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Intel Co-Founder Calls For Tax On Offshored Labor 565

Posted by Soulskill
from the wishful-thinking dept.
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.'"
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Intel Co-Founder Calls For Tax On Offshored Labor

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  • by Qzukk (229616) on Friday July 02, 2010 @01:08PM (#32776900) Journal

    The first thing companies will do is spin off "Offshore Labor, Inc" to a separate corporation headquartered in the Cayman Islands or wherever, then import the products for sale here. No offshored labor here!

    • Re: (Score:3, Interesting)

      by binarylarry (1338699)

      Ask the companies who are being audited by the IRS for their existing Cayman tax dodging practices how much fun that is.

      This is one thing Obama should be lauded for (and I'm not a huge fan).

      • by QuantumRiff (120817) on Friday July 02, 2010 @01:47PM (#32777674)

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

      • by commodore64_love (1445365) on Friday July 02, 2010 @02:12PM (#32778072) Journal

        The logical course would be to tax money based upon where it is EARNED, not where the company resides.

        • by Monkeedude1212 (1560403) on Friday July 02, 2010 @03:08PM (#32778800) Journal

          Okay, so I live in Canada, your business is in the states. I order something online.

          Where was the money earned?

    • by ducomputergeek (595742) on Friday July 02, 2010 @01:58PM (#32777866)

      From the stand point of double taxation of foreign profits in the US, you are much better creating your corporate HQ somewhere like the Isle of Man or the Caymens, et. al. and then creating a separate US entity. Then your profits made in other countries are taxed in those countries, but if you send the profits to the Caymens you aren't taxed again on those profits.

      As it works now, if you are HQed in the US and have different operating units in other countries, you pay the taxes in those countries. Then any remaining profits sent back to the US are taxed again by the IRS. So the US company is being taxed for the profits made in the UK, Germany, Russia, or wherever.

      In most countries, if their company makes profits in the US, they aren't taxed again back home when they bring the profit back.

    • Re: (Score:3, Insightful)

      The first thing companies will do is spin off "Offshore Labor, Inc" to a separate corporation headquartered in the Cayman Islands or wherever, then import the products for sale here. No offshored labor here!

      I agree but it's not hard to figure out who's doing it and just tax their goods.

    • Re: (Score:3, Interesting)

      The first thing companies will do is spin off "Offshore Labor, Inc" to a separate corporation headquartered in the Cayman Islands or wherever, then import the products for sale here. No offshored labor here!

      Well, that wouldn't be that hard to get around. Instead of a tax on the parent company, institute a tariff on the imported goods or services. That way you put the penalty on the consumers of imported goods and services rather than the producers, who can always find a way around a tax. With a tariff, you don't care who manufactures it where, because it's the importer and the consumer who's going to be forced to cough up, as soon as soon as it crosses the border. It would make consumption of foreign produced

  • by rsborg (111459) on Friday July 02, 2010 @01:10PM (#32776936) Homepage
    This is not only good common sense, it's totally populist and would win him many single-issue votes (including mine).

    I am completely sick of being screwed over by the corporatist plutocrats.

    • by AnonymousClown (1788472) on Friday July 02, 2010 @01:27PM (#32777266)
      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: (Score:3, Interesting)

      by scamper_22 (1073470)

      Absolutely not. This is the absolute worst thing that you can do.

      I'd rather the government just be straight up protectionist and say solutions must be made in the USA or at least in NAFTA.
      Companies will always find ways around taxes. they will form subsidiaries... who knows. Not that, but who ends up with the money of a tax? It will be the government. It won't be the struggling American tech worker. I see no benefit in taxes in the government's hands so it can give the money to more bureaucrats.

      The ot

    • by falconwolf (725481) <falconsoaring_2000.yahoo@com> on Friday July 02, 2010 @02:48PM (#32778556)

      It is not only not good common sense but it is actually bad economically. The protectionist law Smoot-Hawley Tariff Act [wikipedia.org], which became law in 1930, led to the Great Depression. When one country enacts protectionist laws other countries pass their own protectionist laws in retaliation which shuts down trade. Economies then collapse causing recessions and depressions.

