Videogame Tax Credits Hurt the Economy

[thiosk]

No company makes its tax returns completely public, but EA reported that it paid $98 million in taxes over those years, far less than the official 35 percent corporate tax rate. The author of the article David Kocieniewski argues that these tax breaks need to be reevaluated.

Say what you will about the evils of corporatism: the part in bold is what is hurting the economy. The tax breaks should be eliminated, but the corporate tax rate needs to be SLASHED to at LEAST 20%. If you disagree on the principle of FUCK CORPORATIONS, thats fine, but America has the highest corporate tax rate in the world, and our multinational corporations are all now paying their taxes in much tax-friendlier european nations. The corporations aren't going to pay 35%. Period. But I'd rather them pay us 20% than zero.

Slash to 20%, cut the breaks by 75%, and bring our corporations home.

 

[Baresark]

snip

How would you make the US "competitive" in the world market?

No matter how "competitive" our workers may be, they can't survive on $1 a day. But some overseas folks can. So there are some jobs lost to us. (Obviously, I'm not confining this assessment to video game companies.) These aren't the kind of jobs we need right now in the US, considering a lot of our unemployed don't have the training they'd need to hold one of these jobs.

Amazingly, though, when a US company shuts down a plant to move it to El Salvador and save a mint on labor, we don't see the slightest change in price here. So that means folks here buying those products are no better equipped to live on $1 a day. They still have to pay top dollar, so they need to make more.

How would the government fix this? Well... the only real method is to stop feeding money and loopholes to these big companies. Give the money to the rich, and they'll hold onto as much of it as they can and spend just what they need to turn more profit. And they'll spend it in other countries because the Third World works cheap. Give the money to the middle class, and they'll spend it here, in our own businesses. "Trickle down" has always been a load of bullshit, but "trickle up" will work without fail if you want to get the economy moving.

More to the topic, EA employs a lot of people, but (as you mentioned) a lot of that is the result of buying up studios that already existed. In the majority of these purchases, do you think that studio gained or lost employees? If they lose even one employee during the transfer, the result is that fewer people are employed on the whole, even if EA's roster got bigger.

It's not as simple as a single thing. There is a plethora of problems that lead up to this. The two biggest (in my opinion, of course) is inflation and wage laws. Basically, if the money was allowed to deflate, then the price of goods would drop and you could make less money and still keep your lifestyle. Wages laws such as minimum wage (which is very discriminatory in nature) would also need to be done away with. You can't define for people what their work is worth, only they and who they choose to work for can decide that. Of course, along with wage laws, a problem is union labor and collective bargaining. The problem with it is that no one is allowed to negotiate their own contracts. If you choose to be in a unionized industry and don't want to be a union man, you still MUST pay union dues, and you still MUST take their negotiated contract. You have all the negatives, and if you get into trouble, they throw you under the bus.

As an aside, the reason why deflation is never allowed is because the government is trying to protect peoples investments, but if they were more savvy investors, they wouldn't buy something for more than it's potentially worth in the future. It's the reason for the bailouts and subsidization of the housing industry and bad banks who suffered from the housing bubble collapse. In a market, there is always ups and downs. Constant inflation tries to combat this, but then you just end up with more financial crisis like what happened with the housing bubble. This is also the reason you never see the price of a good drop, even if it's made cheaper today than it was yesterday.

Just giving money to the middle class wouldn't fix anything. You would need a way for people to earn the money. An economic rule is: if you pay people to not be productive and not work, then people will be not productive and not work. That is why handout programs don't work. And it's important for global capitalism to be understood. Protecting US industry is a bad idea because people everywhere are primarily consumers. If you were to block off cheap imports, you would be left with more expensive and less efficiently made domestic goods. Also, without the foreign competition, there would be no incentive for research into better avenues of development. Also, because of the economic downfalls of the deflation/inflation debate, savings is shot. There is no incentive to save, only to spend. That also hurts the middle class.

I would love to have some kind of counter to your final statement, but I don't. Unfortunately, we have no way of tracking any of it beyond speculation as those kinds of records are confidential. I'm not saying that there is no way they never fired anyone, but you can't always have less people and still be productive enough for your profits to soar as high as theirs have.

 

[Baresark]

No company makes its tax returns completely public, but EA reported that it paid $98 million in taxes over those years, far less than the official 35 percent corporate tax rate. The author of the article David Kocieniewski argues that these tax breaks need to be reevaluated.

Say what you will about the evils of corporatism: the part in bold is what is hurting the economy. The tax breaks should be eliminated, but the corporate tax rate needs to be SLASHED to at LEAST 20%. If you disagree on the principle of FUCK CORPORATIONS, thats fine, but America has the highest corporate tax rate in the world, and our multinational corporations are all now paying their taxes in much tax-friendlier european nations. The corporations aren't going to pay 35%. Period. But I'd rather them pay us 20% than zero.

