Monday, May 18, 2009

The Farmer in Brocade...The Farmer in Brocade...Hi-Ho the Derry-Ho the Farmer in Brocade!

-Brocade CEO Mike Klayko on Routing and Switching Deal with IBM-
"I say I say, boy, I'm the dog and you're the chicken."
-Foghorn Leghorn-

Why Punish Brocade CEO with Unfair Foreign Earnings Taxation?

Brocade CEO Mike Klayko’s interesting OpEd in Sunday’s San Jose Mercury News entitled Tax on foreign earnings punishes Silicon Valley innovators offers an insider’s glimpse into the gross disparities between the American CEO mindset and the dying breed of American white collar professionals who are being kicked to the curb by U.S. corporations for cheap imported labor. While his article ignores the dirty secret of 21st century corporate profiteering otherwise known as The Cash Cow of Indian Outsourcing, Mr. Klayko raises an important question about President Obama’s s plan to hike taxes on income generated by corporations outside the United States.

In this article, Klayko argues that while the Obama administration is correctly targeting corporate tax abusers with its attempt to close loopholes and shut down tax havens, “it fails to make important distinctions among “tax cheats, tax dodgers and entrepreneurs.” (If you’re like most people and see the above three descriptions referencing a corporation, you’d chalk this up to redundant.) Obama’s proposal plays to populism appeasment and not to true corporate tax reform.

In the spirit of community, we like Mike. So we’re here to be part of the solution. Yours truly offers a sure-fire fix to the problem he has in my recent article where I propose a winning solution: Let’s not tax companies AT ALL but in exchange, let’s BRING BACK the top tax bracket to 90% to get rid of THE DOUBLE TAXATION PROBLEM.

Although his article does not mention the H1-B offshoring/inshoring disease that afflicts many U.S. CEO’s, there is little reason to doubt Mr. Klayko isn’t at least so far straying from the herd mentality, based upon his involvement with the Silicon Valley Leadership Group. However, I do have to agree with him that indeed, Obama’s tax proposal may not at all be the most expedient way to spur innovation and create jobs for Americans, although not for the same reasons. Why?

Neil Reynolds provides an overview on Obama’s myth of foreign tax breaks with this Globe and Mail Update that explains how jobs for U.S. citizens may fall by the wayside as multinationals search the globe for the lowest tax breaks:

“President Obama is proposing to levy a $210-billion tax increase (over 10 years) on U.S. corporations that operate through foreign subsidiaries – making them, by and large, the (nominally) highest-taxed corporate entities in the world. This will be negative for the United States, potentially terrific for Canada.
Beginning soon, major U.S. corporations can be expected to move head offices to Toronto and Calgary to take advantage of the lowest corporate tax rates (by 2012) in the G7. In the end, Obama will have ensured neither revenue nor jobs.”

On the face of it, Obama’s underlying assumption is that foreign investments harm American workers and that this tax code will somehow discourage corporations from moving offshore. Haha! As Mr. Reynolds points out, Obama’s plan is no cure for millions of American citizens being pink slipped or for guaranteed increases in revenues at home. Short of some kind of divine intervention from our nation’s president, only CEO’s like Mike Klayko can stop that. In addition, conflicting reports even suggest there is growing evidence that U.S. companies' foreign investments will increase at home as they would expand the administrative and R & D infrastructures at their U.S. based headquarters. If that’s true, then why are millions of American professionals continuing to lose their jobs to imported foreign labor?

Most notably, Klayko’s article ignores the vital role of the social contract (h/t Rob Sanchez) between U.S. citizens in the management/labor equation and CEO’s of our nation’s corporations as they abandon educated Americans by importing H-1B visa and immigrant workers without conscience in pursuit of profiteering at the expense of American citizens who have invested heavily in their educations and careers.

Looky here, son, I'm no loud-mouthed schnook…Not unlike the loud, Southern rooster, Foghorn Legorn who, while teaching his son to play ball in the street explains the difference between dogs and chickens, Mr. Klayko confidently establishes his unilateral, eminent worth to labor by comparing the entrepreneurial role of CEO to that of a farmer who takes it upon himself to “grow the food and supply it to grocery stores” below:

“Entrepreneurs and multinational companies, such as Brocade Communications Systems, are like farmers who grow that food and supply it to grocery stores. We do this by investing in the land, cultivating the soil (here and abroad) and coming up with new ideas on how to grow the best crops while employing thousands for the harvest.”