      If you want to help create US jobs, reduce if not get rid of Payroll taxes [about.com]. Besides all the taxes employers have to deduct from employee pay checks, employers have to also pay taxes [allbusiness.com]. The FICA or Medicare and Social Security tax, employers have to pay half of it. They have to pay federal and state unemployment taxes as well. Not only that but they have to pay accountants to calculate how much has to be paid in taxes. These taxes are paid for every employee, reduce the number of employees and the taxes are reduced as well. Reducing, I'd prefer them to be abolished, federal income and payroll taxes would allow employers to hire more employees and or pay them more. And more people making more money will boost the economy. They will have more money to buy more, driving demand, and or they will invest more thus creating more jobs.

      I am completely sick of being screwed over by the corporatist plutocrats.

      So hold them accountable, just don't shut down trade.

      Falcon

      • by twoallbeefpatties (615632) on Friday July 02, 2010 @03:42PM (#32779284)
        Reducing, I'd prefer them to be abolished, federal income and payroll taxes would allow employers to hire more employees and or pay them more.

        Over the past decade or so, we've had great expansion in worker productivity in America, and we also boasted a high GDP. We also had anemic wage growth vs. inflation (especially against the prices of goods such as college education and health care) and nearly non-existant job growth. And this was after two separate substantial tax cut packages near the beginning of the decade. The lessons of the last decade appear to be that there is not always a direct link between job growth and increased business profits / lowered taxes - often, the business's shareholders just pocket those increases. So forgive some of us for being skeptical that additional cuts on payroll taxes will have any major effect.
  • Damn Skippy! (Score:3, Insightful)

    by FutureCIS (1382381) on Friday July 02, 2010 @01:11PM (#32776946) Homepage
    This is an excellent point. Offshore labor is why I cant understand tech support anymore. I would rather pay a get more for the product to ensure I get good customer support.
    • Re:Damn Skippy! (Score:5, Insightful)

      by eln (21727) on Friday July 02, 2010 @01:24PM (#32777228) Homepage

      I would rather pay a get more for the product to ensure I get good customer support.

      You say that now, but how many products tell you where their tech support is based on the packaging? If you see two identical products on the shelf and one is ten bucks less than the other, you're going to buy the cheaper product without even thinking about where their call center is. Consumers cannot be trusted to vote with their dollars on things like this, especially since in the vast majority of cases they are called upon to make purchasing decisions with incomplete information.

      Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere, decreasing quality of products and services, and gutting the middle class of more prosperous nations. We've seen this over the past decades. Unfortunately, both consumers and suppliers make decisions on short-term scales, meaning they tend to make decisions based on what the balance sheets say today without even considering the impact those decisions will have years or decades down the line. In theory, government regulation is supposed to help provide a hedge against that sort of thing, since governments are supposed to be concerned with more long-term economic matters.

      This is not to say globalization in and of itself is bad. However, it needs to be undertaken much more carefully and gradually than it has been. Simply dropping all tariffs and letting businesses run wild all at once has produced a situation where everyone except for the very richest among us suffers, and even they will start to suffer if we allow the middle class to completely disappear and they have to drive through squalor on the way to their gated compounds like they do in many developing countries.

      It's in everyone's best interest to preserve a robust middle class in developed countries and encourage the middle class to grow in developing countries. Globalization policies should be undertaken with that goal in mind, not with the sole purpose of driving down cost as has been done so far.

      • Re: (Score:2, Insightful)

        by TheKidder (894874)

        Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere, decreasing quality of products and services, and gutting the middle class of more prosperous nations.

        Wait, what?

        • Re:Damn Skippy! (Score:4, Interesting)

          by Monkeedude1212 (1560403) on Friday July 02, 2010 @03:21PM (#32778954) Journal

          Wait, what?

          Which part whooshed past you?

          He basically says that being able to move products and goods without taxation caused this scenario where labour can be sent over-seas to a country with lower wages. This generally means that either that country has all the jobs or other countries have to lower their wages to stay competitive. This also reflects the quality of products and services, since you are paying substandard wages and basically taking people who need money to survive and not people who work because they enjoy it. On the flip side, the middle class in the more prosperous nations are left without the jobs they'd need to get by, or they'd take sub-standard (for their country) wages and scrape along the bottom.

          I don't know if this is accurate to what happens but it basically works like this:
          China and the US make deals to let companies operate in each others borders. Computer Technician jobs from the States get offshored to China because China offers the lowest wages for that kind of work, so Company A can save money on support thus increasing profits. Because of this, the existing Americans that work in Tech support must either move to and work in China (Almost making them more Chinese citizens than American), or find another job. Tech Support in India was also at a low cost but since China and the US made this deal, and China is offering lower wages, India must lower their wages to stay competitive.

