are NO TAXES and NO EFFECTIVE COSTs….
As a practical matter.. when you are a startup or a new company – or doing something innovative… this opens up opportunity… you know the “big guy” can not compete or respond to your innovations or inventions – unless they can (a) knock your thing off “overseas” or (b) get the feds to regulate it into oblivion… So there becomes a LANDSCAPE to skate…
You have to also know how to skate you company in the maelstrom of international manufacturing, development, and product instantiation… Some of ther very BEST places to develop are always going to be “overseas” – no mater where you are from or where you design, develop, and manufacture…
So….When you pose the MAGIC QUESTION… “If you didn’t have to worry about…..
You ALSO need to ask the followup.. “NOW… how do your effectively get to that point…..?”
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