Goldman Sachs issued a report recently claiming to debunk the fact that too-big-to-fail banks like itself get implicit taxpayer subsidies worth tens of billions of dollars a year.
But Goldman’s dissembling gets methodically disassembled by Bloomberg View’s Mark Whitehouse. It’s something to behold:
Before getting into the details, it’s important to note that the Goldman analysts are posing the question in an imprecise — and perhaps convenient — way. They’re asking whether big banks borrow at lower rates than small banks. The salient question is whether big banks, thanks to government support, are borrowing at rates lower than they otherwise would…
The Goldman analysts compare the yields on bonds issued by two groups of banks — the six largest U.S. institutions, and a few dozen smaller ones. They find that the bigger institutions’ cost of borrowing was, on average, 0.31 percentage point lower from 1999 through early 2013, but has lately been about 0.10 percentage point higher.
The analysis ignores a crucial distinction: The biggest banks are riskier because they use a lot more borrowed money, or leverage.
Read the whole thing.
Unsurprisingly, about 40% of the profits of U.S. multinationals are reported in such countries as Bermuda, Ireland, Luxembourg and Switzerland, where taxes are minuscule or nonexistent for foreign firms, according to the Congressional Research Service. The phenomenon supposedly bolsters a common rationale you’ll hear for abolishing the corporate income tax, which is that it distorts corporate decision-making…
This argument is popular among economists. What it leaves out is that government in the real world requires revenue. Since all taxation imposes economic distortion in one way or another, the question boils down to how to do that in a fair, sensible and efficient way. Having a corporate income tax probably meets those requirements better than not having one…
So what should we do about loophole jockeys like Apple? The easiest remedy is to abolish the overseas income loophole: impose a single rate on all income earned by U.S. multinationals, with a credit for taxes paid to foreign countries.
The piece basically shows that Silicon Valley fast lane is filled with self-absorbed twits who don’t have a clue about what the rest of the country looks like. So?
Seriously, who did we think was making big bucks in high tech, great philanthropists? As a general rule it is reasonable to assume that people who make lots of money in any industry, whether it finance, manufacturing, entertainment, or anything else, are primarily concerned with making money in that industry. I don’t know whether we should blame them for that fact, but we certainly should blame policy types who then imagine that these people’s success at money making gives them great insight into how we should run society.
Bill Gates got incredibly rich because he has sharp elbows and perhaps was willing to bend the law more than his competitors. The same applies to Mark Zuckerberg. That doesn’t mean that both are not smart and hard working people, but it does mean that they may not be the best people to determine our education policy or how best to lift the world’s poor out of poverty.