          Had "Free" trade not been enacted, meaning, labour, products, services, etc, getting taxed appropriately, none of this would have happened.

          • Re:Damn Skippy! (Score:4, Insightful)

            by diablovision (83618) on Friday July 02, 2010 @04:38PM (#32780092)

            Your post is balanced on a tower of incorrect unstated assumptions.

            He basically says that being able to move products and goods without taxation caused this scenario where labour can be sent over-seas to a country with lower wages. This generally means that either that country has all the jobs or other countries have to lower their wages to stay competitive.

            There is no mythical place with the cheapest labor prices and an infinite supply of labor. When an employer enters a new country and wants to hire people, they have to increase the wage they offer those workers in the market in order to compete. Those workers actually benefit by doing this.

            This also reflects the quality of products and services, since you are paying substandard wages

            Sub-what-standard wages? Where does the "standard" wage come from?

            and basically taking people who need money to survive

            Everyone needs money to survive.

            and not people who work because they enjoy it.

            Rare breed, they.

            On the flip side, the middle class in the more prosperous nations are left without the jobs they'd need to get by,

            Oh, are they? They couldn't possibly think up new, better, more enjoyable jobs could they?

            or they'd take sub-standard (for their country) wages and scrape along the bottom.

            I am missing the assumption that you are apparently stuck on that there is some kind feeding trough of jobs that people, like cattle, line up for...?

            Apparently you are also missing the very obvious fact that consumers who buy goods actually benefit because the goods are cheaper.

            It's like a broken record with you protectionists. Chinese jobs are bad! US jobs are good! If local jobs are better than foreign jobs, it seems somewhat arbitrary that you choose nations as your granularity. Why not states? Are Arkansas jobs worse than Texas jobs? What about California jobs versus Idaho jobs? Those labor markets have radically different wage profiles--is "exploiting" cheap labor in Detroit bad for the expensive labor market in California? Why stop there? Why not get upset that *any* jobs exist outside your town? Or your family?

            Hey, don't buy that hammer, my brother makes hammers!?

            • Re:Damn Skippy! (Score:4, Insightful)

              by Monkeedude1212 (1560403) on Friday July 02, 2010 @05:25PM (#32780702) Journal

              Your post is balanced on a tower of incorrect unstated assumptions.

              Oh probably, but this is the internet!

              There is no mythical place with the cheapest labor prices and an infinite supply of labor.

              Umm, well, China has pretty cheap labour, and 3+ billion people to do it, and because its so much its practically infinite.

              Sub-what-standard wages? Where does the "standard" wage come from?

              A standard wage is the earnings associated with the cost of living required to maintain a good quality of life. Grade 10 Social Studies, did you skip class or something?

              Oh, are they? They couldn't possibly think up new, better, more enjoyable jobs could they?

              You can't just "Think up" a job and make money. I'd like to think up "Pie eating" as a job, and get paid to eat pies. No, sadly, Jobs are based upon what positions are available at companies willing to pay employees. The big issue is that companies would rather NOT pay employees, or if they have to, would like to pay them very little. Since the government regulates a minimum pay, these jobs go to countries where the government regulated minimum pay is the lowest.

              Apparently you are also missing the very obvious fact that consumers who buy goods actually benefit because the goods are cheaper.

              Well, yes, it IS nice that my new Computer fully decked out with all the latest features ONLY costs maybe 1 or 2 thousand dollars, when really the matierals that make up the computer itself probably cost way more. However, if I make minumum wage and housing costs so much, I'll never afford it. It's a shame the way that works, choosing food over a new TV.

              it seems somewhat arbitrary that you choose nations as your granularity. Why not states?

              Silly Goose, because Nations operate under different dollars and dollar amounts! An American Dollar is worth an American Dollar all across America. However, An American Dollar could be worth more or less than the Canadian Dollar depending on how lucky those Canucks are getting. Now a lot of regulation goes into Canada and US trade (see Lumber [gov.bc.ca]) because they are so close. However, since China is really far away their trade can be a little more free.

              Take Gasoline for example. In Canada, we have to regulate our Gas prices to match the United States (and they to ours, its a mutual agreement kind of thing) even if one of us technically has more gasoline than the other. Why? Well, if Gasoline was signifigantly cheaper in say... Alberta (with the oilsands and all) then there would be nothing from stopping some Montana based company from driving hundreds of tankers up, buying up all the oil, and driving it south to make a profit.

