Intel Co-Founder Calls For Tax On Offshored Labor

theodp writes "Intel co-founder and ex-CEO Andy Grove calls BS on the truism that moving production offshore to locations with much lower wages is a sound idea. 'Not only did we lose an untold number of jobs,' says Grove, 'we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry.' To rebuild its industrial commons, Grove says the US should develop a system of financial incentives, including an extra tax on the product of offshored labor. 'If the result is a trade war,' Grove advises, 'treat it like other wars — fight to win.'"

Grove is a two faced ....

[AnonymousClown]

When Grove was CEO of Intel, HE was the one who moved much of their R&D overseas because they were "unable to get qualified Americans."

Re:Is Grove running for office?

[TheRaven64]

They might be made in China, but the decent ones aren't designed there. They're designed in Israel.

Re:How do you decide what's offshored labor?

[QuantumRiff]

Then they just do what haliburton did, and move their headquarters out of the US, to Dubai...

Re:Ugh

[kf6auf]

Why shouldn't taxes punish people for negative externalities? For example, gas taxes are a more free-market way of limiting smog from cars than mandating that every new car have a certain fuel economy or telling the manufacturers every car needs to be a hybrid. The argument isn't "we don't like X so let's tax them" but rather "action X has a hidden cost to the nation of $Y, let's tax it $Y". Of course, you're lucky if you can get 60 senators to agree that pollution is bad so we don't really hear much of the nitpicking over whether it's $Y or $Y-1, just that some people think there is a cost (in other words pollution is bad) and some don't. Taxes are for forcing the free market to realize negative externalities and funding needed government services. What's wrong with the argument "it would be better for the country if we taxed X"? Furthermore, pretty much all of the taxes you pay do go to stuff the government pays for that you have previously benefited from (public education), are benefiting from (the military, police, fire protection, roads), or will benefit from (Social Security, Medicare, federally funded research). Now some of it is pretty indirect, like the Secret Service protecting the President, but in the end most of it still benefits the country. If the government cannot raise taxes to pay for these costs, how should it or should it stop doing them?

Re:Dont tax, remove tax breaks.

[Anonymous Coward]

We have one of the highest tax rates "on paper", and one of the lowest in practice; the tax breaks are why. Remove the ability to keep the tax breaks when offshoring, and that really does make the rest of the world more expensive. Sure, the labor elsewhere will still be cheaper, but it's the after-tax profit that matters.

Re:Grove is a two faced ....

[hitmark]

more correctly, what was in the best interest for the shot term profits of the intel shareholders. The long term viability of intel, or for that matter, any national economy, is at best secondary.

Re:Is Grove running for office?

[trigeek]

Are you serious? Intel is one of the few companies that still fabs most of its chips in the United States (Arizona, New Mexico, and Oregon). There are also fabs in Israel and Ireland, but the bulk of the fabbing is done in the US. The packaging is done in Indonesia, China, etc, but that's not where the real money is.

Re:the economic justification is actually simple

[cdrguru]

The problem is now and has been since the end of WW II that neither Japan nor China want anything from the US. This isn't something new. You would think that US-grown rice would have a market in Japan and China - nope, it doesn't meet their standards. It doesn't matter what the standards are, either - whatever is brought over instantly doesn't meet their "new" standard.

For the most part, folks in the US have stopped trying because it doesn't work. There is no power that can force Japan or China to "Buy American".

Why, with this as a given for the last 70 years or so, would anyone open up "free trade" with China? But it was viewed by some as a way to influence their policies on human rights. Yeah, sure. We can complain about their human rights record while they are burying us economically. Because we encouraged it.

The problem on our side is that as a member of the WTO, we can't impose tariffs on imports - including importing work that takes place overseas. Doing so will not last a month until it is repealed. Remember the flap about steel imports? No, we are't getting out of this by taxing or imposing surcharges. Quite possibly the only way out will be the market for offshore workers collapsing because the companies in the US go belly-up.

Re:This is not only good common sense

[Anonymous Coward]

Nope, sorry, experience has shown us time and again that given the increased profits that would enable them to hire more people, American corporations instead take that money and grant even more ludicrous bonuses to those already at the top of the pay scale.

Re:the economic justification is actually simple

[twoallbeefpatties]

The problem on our side is that as a member of the WTO, we can't impose tariffs on imports - including importing work that takes place overseas.

I've heard here and there that the WTO will allow for certain tariffs to exist (such as Value Added Taxes) for certain externalities. I'm running around Google looking for examples... Here's a short example. [ft.com] Here's another. [prospect.org]

Re:This is not only good common sense

[rrhood]

Given Clinton raised taxes (the largest tax raise in history if the Republicans are to be believed) and he left office with a robust economy and a balanced budget as well as unemployment below 4%, and Bush reversed all Clinton's taxes (and many other policies) resulting in enormous tax reductions, and he left office with a busted economy and unemployment rapidly approaching 10% I find it difficult to understand how anybody can still be pushing supply side economics (otherwise known as Reaganomics, and Reagan also failed with this policy). To many people looking for gimmicky fixes to the economy are the reason I don't think we will pull out of this anytime soon. Most of what I think need to be done; Higher taxes for people who have an income, lower benefits for everybody, bigger government (in some areas) and a certain amount of protectionism for the American worker; are painful and so probably won't happen. Eventually things will really collapse, and the pain then will be excruciating. I don't think we can avoid the pain one way or another. Given Obama also seems to believe in supply-side economics causes me to see no hope. I suspect financial incentives will not work either. I would put in a law that requires some percentage of any product consumed in the US (say for products with $100 Million gross) must be produced at least at the 25% level (of products consumed by US people) by US workers.

Re:How do you decide what's offshored labor?

[Anonymous Coward]

Companies quartered in the United States are given a 1 to 1 reduction in U.S. tax liability for each dollar in foreign tax they pay.

Re:How do you decide what's offshored labor?

[pgmrdlm]

Hate to break it to you champ, but when Eisenhower was President, Corporations and the top tax bracket were 87%. In those days, fiscal conservation actually happened. The wealthy who reaped the benefits off of labors backs paid back and the nation built highways, dams [Eisenhower screwed up by not making rails first and highways second, but that's a separate issue], power grid expansions, etc.

Breaks my heart that I can do this, but here is a supporting link. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 [taxpolicycenter.org]