As the 2014 midterm elections approach, Democratic candidates led on by President Barack Obama and U.S. Treasury Secretary Jack Lew are adopting rhetoric against corporate inversions, which they define as “the ability of American companies to avoid U.S. taxation by combining with a smaller foreign business and moving their tax domicile overseas.” In such rhetoric, Lew has called for “a new sense of economic patriotism, where we all rise or fall together.”
The phrase “economic patriotism” has been defined in many different ways by different politicians at different times, and some of these definitions contradict others. The current definition espoused by Obama and Lew appears to be something resembling “a duty to produce the greatest good for the greatest number of Americans, and the duty not to relocate the tax domicile of a corporation to pay less taxes.” Therefore, the best approach toward countering economic patriotism is to refute utilitarianism, show that paying higher corporate taxes is economically unsound, refute the idea that corporations should be loyal to the US government, and explain why economic cosmopolitanism, known more simply as free trade, is superior to economic patriotism.
The task of dispensing with utilitarianism, or “the greatest good for the greatest number,” is rather lengthy but not so difficult. Utilitarianism is a subset of consequentialism, which is the class of normative ethical theories which regard the consequences of an action as the basis for its rightness or wrongness. Therefore, if consequentialism is shown to be false, then utilitarianism fails a fortiori.
When people agree to engage in rational argumentation, they implicitly accept certain behavioral norms. Among these are that truth is universally preferable to falsehood, and that one will make an effort to persuade others to agree with one’s philosophical position. (This does not mean that all people at all times will behave as such; only that they should behave as such.) These norms must be accepted because to reject them is to leave one’s colleagues in argumentation with no reason to believe that one is making an honest effort toward creating valid arguments (and therefore every reason to believe that one is jesting, trolling, and/or lying).
Disproving consequentialism requires two steps. First, we must prove indeterminism. Determinism is the philosophical position that for every event, including human action, there exist conditions that could cause no other event. It logically follows from determinism that it is impossible to persuade others of one’s philosophical position, as strict determination of human actions (and therefore, a person’s philosophical position) would mean they were completely necessitated by past events beyond present control, and therefore not alterable by argumentation. But the effort to persuade others of one’s philosophical position is a condition of rational argumentation. Thus, to argue for determinism is to try to persuade someone to agree with the philosophical position that it is impossible to persuade someone to agree with one’s philosophical position, which is a performative contradiction. Therefore, indeterminism must be true.
Now, we can disprove consequentialism. Consider two people who find themselves in identical situations and who take identical actions. Because of indeterminism, the future is not directly knowable by extrapolating from the past. Thus, the consequences may play out differently in each case. Regardless of one’s criteria (or lack thereof) for distinguishing good consequences from evil consequences, the situations may play out with good consequences in one situation and with evil consequences in the other situation. This means that the same action taken under the same circumstances can be both good and evil. This is a contradiction, therefore consequentialism is false.
NB: There is a notable sidestep to the above argument. One could take the position that free will is not a prerequisite for rationality or for trying to change a person’s mind, which would be free from internal contradictions if one is determined to persuade someone of something, and the receiver of the argument is determined to accept it. But this position necessitates a lack of responsibility for one’s actions, as those involved in the argument would have no choice, and therefore no moral agency. Therefore, the end result is moral nihilism, which would also disprove consequentialism if correct.
II. Corporate Taxes
From a moral standpoint, any form of taxation is armed robbery, possessing/receiving/transporting stolen goods, slavery, trespassing, communicating threats, and conspiracy to commit the aforementioned crimes. But let us consider the economic aspect of corporate taxation in particular. The first thing to note is that there is really no such thing as corporate taxation. When a government levies taxes on a corporation, those who own the corporation will treat the taxes as a cost of doing business, which gets included in the prices of goods and services offered by the corporation. Thus, any tax upon corporations is ultimately a tax upon their customers, not upon those who own the corporation or invest in it. Secondly, any money that a business must pay in taxes is money that the business cannot use for any other purpose. This means that when businesses are taxed, they are discouraged from hiring more workers, paying higher wages, performing research and development, and offering better goods and services at lower costs to consumers. Even worse, these effects are hidden (and frequently ignored by government economists) because it is impossible to count jobs and products that were never created because government taxes prevented their creation.
III. Corporate Loyalty
A corporation is a legal fiction created by the state to shield business owners and investors from being fully responsible for their actions. A corporation does not exist in any physical sense; only the workers, buildings, trade goods, etc. actually exist. Corporations allow business owners and investors to keep profits for themselves and force their losses onto everyone else. This government-granted immunity from responsibility is antithetical to a free market and would necessarily be absent in a free society.
But let us deal with the world as it is, not as it should be. In some perverse sense, there is some truth to Mr. Lew’s argument that “[t]he firms involved in these transactions still expect to benefit from their business location in the United States, with our protection of intellectual property rights, our support for research and development, our investment climate and our infrastructure, all funded by various levels of government.” At first glance, the corporation owners and investors are receiving services, and should pay for those services. But this view is morally problematic, as intellectual property violates physical property rights and all of the aforementioned benefits are provided through state violence and threats thereof against taxpayers, as well as debasement of the currency that they are forced to accept under legal tender laws. After all, governments have no justly acquired purchasing power of their own. It is also philosophically invalid to treat taxation as a payment for services rendered because the recipient of the service generally must pay for the service whether or not one makes use of the service, and has no choice of whether or not to receive the service at all in some cases. Furthermore, governments frequently prohibit competition with infrastructure by granting monopolies to service providers, such as energy companies and water companies. Aside from the moral case, there is no logical reason why the owners of a corporation should be loyal to the U.S. government when they can find similar arrangements elsewhere, and it is logically inconsistent to attack business owners for moving their tax domicile elsewhere while continuing to do business in the U.S. while not attacking business owners for moving their tax domicile to the U.S. while continuing to do business elsewhere. Finally, Mr. Lew implies that the above amenities require government, a positive claim accompanied by a burden of proof. Like most statists, he never fulfills that burden of proof.
A step in the right direction would be for such unfair advantages to be discontinued, along with the immoral revenue-generating practices that fund said advantages, forcing wealthy CEOs and investors to play by the same rules as everyone else (and isn’t this what leftists usually claim to want?) Once that happens, the market will become more free and the correct ideas of the loyalty (to its customers) and duty (to its investors) of a business can become manifest.
IV. Free Trade
The opposite of patriotism is cosmopolitanism, or the lack of devotion to any government. It follows that the opposite of economic patriotism is economic cosmopolitanism, known more simply as free trade. Free trade is defined as trade in which no coercion or fraud is involved. All participants enter into the trade voluntarily and each participant benefits from the trade by their own subjective measures of value. This creates the most benefit for those involved because any amount of coercion or fraud present in a transaction increases the cost of doing business from what it is in the ideal state of free trade, resulting in lost opportunities. As shown above, economic patriotism necessarily involves coercion.
With the case made by President Obama and Secretary Lew so easily dismantled, why is there such a push for “economic patriotism?” Quite simply, they know that there are a significant number of voters who can be persuaded by such arguments because they are incapable of seeing through them. As always, politicians act in their own rational self-interest, which is to expand their political power. A “new sense of economic patriotism” is simply another means toward that end.