              It's unlikely though, that anyone would go and buy a product over in China where it is cheaper, than bring it back to the states. So free trade is a little more lenient with further countries. (Don't get me wrong, thats not the only thing that plays a part).

              So thats where corporations come in and fill that gap. They'll make the product where its cheaper and ship it back to you, thus, THEY make the savings.

      • Re:Damn Skippy! (Score:4, Insightful)

        by nedlohs (1335013) on Friday July 02, 2010 @02:39PM (#32778452)

        Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere

        Really? You have some statistics to back up your claim that the wages in China and India have fallen since they got on the global free trade bandwagon right?

      • Re: (Score:3, Insightful)

        by wiggles (30088)

        I agree with you for the most part, but you left out something important. While, yes, globalization has been driving down salaries of the middle class, it's also reduced the cost of living of the middle class, as well as created a middle class in developing countries like China and India.

        It's not that globalization is universally bad -- it's just bad for salaries of middle class workers in developed nations.

      • Re:Damn Skippy! (Score:4, Insightful)

        by quanticle (843097) on Friday July 02, 2010 @03:30PM (#32779124) Homepage

        in practice ends up driving down wages everywhere

        That is utterly and absolutely false. Sure the wages paid to Chinese factory workers are low by our standard. However, the wages a Chinese peasant earns in an electronics factory are far higher than the wages he or she would have earned in any of the other occupations open to him or her. If it were not the case, there would not be such a large labor force for these factories. China, despite all its other authoritarian policies, does not frog march workers into these plants. They come of their own free will.

        That's what makes me despair about a lot of the anti-globalization/fair trade protesters. They don't understand that workers are not being driven into the factories. Rather the factories are a more attractive form of employment than subsistence farming or herding. Are these factories places where you or I would want to work? Absolutely not. That, however, does not give us the right to take that factory job away from someone whose other opportunities are even worse.

    • Re: (Score:3, Funny)

      by COMON$ (806135)
      Then stop supporting the offshore companies. Don't tax them.

      You have many choices of places to get support from. All that taxing these companies will do is push the cost on to you the customer.

      As a side note, I have found that I get better support many times from the offshore folks than I do from the bubblegum chewing American doing the minimal amount of work to pass me off to the next level of support. Of course I am a Nebraskan so I am accent neutral, talking to overseas is just fine with me.

      • Re:Damn Skippy! (Score:5, Interesting)

        by hedwards (940851) on Friday July 02, 2010 @01:34PM (#32777436)
        Sigh, I wish this line of reasoning would die the swift death it deserves. Taxes are probably the least controlling way of making these sorts of adjustments. You're not realistically going to vote with your money because there's few if any products which aren't at some stage created in that fashion. A tax is a simple way of shifting the cost curve up in areas which aren't desirable so that the new equilibrium is a bit more responsible. And it works wonders. There's a reason why Seattle beats the crap out of pretty much any other major US city in terms of fuel efficiency. The state legislature instituted high taxes on gas and when combined with the oil industries tendency to screw us over at the pump more than other parts of the state you end up with people making sensible decisions over all.

        By taxing them you put people on a more even footing to make informed decisions, it's not telling companies that you can't do it, it's telling them that if they want to do it they'll have to compete on a more even playing field.
  • by bl4nk (607569) on Friday July 02, 2010 @01:12PM (#32776966)
    ... and enter it with reckless abandon and no exit strategy; that last part is crucial.
    • by GrumblyStuff (870046) on Friday July 02, 2010 @01:18PM (#32777096)

      And weak to no media coverage and using the same soldiers over and over until they're ground to a pulp physically and/or mentally and ensure that the general population suffers no ill effects of the war to the point that it doesn't affect more than the occasional purchase of a "Support our troops!" magnetic ribbon.

      • Re: (Score:3, Insightful)

        by bennomatic (691188)
        And don't forget about torturing your competition but decrying that torture when used against your own people!
    • Re: (Score:3, Interesting)

      While we're going all Iraq Invasion Style here...

      How about the rest of the world add tariffs for stuff like exceeding a certain baseline aggregated carbon emissions for the production of goods, or paying salaries to textile workers that are lower than some predefined (and local price level adjusted) level?

