The Wall Street Journal published an in depth article on Wednesday 04/22 about how "The Obama administration's nascent proposals to tax offshore profits may have a sizeable impact on the likes of Pfizer Inc., Cisco Systems Inc., Coca-Cola Co., and Hewlett-Packard Co., which shelter tens of billions in income offshore annually". Granted, there are problems with the corporate tax code as it currently exists in so much as multinational U.S. based companies have a great deal of flexibility as to how they assign domestic vs. foreign profit on their income statements. But corporate abuse of the statute doesn't warrant its elimination, especially when the primary government objective is to find new ways to bleed stable U.S. based companies that we need to play a vital role in recovery.
Rather than quite literally 'biting the hand that feeds', why not source new tax revenue from very profitable industries that pay no tax at all? This article from AOL news (of all family friendly places) about how the recession has impacted German brothels got me thinking about one of many possible sources. Not because business is down for 'the oldest profession' in Germany, but because it's legal and provides a potential measure of what the U.S. is missing by not making prostitution legal in the States. "Germany has about 400,000 professional prostitutes...[and] Annual revenues are about 14 billion euros ($18 billion), according to an estimate by the Verdi services union." Let's just say for sake of argument that the U.S. has at least 3X that number of illegal prostitutes (without health standards or insurance). That's roughly equivalent to $54 billion in underground revenue that is not only untaxed -- we're also spending a significant percentage of that amount in futile law enforcement efforts to stop it. And that does not even factor into consideration the lost benefit that legal prostitution reduces the incidence of rape by 50% and more.
It suffices to say that the oldest procured service in history could be a legitimate source of revenue for the US government. And at the same time, it would also benefit both the buying and supplying parties associated with it by decreasing the risk of violence, disease, providing retirement / social security benefits, etc. While some might argue that prostitution is a moral problem that should be illegal, moral legislation does nothing more than criminalize, not abate, existing behavior. In today's political climate, it's hard to argue with a straight face that two consenting individuals can't pay for services with each other when the Federal government is getting into bed and doing the hanky spend panky with both the banking and automotive industries (and coercing, in some cases, otherwise healthy banks to take their money on onerous terms -- or else).
In the midst of this recession induced regulation and tax manipulation frenzy, let's be mindful about not holding business hostage and at least get involved where there's reliable payback, increased revenue and -- with this argument -- improved public health. After all, all Spend Matters. From personal spend that's allocated to the oldest profession in history to government spending (and policy) that economically supports public health and well-being.
- William Busch, Spend Matters Columnist