This past Sunday, 60 Minutes ran a fantastic and mostly factual story on how companies are hoarding money oversees to avoid paying taxes in the U.S. Every American should watch this video, it is that important!
Emotions run very high on both sides of this issue. Groups like USUncut recently protested against these companies and feel strongly that the government should close these tax loopholes. Others feel that corporations are already paying too much in taxes and the rate needs to come down. Let us provide some perspective on this situation.
Capital flows like water. What that means is that water will flow downhill and look for the path of least resistance. There is nothing anyone can do to change this basic phenomenon in nature. Water will never flow uphill on its own. Capital will always flow to wherever it can earn the highest perceived return on investment, period. The key word is "perceived", because the end result is not always the choice that results in the absolute highest return. However the capital will flow wherever the decision makers "think" it will earn the highest return. This is how capital SHOULD flow, as it results in the most productivity and value for each dollar invested. The end result is the world we live in today, where society moves forward with new discoveries, increased productivity, and a higher overall standard of living. It is hard for anyone to argue against this, unless they feel we would all be better off riding horses, using the Pony Express to communicate, building fires to stay warm, or going without basic pain medicine or anesthetics. Amazingly, there are some folks that feel this way, but for the rest of us, we like the way things have progressed over the last 200 years.
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