      This would IMO lead to a decrease in the use of manufacturing processes (and energy generation for these) that are focused on saving pennies on the dollar in exchange for large increases in pollution. In t

  • by Kenja (541830) on Friday July 02, 2010 @01:15PM (#32777022)
    If you send work off shore, you no longer get all the corporate welfare tax breaks that US companies get.
    • On the other hand, you avoid the demonization that is part and parcel with being a "big corporation"
    • by assertation (1255714) on Friday July 02, 2010 @01:32PM (#32777396)

      But would that, alone, be enough to make offshoring financially ?

      If the answer is "no", I would say do it anyway. Tax breaks are really taxes put onto someone else...American citizens. If fewer American citizens are earning money from these companies ( to be taxed ) I see no reason why Americans should subsidize these companies with gifts.

    • by bennomatic (691188) on Friday July 02, 2010 @01:35PM (#32777472) Homepage
      Isn't that the same thing? Effectively removing tax breaks that have been in place for 5, 10, 15, or 20+ years is just like creating a new tax, at least in the minds of people who will have to oversee its payment, potentially for the first time in their careers.

      No CFO in the world will say, "Thank goodness we've been saving so much over the years with those tax breaks! All that money is right here in a piggy bank, so we're ready to start paying those taxes again." Those same CFOs already received huge bonuses based on those breaks, and that money's long spent.
      • by Kenja (541830) on Friday July 02, 2010 @01:41PM (#32777562)
        Same effect, less paper work. But bottom line is that if you dont want to have the jobs in the US you shouldn't get the benefits of incorporating here.

        I'd live to see the tax loopholes closed altogether, but failing that lets stop reducing money coming in (by sending jobs offshore) while at the same time paying out in tax breaks.
  • how is it (Score:5, Interesting)

    by nimbius (983462) on Friday July 02, 2010 @01:19PM (#32777124) Homepage
    every american businessman inevitably refers to business process in terms of war.
    • Re: (Score:3, Insightful)

      by Pojut (1027544)

      You have obviously never tried to convince an American "businessman" to consider customers first and profits second.

      • Re: (Score:3, Interesting)

        I'm pretty sure if they had any interests other than making profit, they could find employment doing something more useful than management.

        Well, okay, that's not fair. What I mean is, the people who went into business from the get-go were never interested in being of service to others. You don't earn a business degree as opposed to an engineering degree, science degree, law degree, etc, because you wanted to do interesting things. You earn it because you want to be in control of a business. Businesses "

        • Re: (Score:3, Interesting)

          by Pojut (1027544)

          Personally, I'm going after a business degree primarily because I already have technical skills. I will be much more capable having an understanding of both sides, rather than only one.

          It will narrow my job opportunities, but the opportunities it allows will be worth it.

    • Re: (Score:2, Troll)

      by DaveV1.0 (203135)

      I don't know how you were voted interesting when the term "trade war" has been around a very long time and is a political and economics term.

      It is not that "every american businessman inevitably refers to business process in terms of war." Rather, many businessmen of all countries use the same terminology and you are picking on American businessmen because you are most-likely anti-American.

    • Re: (Score:3, Funny)

      by pitchpipe (708843)

      how is it every american businessman inevitably refers to business process in terms of war.

      How DARE you misrepresent the American Businessman this way! This means WAR!

  • by Myji Humoz (1535565) on Friday July 02, 2010 @01:20PM (#32777130)
    The trouble with these type of taxes is that the corporations simply pass it onto the customers. Unless a huge tax is placed on the products, it will still be cheaper overall to offshore labor and charge consumers more. There are three scenarios:

    1) Low tax, say taxing the corporations for 20% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get no new jobs, and are worse off. The government earns taxes and is better off. The corporations sell slightly fewer products due to slightly higher cost, and are slightly worse off.

    2) Medium tax rate, say taxing the corporations for 80% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get no new jobs, and are worse off. The government earns lots of taxes and is better off. The corporations sell fewer products due to higher cost, and are noticeably worse off.

    3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get some new jobs, and are worse off unless they would be unemployed otherwise. The government earns very little in taxes and is barely better off. The corporations sell fewer products due to higher cost, and are much worse off.

    Of course, the corporations lose less money if the goods in question are price inelastic (demand doesn't drop that much if price increases) and there's a social benefit from more employment and technical expertise, but the government gets the most money in case 2, where everyone except for the government is made worse off by the taxes. In real life, there's a huge time in cost and effort needed to move manufacturing back to the US, what with hiring new managers, building or reopening factories, establishing entirely new supply lines, canceling contracts, etc. Because of this, companies are unlikely to move manufacturing back to the US even if the tax makes hiring offshore workers the same as hiring American workers; the slight gain in quality and public respect is canceled out by the upfront cost of moving.

