G-8 Communique: We don’t want no John Galts

At the recently concluded G-8 summit in Northern Ireland, the leaders of the world’s biggest powers couldn’t even come up with a statement openly condemning Syria or Hezbollah.

“We very much share the view that it is important for us to build on the G-8 communique — to move toward a political transition inside of Syria, to build a strong opposition that can function in a post-Assad world — and that we will continue to work to try to find a political solution to this process,” President Obama said Tuesday after meeting with French President Francois Hollande.

As the two-day summit in this resort town concluded, the question of how to end Syria’s war emerged as the most vivid example of the divide between the United States and Russia, a potential key partner or chief obstacle in several of the most pressing national security issues.

The differences between the United States, which wants Assad out, and Russia, the Syrian leader’s chief weapons supplier, were clear Monday after a two-hour meeting between Obama and Russian President Vladimir Putin. The two bluntly declared that their disagreement about Syria’s future, in particular whether Assad remains viable as a leader, could not be bridged during the summit.

One thing they did agree on, though, is that they want more money and will do all they can to rid the world of the scourge of “tax avoidance,” which was recklessly lumped together with “tax evasion.”

Comprehensive and relevant information on the financial position of multinational enterprises aids all tax administrations effectively to identify and assess tax risks. The information would be of greatest use to tax authorities, including those of developing countries, if it were presented in a standardised format focusing on high level information on the global allocation of profits and taxes paid. We call on the OECD to develop a common template for country-by-country reporting to tax authorities by major multinational enterprises, taking account of concerns regarding non-cooperative jurisdictions. This will improve the flow of information between multinational enterprises and tax authorities in the countries in which the multinationals operate to enhance transparency and improve risk assessment.

The premise to this idea is that government somehow deserves the tax money that a corporation moves around. There are rules governing these transactions. Apple, for example, was breaking no laws when it set up Irish subsidiaries. If the United States were to lower its corporate rates, Apple wouldn’t have taken that action. But rather than looking at how governments could be more hospitable to business (and help their own economies) the G-8 crowd was more interested in taxing initiative and innovation than in rewarding it.

Last month when the Senate was lambasting Apple for its “tax avoidance,” the editors of the Wall Street Journal wrote:

The genuine outrage is that Apple’s profits in the U.S. are subject to a combined state and federal statutory tax rate of 39.1% that is the developed world’s highest. Corporate taxation is so heavy in the U.S. relative to other countries that even while enjoying its near-zero rate in Ireland, Apple ends up with roughly the same overall effective tax rate, 14%, as South Korea’s Samsung, its main global competitor. Yet Samsung still enjoys a tax advantage, because it has more flexibility to allocate those profits to the most promising investments anywhere in the world. …

So it’s no surprise that Apple keeps $102 billion of its roughly $150 billion cash pile overseas. The repatriation tax penalty is so absurd that Apple chose in April to borrow $17 billion to pay a prospective dividend to shareholders rather than pay out of its overseas cash horde.

All of which argues for a corporate tax reform that would at the very least cut the combined U.S. state-federal rate to the mid-20s to be comparable with many of our trading partners. We’d suggest something closer to the Irish model—ideally zero but 12.5% also works—to turbo-charge growth and coincidentally generate lots of new revenue for Mr. Levin’s beloved IRS.

So instead of looking to fix the American system – a stronger economy helped by lower tax rates generates more business and, consequently, more  tax revenue – President Obama and his pals – who make nice salaries funded by taxes and will have generous pensions funded, too, by taxes – decided to vilify the wealth creators and force them to pay more. The takers want to ensure that the makers “pay their fair share.” No word if the takers believe there’s a limit on the fair share of their citizens’ wealth that they’re entitled to. Despite claims of wanting to free up trade, the summiteers want to make their jurisdiction into tax enforcers. The sense of “you didn’t build that” pervades this declaration. The working premise would seem to be that public wealth is a right; and that private wealth is a privilege.

It would have been nice if at least one of the attendees was as strong in defending individual (and corporate) property rights as Putin was in defending the dictator of Damascus.

Barack Obama came to office funded by record amounts OF PEOPLE’S MONEY, doling out government largesse BY transferring PEOPLE’S MONEY to favored causes and industries, FOR which he requires even more PEOPLE’S MONEY, to fund an ever expanding government. And that is the mindset he brought to the G-8 summit, that is reflected in their final communique.