Slash to 20%, cut the breaks by 75%, and bring our corporations home.

I could not agree with this more. A corporation will pay high wages the US economy DEMANDS, if they corporate tax rates were not the highest in the world. It's like burning the candle at both ends.

I had gotten into this very debate with an older gentleman, who thought a good idea was making it illegal for companies to outsource like they do. I made the same point, that cutting the tax rate and getting less taxes from them pales into insignificance of not getting any tax revenues at all from them.

 

[Staskala]

When you've already exhausted, or looked through 500 companies - including Phillip Morris, McDonalds, Dick's Sporting Goods - then it's a pretty desperate report to bring up Electronic Arts - and then apply it to the whole gaming industry - when only the Triple A titles will be doing that.

Remember that that report would indite Zynga in the same area as Media Molecule.

Looks like we disagree here, I consider no issue small enough to not warrant criticism.
Indeed, companies like EA or Zynga getting more subsidiaries than they need is utterly insignificant on the grand scale of things, but I see nothing wrong with calling out lobbyism and tax "evasion". You imply that Kocieniewski also includes indie devs here, but I question that, as he never mentions them. Rather, he seems to have an issue with the fat cat(s), no one else.

But due to the forum guidelines, I can't directly accuse you of something, or I'm in breach. Equally, due to text being two-dimensional, I can't tell your emotional state when you wrote that. That's why the "dance of implication" exists.

Another needless anglo-saxon practice. Why are you people so averted to directness?
Whether you say so directly or cowardly hide behind the facade of indirectness doesn't change the fact that those words still came from your mouth keyboard.

Implication and Statements again. I'm saying that blaming the gaming industry for EA, while stepping past far more obvious implications gives a very tarnished outlook on Mr. Kocieniewski's stance - and reason for reporting it.

Taking a quick look at Mr. Kocieniewski's stance - it does seem like he's on a blame mission at the moment: http://topics.nytimes.com/topics/reference/timestopics/people/k/david_kocieniewski/index.html

But General Electric? http://www.nytimes.com/2011/03/25/business/economy/25tax.html?ref=davidkocieniewski

They pay no tax whatsoever.

So, EA aren't really that bad, are they? Or at least, not in this respect.

Well, you can always use the "not as bad as ..." argument until you inevitably reach the arms industry, so I'm really not a big fan of it.
But yeah, EA obviously isn't as bad as half of the F500, I'd never dispute that.
Again, I'm really not a big fan of the article myself, but I think implying ill intentions or even a higher agenda is going a bit too far.
Like I said above, there is no proof to imply any of that. The article leaves much to be desired, but I see no reason to cry foul here.

 

[Lorechaser]

I would just love to see EA get screwed by that stupid Dead Space 2 ad campaign.

 

[Callate]

"The company with the defiant sales slogan, 'Your Mom Hates Dead Space 2,' in effect gets financial help from moms and other United States taxpayers to reduce its federal tax bill," he wrote.

You just knew that stupid ad campaign was going to bite them in the ass. It was just a matter of time...

The U.S. has the highest corporate income tax rate in the world...

Oh, for pity's sake. This is the kind of hyperbole that keeps getting passed around until everyone is certain it's gospel, and no one can even be bothered to check and see if it's true because it reflects what they already want to believe.

The U.S does not have the highest corporate tax rate in the world. Japan does, and several others have official rates that are at a par with those of the U.S., including countries like Brazil whose economies are on the rise.

Meanwhile, a General Accounting Office study cited by Business Week notes that between 1998 and 2005, 55% of large businesses had at least one year in which they paid no taxes at all.

I agree that we'd be better off with a lower corporate tax rate that was actually paid right across the board than a higher one. But I'm really, really tired of this idea that lower taxes are the magic bullet to make all our ills better. I'm sick of people ignoring history with this idea that if we don't make them pay taxes, and rip apart health, safety, and environmental regulations, and raze unions, and let them take over their own worker's compensation systems, that maybe the jocks will like us and stop beating us up for our lunch money.

 

[lomylithruldor]

Don't give them tax breaks, they'll just move here (Canada). I've got no problem with that.

 

[SemiHumanTarget]

My take? FUCK YOU, EA!

And FUCK YOU, David Kocieniewski!

 

[SemiHumanTarget]

oh, and @Staskala,

The fact that Kocieniewski never mentions indie developers is irresponsible journalism. As is the headline photo that clearly draws the industry only as a lucrative producer of entertainment products on the scale of Hollywood, and his constant references to Dead Space. As a holder of a journalism master's degree, I can tell you with certainty that this is not legitimate journalism - which would require doing one's best to tell a balanced story - and as such, should pretty much be excluded from any serious critique.