    I for one sincerely doubt that the US government will tax corporations with a high enough rate to make most of them move back to the US, as the tax income is the lowest in that situation. Sadly, even if this knee jerk reaction goes through, social benefit to consumers and citizens will likely take a back seat to corporate interests and government revenue collection.
    • Re: (Score:3, Insightful)

      by frosty_tsm (933163)

      3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get some new jobs, and are worse off unless they would be unemployed otherwise. The government earns very little in taxes and is barely better off. The corporations sell fewer products due to higher cost, and are much worse off.

      You're analysis is impressive, but is missing one point in scenario 3. While cost of goods are higher, domestic demand is raised due to more jobs and a higher median income. Neglecting domestic jobs has reduced demand (less money to shop with), which has been offset by cheaper goods.

    • Re: (Score:3, Insightful)

      by h4rr4r (612664)

      ECONOMIES DO NOT WORK THAT WAY!

      If you have a cost and pass it on, your prices go up! If they could raise the price they already would have. Their competitors would drink up their milkshakes if they did what you are suggesting.

    • Re: (Score:3, Insightful)

      by hedwards (940851)
      Consumers are already paying for the degenerate practice of shipping jobs overseas. It's already being accounted for by artificially reduced wages and tax revenue that never gets collected since corporate entities don't have to ever book those profits. Putting a tax of this sort on those items puts the price of said items closer to what they'd be were the Chinese and Japanese engaging in illegal currency manipulation. Yes, it will make things cost more, but they would've already cost more were the entirety
    • The trouble with these type of taxes is that the corporations simply pass it onto the customers. Unless a huge tax is placed on the products, it will still be cheaper overall to offshore labor and charge consumers more. There are three scenarios: 1) Low tax, say taxing the corporations for 20% of the difference between US cost of labor and offshored cost of labor....
      2) Medium tax rate, say taxing the corporations for 80% of the difference between US cost of labor and offshored cost of labor....
      3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor....

      Haven't heard of a tariff, now have you?

      The whole point of a tariff is that you raise the cost of the imported item at issue (e.g. off-shoring) to be the same or greater than that of doing the same thing domestically. Sure companies (of all sizes) may try to pass it on their customers; but that just means they're going to go to another vendor that can provide it cheaper because they don't have to pay the tariff. At best, the minimum price level becomes the same - since labor, etc. is generally fixed per t

    • by mckinnsb (984522)

      Not necessarily - the argument of "passing on the tax to the consumer" doesn't really hold up in a free market. If a good or manufactured product faces many competitors in the same market, and the prices are competitive, then the company will be more reluctant to raise the price, especially if there is little else differentiating it from its competitors. Companies act individually. They don't always act in concert.

      Lets say, for instance, you have companies A, B, and C. All companies perform the same amount

    • Re: (Score:3, Insightful)

      by mcgrew (92797) *

      The trouble with these type of taxes is that the corporations simply pass it onto the customers.

      The trouble with your logic is that your competetion can choose NOT to outsource, and thus don't have that expense to pass along to their customers. They can either out-compete you, or charge the same as you and take higher profits.

  • Ugh (Score:5, Interesting)

    by COMON$ (806135) on Friday July 02, 2010 @01:21PM (#32777174) Journal
    I subscribe to the theory that you should not tax just to generate income or punish. You should tax based on liability, if it costs the gov't cash to maintain a service you pay for it. fairtax.org Im so tired of paying extraneous taxes for random stuff. We seem to have this thought that we have a budget shortfall so lets tax something. Or we don't like people behaving like X so lets tax them. Did we forget what taxes are for?

    Of course this ever happening in the US this is a pipe dream, but I like to visit these dreams every once in a while and yes it makes me feel better.

    • Re:Ugh (Score:4, Insightful)

      by Rivalz (1431453) on Friday July 02, 2010 @01:37PM (#32777496)

      I think the problem is there just aren't enough jobs. For local / offshore / everywhere.
      Too many people in the world, not enough resources, not enough of anything to be honest. So we want to make a system that further skews things because too far in one direction is worse then a crappy balancing act. Offshore pushes towards labor inequality. I just wish the offshore people would demand more from their employers and it seems to be slowly moving that way. But the fact is that there are too many people that can do the same job, but with varying demands of compensation. So taxing them because they are willing to work for less does not seem very ethical to me but that is why I will always be broke. I'm not willing to screw people over just for a little extra money.

