Big Companies

I am in the local CVS, one of the many near-monopolies, retailing everything from pharmaceuticals to newspapers. I have bought some milk, and, because the customer has to do all the work, I scan the carton, cost $2.67. A total of $38.97 shows up on the screen. While accustomed to price gouging this is, nevertheless, mildly surprising. I find one of the few, increasingly elusive, staff.

"Look what your machine is trying to charge me for a pitiful little carton of milk!"

Says she, looking not in the least surprised, "This is happening all the time."

"It looks as if somebody scanned their items, didn't like the look of the price, and walked out without paying."

"You're right, Sir. As I say it's happening all the time."

"You mean several times a day?"

"Oh, yes, We can't keep an eye on everyone."

Should we be dismayed by the unethical and dishonest people who walk out without paying? Yes.

Should we sympathize with the company? No! They're not bothered by theft!

The economics of price scanners appear to be as follows:

1. The purchase of scanners shows up on the balance sheet as depreciation, and the government has decreed that it can be written off against tax under a program called " Accelerated Depreciation". Thus, a hunk of tax can be saved almost immediately.

2. Stores can reduce their overhead by eliminating counter staff, keeping just one person to supervise, say, six scanning machines.

3. Since many American companies are now virtual monopolies (thank you, Congress!) there is no problem - just raise prices to make up for "wastage" of inventory.

The giant scam that has re-written the rules on depreciation is a subsidy to capital investment, encouraging firms to substitute capital for labour. It means that some large companies pay no U.S tax at all, thus worsening the fiscal. A big telephone company, Verizon, benefitting from millions of dollars of subsidies (why, please?) is reported to have a negative 3% tax liability for the last three years.

It doesn't stop there, because the taxpayer has to pick up the cost of unemployment benefit, even if American unemployment benefit is paltry in comparison to other advanced economies, where citizens are treated with more sympathy and respect. Business writers label staff reduction "a productivity improvement" and claim that those "let go" are released to do something else. Something else turns out to be watching television all day, eating candy bars, and contracting diabetes.

Perhaps the so-called "think tanks" could tell us how we taxpayers benefit from the activities of these companies, who pay less than their fair share of tax and who have bought Congress outright? But I doubt they ever will. They are paid by the self-same big corporations.

.

Can we please get real? This dubious peace of special pleading might have had some substance three or four decades ago before globalization, but it is utter nonsense today.

Let us look at the facts.

The rate of tax paid by some super rich is now lower than the rate of tax paid by some of their chauffeurs and the pilots of their corporate jets. Bush lowered these taxes on the grounds that lower taxes on the rich would result in more job creation. Then why do we now have a stubborn 9% unemployment that won't come down? Where are the promised jobs?

The reality is that the super-rich gladly pocketed the tax breaks and then shipped the jobs overseas. Were they thinking of the United States, which reared them, educated them, and offered all the appurtenances of an advanced, law-based, and reasonably peaceful society? No! Patriotism has nothing to do with it; profit does.

There are two things one should know about most (though not all) very rich people. One is that they can afford (and they use) very good accountants, who make fortunes hiding assets in offshore banks and pokey islands, out of the sight of the Internal Revenue Service. Having said this there is a small minority of patriotic, rich people who do want to give back something to their countries of birth. But most of them are not Republican funders and voters.

Secondly, the super rich now have more in common with one another than they do with their erstwhile fellow compatriots. They are citizens of the world, and they owe declining allegiance to their place of birth. New York is simply a city where they have one of several penthouses; Washington D.C is where "their" Congressman lives and works and protects the interests of the financial masters.

You can reduce the rate of tax to zero and it still may not make the slightest difference to the super-rich. Rather than invest in the United States or Europe they look to the new economies and to relatively large returns available there that simply are no longer available in the traditional "advanced" economies. The big profits and the bright future are in China, India, Brazil and Indonesia, and maybe Russia. Meanwhile, education is a disaster in the West (maybe Germany is an exception), and the will to work is weak and morale is low. This is not a magnet for the investor.

October 2011