Take it from me, the NYT is more and more becoming a pro-war, pro-business right wing mouthpiece since some extreme changes in editorial philosophy in the last decade or so.

 

[The_root_of_all_evil]

Again, I'm really not a big fan of the article myself, but I think implying ill intentions or even a higher agenda is going a bit too far.

David Kocieniewski refers to the gaming industry as doing this. Which directly implicates all gaming as one industry. That's irresponsible/tabloid journalism.

The implication is not a higher agenda, but a lower agenda. He's found one area that could be improved, so - without any background research - he's inflated it to equal with one of the biggest power companies in America paying no tax. (Remember, he even states EA paid nearly $100 million).

That's wrong.

Oh and

Another needless anglo-saxon practice. Why are you people so averted to directness?

That, by definition, is racism.

 

[SyphonX]

As much as I like games, I don't think the industry should be "subsidized". I mean, gaming is a pretty 'big thing', maybe you've all heard about it.

I don't think anything should be subsidized really. It creates huge anomalies in the market, and for the public in general. Corn, for instance, is subsidized in America, and as a result you see it as an ingredient in every single fricking thing in the grocery store. Even when it doesn't need it, someone will find a way.. because its subsidized, and more is always good. High-fructose corn syrup anyone? No thanks.

 

[Staskala]

Oh and

Another needless anglo-saxon practice. Why are you people so averted to directness?

That, by definition, is racism.

Wait, what? Racism? Are you serious?
Now, I do know that a joking tone doesn't carry over very well to the internet, but even if you took that 100% seriously, how does calling it racism make any sense? Even remotely? If anything, it's a cultural thing that very much exists. [http://joeingermany.wordpress.com/2011/04/06/british-politeness-vs-german-directness/]
Besides, I didn't know there was any racial distinction between Germans and Britons, as both the Angles and the Saxons came from Germany.
I'd really like to know by which definition exactly this can be called racism; although I still hope you were just joking there.

 

[Twilight_guy]

So the tax laws need to be fixed because they're old and inefficient. Next thing you're going to tell is that the sky is blue and birds go tweet.

Tax law is a confusing mess that nobody understand completely. It needs to be fixed but fixing it is such a huge proposition that its not like you can just snap your fingers or wave the IRS wand and make it work. Sometimes its just broken. It'd be nice to see them fix loopholes like this though.

 

[Atmos Duality]

Protecting US industry is a bad idea because people everywhere are primarily consumers. If you were to block off cheap imports, you would be left with more expensive and less efficiently made domestic goods. Also, without the foreign competition, there would be no incentive for research into better avenues of development.

And left as it is, there will eventually be no incentive to invest in the US, because most of the jobs are being moved to where conditions exist at near-slave-labor rates (and labor is the number one cost for most business/industry).

There is literally *nothing* the US Government nor its citizens can do to fix this.
If you give subsidies to the rich, they keep the cash and ship the remaining jobs overseas where the labor cost is just a hair above slavery.
If you give it to the lower-class citizens, the rich move their business elsewhere anyway.

So we end up with a situation where the rich are reinvesting less and less into their native/domestic economy so they can buddy up to rising superpowers like the PRC and profit.

The most powerful unwritten law of business states that "ethics is a hindrance"; it raises costs and hampers expansion. America has safer working conditions and a minimum wage, China has millions of replacements waiting in the wings should industrial accident or a worker strike occur.

Their products might be total rubbish to boot, but it will still sell because it costs a fraction of a normal/quality good of the same type. Bare-minimum quality also means you can upcharge a bit and make even more profits on replacements.

And if all else fails, just steal what the other guy designed and undercut him.

You can't retain ethics AND compete in the same global market because the firm with the lowest operating costs leaves the market last.

 

[Speakercone]

The only tax break that very large companies should receive is on any funds spent on employing people. Bonuses to executives don't count as 'employing people'. Gives them an incentive to use their money creating jobs. Fair tax on a very large company would be 35% of gross unless the company has made a significant loss, say 3% year on year or more, in which case the tax would drop to something like 20% gross, allowing them more cash to invest in next-year growth.

Small companies should receive further tax breaks in order to foster entrepreneurship. Fair tax on a small company would be closer to 15% gross unless the company has suffered a loss of over 10% year on year in which case the company would owe zero tax. Very small companies should not have to pay any tax at all until they reach a given company valuation, perhaps somewhere in the region of £500,000.

There, I fixed corporate tax policy. Please send me money because I'm awesome.
I also put a whole lot of tax lawyers out of work, but perhaps they can use their time more constructively now.