    • by larkost (79011)

      Your attitude does not stand up to even moderate scrutiny, and seems to be based on the assumption that a large percentage of the Federal budget goes to stuff that benefits only a small portion of the US. I would invite you to go look at the "Death and Taxes 2011" poster:

      http://www.wallstats.com/deathandtaxes/

      Looking at the poster you can't help but realize that the vast majority of the expenditures (either discretionary like most of the poster, or the including the non-discretionary as in the small inset)

    • by hedwards (940851)
      Fairtax is a scam whereby the rich don't pay their fair share and the rest of us end up picking up the tab. 23% sales tax is enough to kill pretty much any economic activity.

      But then again, what the hell, lets just let corporate entities make up their own decisions, I mean it's not like we just had to spend trillions of dollars bailing them out for incompetent decisions. Wait, we did, didn't we? Taxing things of this nature is the least intrusive way of guiding things in a reasonable direction. It allows
    • Re: (Score:3, Informative)

      by kf6auf (719514)
      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
  • by electrosoccertux (874415) on Friday July 02, 2010 @01:24PM (#32777208)

    Now, I would consider myself fairly conservative. Usually the argument goes "they're taking our jobs!! We need to enact protectionist policies to protect American workers!"
    Doing this blindly, I have a problem with it-- it doesn't make economic sense. If we are more efficient at producing one good, and they are more efficient at producing something else, then it doesn't make sense for us to waste money trying to produce it ourselves in the States.

    However, I cannot economically justify free trade when
    1). the trade occurring is uni-directional (IE, we're buying from them and they're not buying anything of ours-- I don't count China's investment in Treasuries as real goods-based Trade [even though financial trade is _technically_ trade])
    2). one of the countries (China) involved in the trade refuses to let their currency's value be determined by the market.

    In other words, what we have now is not true "free trade". If it were free trade, China would be buying our products [unfortunately much of our product is now Intellectual Property and it's difficult to enforce consumption of these goods], and China would not be fixing the value of their currency. If they weren't fixing the value of their currency relative to ours, then any trade imbalances would be slowly corrected as it becomes more and more expensive (in dollars) to outsource labor/manufacturing to China.

    The Intel guy is mostly right; we just differ on how the imbalance should be corrected. I'd much rather a natural, market-driven return to mean, than a politically dangerous (taxing imports) one.

    • Re: (Score:3, Insightful)

      by assertation (1255714)

      The Intel guy is mostly right; we just differ on how the imbalance should be corrected. I'd much rather a natural, market-driven return to mean, than a politically dangerous (taxing imports) one.

      What would be a realistic example of that?

    • Re: (Score:3, Insightful)

      by seanadams.com (463190) *

      If we are more efficient at producing one good, and they are more efficient at producing something else, then it doesn't make sense for us to waste money trying to produce it ourselves in the States.

      You aren't addressing Grove's point, which is that there is intellectual capital to be gained and retained by continuing to manufacture such commodities ourselves. Textiles vs semiconductors differ in this respect. There is also physical capital we might like to have ready to go, i.e. the fabs, for when China g

    • by cdrguru (88047) on Friday July 02, 2010 @03:09PM (#32778804) Homepage

      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: (Score:3, Informative)

        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]
  • Hmm... (Score:4, Interesting)

    by fuzzyfuzzyfungus (1223518) on Friday July 02, 2010 @01:24PM (#32777218) Journal
    I wonder where the good Mr. Groves stands on Intel's large R&D base in Israel... Should we be taxing that, or is this only a tax for his dirty competitors who are fabbing with TSMC?
  • As a conservative, I always felt it was the corporation's responsibility to insure the highest possible return on investment to the company owners. However, if no one has work, then who will buy the products produced? Perhaps free trade has gone too far. Of course this will not be popular with our trading partners and treaty signers (NAFTA, etc.). With that said, I refuse to buy inferior products JUST because they are made in the USA. Detroit was handed their lunch by producing Pintos and Vegas when Civ
  • by MSTCrow5429 (642744) on Friday July 02, 2010 @01:31PM (#32777380)
    The US is not the only economy in the world, and Americans are not going to stay in the US if there are no jobs. The policy of the Federal and State governments should be to work to attract high-wage jobs by cutting taxation, regulation, and the deficit, and returning to hard currency. Trying to fence jobs in will only result in foreign employers even more strenuously avoiding the US, while the most capable Americans will strive even more vigorously to escape.
    • by DaveV1.0 (203135)

      Sorry, but that will not work.
      First off, it is harder to immigrate to other countries than it is to immigrate to the United States, so Americans will not be going overseas to work.

