This is an excellent article on the future of America as the center of global capital finance.
It’s worth paying attention to, especially if you see as positive the additional regulation the Democrats promise to place on capital (other than for “Affordable Housing,” which they have proven to be uninterested in regulating, and the rejection by Democrats of GOP-sponsored Fannie/Freddie regulation led the way to the current mess), and as a good thing the additional taxes the Democrats promise to place on businesses, somehow hallucinating that it will keep jobs in a higher-tax America rather than having them go to lower-tax countries overseas.
There is no small irony in the fact that state-driven capitalism, which is the norm in the Persian Gulf and China, finds the U.S. too restrictive. Sovereign wealth funds, with enough cash on hand to bail out Wall Street and the U.S. housing market many times over, invested billions a year ago but are now saying no.
Uncertain growth for the United States is one reason. But the nature of the American regulatory regime is also to blame. Sarbanes-Oxley and the Patriot Act — whose anti-money-laundering provisions had the unintended consequence of repelling legitimate investors — combined with a tax code that places a heavy burden on corporations doing business in the U.S. has meant that, as the wealth transfer has happened, there is less and less inclination for global institutions to place that capital in the U.S.
This is a fact regardless of whether you believe that a high corporate tax rate is morally and fiscally correct. In truth, because of the differentials between high U.S. corporate taxes and the rates in Europe (lower) and Asia (in places nonexistent), even U.S.-listed companies that operate globally keep their profits outside the U.S., and thereby avoid those high taxes altogether.
In addition, the regulatory requirements of listing a company in the U.S. have led many companies to look to other markets and other exchanges for financing, hence the boom of financial centers such as Hong Kong, Dubai and even London.
This should not be a partisan argument. It is perfectly fair to argue that wealthy corporations should pay a greater share of the tax base than struggling middle-class Americans. Fair, but not realistic. The U.S. government can no longer dictate to global capital. Once, when the U.S. was the engine of global growth, when the world needed Wall Street for funding, capital could be taxed and controlled by the fiat of the U.S. government. No longer. The U.S. may have the will; it does not have the power.
Something to think about as you consider voting for a Democrat president who already has promised to raise business taxes, coupled with a Democrat Congress that lacks basic understanding of economics and has yet to find something it can’t tax.