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Does Higher Taxes Cause Industry To Outsource Jobs

Damon 2012/07/03 20:19:07
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I feel higher tax leads to company's outsourcing jobs to other countries, and therefore contribute to unemployment and underemployment here in the U.S.
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  • Anonymouse ~superdoge~ 2012/07/07 17:40:14
    Yes
    Anonymouse ~superdoge~
    +1
    But not by itself. Business regulation, high taxes, payroll taxes, the minimum wage, job security laws, health and safety, they all cost the businesses so much, they have to outsource. Scrap all the aforementioned items - it's better to have lots of people employed cheaply than them not employed at all.
  • Damon Anonymo... 2012/07/07 17:51:44
    Damon
    Thanks for your opinion...
  • Mr. Stark 2012/07/04 07:44:07
    Undecided
    Mr. Stark
    +1
    I posted undecided because what you're regurgitating here is certainly one theory. But this doesn't explain a lot of it, as taxes are only one part. Take Google for example, they make their income through capital gains, but they don't pay 15%, they pay an effective 2.5% tax rate by sending their income through Ireland, to the Netherlands, and then to Burmuda - which means that they don't have to outsource because loopholes allow them to maintain jobs here - or leave. When jobs are outsourced, taxes are just the excuse. People fail to realize that between the 1940 and 1960 America had the highest tax rates it had ever seen but we had a huge amount of manufacturing jobs -we were fighting three wars during this time (WWII, Korea, Vietnam).

    There are a number of reasons behind why outsourcing occurs, and it's been going on since the 1700's. But the point is, under the neoclassical economic approaches profit is the number one interest. Of course this is the goal of any business, but it becomes much more exaggerated under neoclassical interpretations of capitalism. So, we can blame taxes, but that's only one part of it. Third world countries, and third parties typically don't regulate how businesses must function which means they can reduce costs, reduced costs mean that their pro...





    I posted undecided because what you're regurgitating here is certainly one theory. But this doesn't explain a lot of it, as taxes are only one part. Take Google for example, they make their income through capital gains, but they don't pay 15%, they pay an effective 2.5% tax rate by sending their income through Ireland, to the Netherlands, and then to Burmuda - which means that they don't have to outsource because loopholes allow them to maintain jobs here - or leave. When jobs are outsourced, taxes are just the excuse. People fail to realize that between the 1940 and 1960 America had the highest tax rates it had ever seen but we had a huge amount of manufacturing jobs -we were fighting three wars during this time (WWII, Korea, Vietnam).

    There are a number of reasons behind why outsourcing occurs, and it's been going on since the 1700's. But the point is, under the neoclassical economic approaches profit is the number one interest. Of course this is the goal of any business, but it becomes much more exaggerated under neoclassical interpretations of capitalism. So, we can blame taxes, but that's only one part of it. Third world countries, and third parties typically don't regulate how businesses must function which means they can reduce costs, reduced costs mean that their profits may increase, or more can be spent towards investments to produce more revenue...which means more profit.

    Taxes have been going up and down since we were dragged into World War II, and currently the federal taxes are the lowest they've ever been - and I think that this comparison will show that taxes are certainly one small part. If you were to compare the unemployment rate to the capital gains tax, you would get a -0.009. This is a negative correlation, it means that as one goes up, the other goes down - this doesn't support your theory. According to your theory, it should be a positive correlation, as one goes up, so does the other. But this means that when unemployment goes down, taxes go up, and vice versa. While this result is statistically significant (meaning that it didn't happen by chance), it doesn't control for anything. More importantly, -0.009 is so small, it is insignificant (as the scale is between -1 and +1). So, when it comes to Capital Gains, that doesn't explain it. On the other hand, there's corporate taxes - which the highest rate is 35%. If one were to compare corporate tax rates since 1972-2010 to unemployment, we get better results in terms of your theory. Correlation of .31. Meaning that as taxes go up, so does unemployment. But before we jump for joy on this matter, and while it statistically significant, it doesn't control for other problems, and .31 is mediocre. Lastly, more statistics show that taxes effectively only explain .09% of the unemployment rate. On a more observational basis, unemployment fluctuates for many reasons, and in 1972, the unemployment rate was 5.6% with capital gains at 35%, and Corporate Tax at 48%. Capital Gains, and Corporate Taxes have respectively been 15 and 35%, but unemployment rates went from 5.5% 9.6%. The lowest unemployment rate that we saw was when capital gains were at 20% (with 4% unemployment).

    So, while your theory has some legitimacy towards it, it only explains a very small part of why there's outsourcing, why its so prevalent, and why we have such a high unemployment rate.