      Second, even if they did, most Americans are not willing to work for 16 hours a day for $2.00 per hour and live in a company sponsored dorm as happens in China, etc.

      Third, those high-wage jobs require high cost schooling that is getting harder to get. Also, there will not be enough of those jobs to go around. Computer programming

  • That FSCKER! (Score:5, Insightful)

    by bennomatic (691188) on Friday July 02, 2010 @01:31PM (#32777382) Homepage
    Some years back, my uncle got an MBA at UC Berkeley's Haas school of business, and the commencement speaker was none other than Andy Grove.

    He basically told them they were all fscked. "Somewhere in India," he said, "there's someone willing to do what you do and more for 1/10 your salary. Sitting next to you are people who will do anything to beat you at your own job," and so on. He talked on and on about how much you have to compete to survive, effectively saying, "your work needs to be your life and you need to expect nothing from it."

    And that'd all be well and good, but that same year, he was compensated over $100M, partially because of the cost savings of outsourcing, of forcing his employees to compete ruthlessly for each other, and so on. It seemed disingenuous at best to say, "This is the reality," when it's the decision of him and people like him to enforce that reality.

    What this change in tone says to me is that he feels that other companies are beating Intel at the outsourcing racket. Maybe he's upset that Samsung is making Apple's A4 for the iPad and iPhone, and he wishes it had been Intel ARM chips going into those millions of devices over the last quarter or so. Maybe it's something else, but this rings of the spoiled kid down the block leaving the game with his football because his team is losing.

    There is another way to run your company. Treat your employees like valued contributors. If they don't contribute, find out if they want to be in another role, or another company and let them do that. But if you're always looking to get the cheapest workers, you're in danger of losing your best people, and being beaten at the bottom dollar game as well.

    OK, end of rant.
  • by dpbsmith (263124) on Friday July 02, 2010 @01:33PM (#32777410) Homepage

    "We broke the chain of experience that is so important in technological evolution..." Darn straight. I sure wish more company management understood that.

    You can document a little, you can document a lot, but you can't ever document everything. Every company relies on stuff in peoples' heads. Reading other peoples' code and then being able to ask them about it. Solving problems at the time they occur by talking to the right person for five minutes in the hallway, instead of writing thirty-page memos and scheduling a series of weekly hour-long meetings, which eight people attend so that two of them can talk.

    The guy who says "Well, it worked well when we did it thus-and-such way on the Dash-Twenty-Twos."

    Even more important, the guy who says, "Well, the reason we're doing it that way now is because of concerns X, Y, and Z that we had on the Dash Twenty-Twos, but those reasons don't apply any more.

  • Jeez...doesn't anybody know any basic Economics? I mean, some places, like China, have an absolute competitive advantage in manufacturing, and that's where certain things will be manufactured because of it. The off shoring mostly a "comparative advantage" and it is still better to have things produced where this comparative advantage exists. What Andy Grove is talking about is a tariff...the worst idea of all (except for, maybe, subsidies). As much as I admire Andy Grove, this is a BAD idea.

  • Of course he is now they have exploited it for over a decade. You have to make sure you are shutting out any up-and-coming companies from leveraging it. Now that Wipro and other contracting shops makes outsource as easy as a phone call and some basic contract negotiations they have to lock out startup from getting access to cheap labor. ONLY US MEGACORPS ARE ALLOWED!! F*#$&%( UPPITY PEASANTS!!!

    You'll notice the same two faced bullshit when it came to the Internet.

    A: Internet is novel.
    B: Oh shit there is

  • Holy fuck, Andy.

    Where were you when Carly and your boy Craig were agitating to move jobs offshore at the beginning of this millennium?

    You didn't say a fucking WORD when Bush cut the outsourcing tax to let them do it.

    You'd better start campaigning against those people, because now that they've ruined their companies and our economy, they're running for public office.

God may be subtle, but he isn't plain mean. -- Albert Einstein

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