OK. So Brocade doesn’t really get its hands dirty farming rice or potatoes so what does it actually grow and supply for the rest of us in the sticks outside of the boardroom? Investments abroad! Why, that giant sucking sound is the wind that Joe “white collar” Taxpayer is left to consume while CEO’s reap bazillions, collectively, courtesy multinational tax loopholes and global human slave trade labor “investments” or imported cheap labor schemes. The good news is that this problem can be fixed, if only CEO’s would admit that they are powerless over the promise of profits gained through outsourcing American jobs and vow to change. Change we can use!

The critical question yours truly raises to CEO’s like Mike Klayko is this:

Obama and his tech lobby sponsors and promotional pitchmen are asking us to give up our addiction to cheap, foreign oil. Can they give up their addiction to cheap foreign labor?

Does Klayko’s farmer analogy to “investing in the land” and “cultivating the soil here and abroad” and “coming up with new ideas on how to grow the best crops” suggest that American citizens need CEO’s who ship our jobs overseas or is he the exception to the rule? Does he envision a pig pile of unemployed Americans stacked to the skies like rotting grain in silos as vital to improving the lives of multinational, corporate communities? So far, this whole hot, smelly, flat world globalization thing has been working out just fine for a few global elites, so why would Obama and his corporate tax plan want to upset the apple cart? Answer: he doesn’t.

Without addressing CEO responsibility to the social contract, the American CEO is, accordingly, the farmer and the educated American is the old, rotting head of cabbage discarded to the dung heap of our country’s tragic history.

Gee, how about that for sustaining the growth engine of corporate America? U.S. educated citizenry can serve as fertilizer on the scorched earth of corporate America. Smart planning!

And who exactly is Mr. Klayko purportedly looking to employ? “Employing thousands for the harvest”? What harvest? Whose thousands? Where? Is he a breakaway CEO who finally gets that putting citizens who have invested in our local communities first for jobs is the key to sustainable growth? Or does he pine for more cheap, imported labor, swallowing the tech-lobby party line that useless educated Americans are a nation of sacrificial hillbillies, ostensibly too unworthy and stupid to cling to jobs and healthcare?

Surely, Klayko isn’t talking about throwing the social contract out the barn door by emulating Brocade partner IBM’s offensive plan to fire its own workers and then offer to move them to India through ProjectMatch? Do CEO’s like Mike honestly believe that they can personally avoid tax brackets that would fairly have them pony up the dough necessary to reinvigorate this economy or that this nation can keep outsourcing human beings around the globe to the point of extinction? He doesn’t say in this article. Perhaps in the next one, he will.

We can solve this problem for CEO’s like Mike Klayko through restoring the top income tax bracket at 90% and through reinvestment in our local economies by rehiring our citizens and putting them first. Until U.S. CEO’s want to take the bull by the horns and start investing in our own communities again and stop throwing educated American workers and their families under the John Deere tractor, articles like this one are grist for the woodchipper.



2Truthy said...

One more thing: CC, if you're out there, this one's (Foghorn Leghorn) for you.

Alex P. said...

"Let’s not tax companies AT ALL but in exchange, let’s BRING BACK the top tax bracket to 90% to get rid of THE DOUBLE TAXATION PROBLEM."

Bravo, TT!!!! Great article with so much for CEOs with consciences to chew on who care to rebuild their companies and communities.

Anonymous said...

Great article.If the whole best and brightest, H-1b and green card worker scam jig isn't up by now, when will it be? The ONLY purpose this has served is to pink slip American citizens.

One way CEO's like Klayko can steer the cheap guest worker visa boat around is to insist on background checks and raise the educational bar (again, with background checks) to filter out the majority of imported fraudsters with visas taking U.S. jobs.

Another overdue filter is for U.S. companies and staffing firms to establish and apply industry specific certification credentialing to the IT/tech, medical and finance sectors to screen out the frauds who were sold U.S. jobs by crooked pols and greedy human resources brokers.