    So, take from this what you will.
    (more)
  • Anonymo... Mr. Stark 2012/07/07 17:43:06
    Anonymouse ~superdoge~
    That's interesting, have you got any theories as to why the economy improves when capital gains taxes are increased?
  • Mr. Stark Anonymo... 2012/07/07 21:15:48
    Mr. Stark
    Because the correlation is so small, it in effect really only accounts for 0.00081% of the reason behind such a correlation. Correlation doesn't equal causation, but there could be any number of reasons. Such a small correlation (although not by a chance) is insignificant so there's really no need to theorize about it. If it had been a correlation of say, -.60, p=.031, and other conditions had been controlled for, then I would say there's cause to theorize, but in this case - nada.
  • Anonymo... Mr. Stark 2012/07/07 21:23:34
    Anonymouse ~superdoge~
    So is it just a false positive, owing to other factors? It is a very small correlation... Then again, I suppose it only affects buying and selling of shares and expensive items, not jobs...
  • Mr. Stark Anonymo... 2012/07/07 21:35:34
    Mr. Stark
    I wouldn't call it a false positive, because my p-value for the -.009 was -.0E13 (significant). However, I didn't control for any other things, it was a simple comparison between capital gains taxes and unemployment rate.
  • Anonymo... Mr. Stark 2012/07/07 21:42:29
    Anonymouse ~superdoge~
    Was it a theoretical link or based on past actual events? If the latter, it could just be a false positive, and if the former, it could be missing some important factors that actually happen in real life...
  • Mr. Stark Anonymo... 2012/07/08 23:44:38
    Mr. Stark
    It was a simple comparison based on no theory. I just wanted to see if there was a correlation between the two. Both of your options are legitimate, but I would lean towards important factors missing than I would agree with a false positive.
  • Damon Mr. Stark 2012/07/07 17:43:46
    Damon
    Thanks for the reply...
  • santa6642 2012/07/03 23:13:54
    Yes
    santa6642
    +1
    if they can get it cheaper , away they go.Thank your unions.
  • dallas santa6642 2012/07/03 23:21:29
  • Damon santa6642 2012/07/07 17:44:11
    Damon
    Thanks
  • ManBearPig 2012/07/03 22:03:13
    Yes
    ManBearPig
    +1
    in a global economy where there are minimal tariffs on imported goods companies will flock to the country that is taking the least amount of their money...

    were not in an economy like how we were in the 50s anymore... back then the only country that could hold production and resources was the US... hence why they took big tax rates for that expense
  • Damon ManBearPig 2012/07/07 17:44:43
    Damon
    Thanks for the reply.
  • BOOGIE-WOOGIE-MUSIC-MAN-ROC... 2012/07/03 21:59:56
  • Damon BOOGIE-... 2012/07/07 17:45:16
    Damon
    +1
    Thanks for your opinion.
  • Mel 2012/07/03 21:35:04
    Yes
    Mel
    +1
    Oh yes, the county I live has lost tons of jobs due to it.
  • Damon Mel 2012/07/07 17:45:43
    Damon
    Thanks for the reply
  • ProudProgressive 2012/07/03 20:44:03
    No
    ProudProgressive
    +2
    All that raising taxes accomplishes is to increase the bribes that corporate lobbyists pay to corrupt legislators to create more loopholes so that the increase doesn't affect the companies it is supposed to but only the small struggling businesses trying to compete in an increasingly skewed marketplace. That's why the claim that US companies pay high taxes is only an empty myth. In terms of actual tax paid US corporations pay less than corporations do in almost every industrialized nation in the world.
  • Damon ProudPr... 2012/07/03 20:50:22
    Damon
    Would you agree we should get rid of all the deductions and have a straight forward tax that everyone can understand... And if so, should everyone have to contribute something.
  • dallas Damon 2012/07/03 23:22:39
  • I. Car Rus 2012/07/03 20:40:17
    Yes
    I. Car Rus
    +2
    Yes, its axiomatic that business will look for most favorable environment to maximize profit.
  • Damon I. Car Rus 2012/07/07 17:46:41
    Damon
    +1
    Thanks
  • I. Car Rus Damon 2012/07/07 20:29:33
    I. Car Rus
    sure
  • none 2012/07/03 20:31:07
    Yes
    none
    +2
    Damn right it does and so do all the ridiculous rules and regulations that make it so hard for businesses to get ahead. Try telling that to the politicians in Washington but I guess it's what you get when just about everyone there is a lawyer instead of a business man or woman.
  • Damon none 2012/07/07 17:47:10
    Damon
    +1
    Thank you for the reply...
  • none Damon 2012/07/07 17:50:13
    none
    You're welcome.
  • Roger47 2012/07/03 20:28:22
    No
    Roger47
    +2
    We only have a high corporate tax rate in theory. Once you take into account all the deductions that corporations can claim, and look at their ACTUAL tax rate, you find we tax our corporations at a lower rate than other countries.
  • Damon Roger47 2012/07/07 17:47:37
    Damon
    Thanks
  • stevmackey 2012/07/03 20:24:08
    Yes
    stevmackey
    +2
    Many have left this country to get tax beaks that other countries offer.
  • dallas stevmackey 2012/07/03 23:23:59
  • Damon dallas 2012/07/04 01:28:40
    Damon
    Cheap labor is a large factor for outsourcing jobs, but its not the complete answer... Polaris left Wisconsin to move to Mexico, they could have moved to a State without unions and cheaper labor... I feel it was a combination of high labor cost, tax, and regulations.
  • Mr. Stark Damon 2012/07/04 07:47:53
    Mr. Stark
    I will say that I believe regulation is a bigger cause than taxes. Google, and many other corporations have proven how to get much lower effective tax rates, very close to 0. But reducing tax rates does not escape regulation, nor does it escape the unions.

    I refuse to blame unions entirely as well, there's a strong history when it comes to unions, and they should be considered one of the proponents for liberty, and fairness. I see no distinction between a religious government, or a corporate government - they're both corrupt.

    This should not be construed to suggest that all unions are good, because there are obviously bad unions.
  • dallas Damon 2012/07/04 12:45:29
  • dallas dallas 2012/07/04 12:49:34
  • Damon dallas 2012/07/04 23:01:45
    Damon
    There are sensable regs and there are stupid ones...
  • dallas Damon 2012/07/04 23:07:10
  • Damon dallas 2012/07/04 23:09:56
    Damon
    I would tend to agree, some people, if left to their own regard, will act carelessly.
  • dallas Damon 2012/07/05 00:06:49

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