That's not what I want to talk about. Let's talk about why they do it. That's obvious, right? They don't want to give Uncle Sam billions of the dollars they've earned. Did you notice the other thing? They're willing to pay some taxes, if the rate is lower. That's what all that jazz about a "tax holiday" was talking about. It turns out that tax rates affect behavior!
You're probably thinking, "No d'uh, Jake!" Well, it also turns out there are lots and lots of people that either don't believe it or ignore it because it doesn't fit with the agenda they want to push. Check out this little blurb from Walter Williams:
"Politicians, news media people and leftists in general entertain what economists call a zero elasticity view of the world. That's just fancy economic jargon for a view that government can impose a tax and people will behave after the tax just as they behaved before the tax, and the only change is more government revenue. One example of that vision, at the state and local levels of government, is the disappointing results of confiscatory tobacco taxes. Confiscatory tobacco taxes have often led to less state and local revenue because those taxes encouraged smuggling.
"Similarly, when government taxes profits, corporations report fewer profits and greater costs. When individuals face higher income taxes, they report less income, buy tax shelters and hide their money. It's not just rich people who try to avoid taxes, but all of us -- liberals, conservatives and libertarians.
"What's the evidence? Federal tax collections have been between 15 and 20 percent of the nation's Gross Domestic Product every year since 1960. However, between 1960 and today, the top marginal tax rate has varied between 91 percent and 35 percent. That means whether taxes are high or low, people make adjustments in their economic behavior so as to keep the government tax take at 15 to 20 percent of the GDP. Differences in tax rates have a far greater impact on economic growth than federal revenues."
And the article about Cisco is great example of that adaptive behavior. Think how much money it costs them to play those shells games, how much money they have to pay to lawyers and accountants, and how the complexity of the organization leads to inefficiency. It must cost a lot, but it certainly costs less than the taxes they would pay.
The upshot? Unlike others, don't assumes that raising tax rates will necessarily bring in more income for the government to spend.
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