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What happens when people and business flee the government regulations that burden them? In a somewhat shocking recent announcement, classic American company Burger King has said that they plan to move their corporate headquarters to Canada in order to escape the United States’ punitive corporate taxes, the highest such tax rates in the world.
President Obama has expressed displeasure at Burger King’s decision, and is even threatening to use his executive power to try to prevent, or at least, discourage, companies from following their model. He is also calling on Congress to act, but one wonder what laws Congress could pass, short of the eminently sensible move of lowering our own corporate tax rate, that would not be outright despotic in curtailing the freedom of business to relocate.
Sen. Sherrod Brown (D-OH) has proposed a global minimum corporate tax rate in response to corporations’ decision to relocate. Al this simply demonstrates that government is motivated, not by a desire to help people or make things better for its citizens, but simply to extract money from producers for its own purposes.
Corporations are not unique in their desire to escape regulation. A recent analysis of migration patterns shows that U.S. citizens are increasingly leaving heavily regulated blue states like California and New York in favor of the lower taxes, lighter regulations, and better economies of middle American red states.
The democratic process is a slow and messy one. Elections are held infrequently, and even with a clear mandate from the people, legislative change takes a long time to accomplish. At times, this is a good thing, when it prevents, bad laws from passing too quickly or easily. At other times, it can be frustrating, when the obstacles for removing an existing regulation seem nearly insurmountable, despite the demands of the people.
Fortunately, markets work more quickly and efficiently than governments. A business needs to make money in real time, and so must react quickly to changing circumstances in order to survive. We can therefore observe the behavior of both individuals and businesses to see whether regulations are succeeding in doing what they are designed to do.
The conceit under which the defenders of government intervention in markets labor is that regulations make things better the citizens. Whereas an unregulated market, they reason, would result in exploitation and chaos, government is necessary to improve the lives of ordinary people. If this is true, then we would expect to see people happily flocking to those places where government works best, and leaving those places where it fails to sufficiently regulate.
If people and businesses are moving in order to escape laws, it is clear that those laws are not working, or at least they’re not working in the sense of making people’s lives better.
This is why federalism is so important. The ability of citizens to vote with their feet and escape the effects of bad policies is vital both for freedom in general, and for us to observe the actual effects of policies as they are implemented.
In a final bit of irony, billionaire and vocal supporter of higher taxes on rich people is helping to finance Burger King’s exodus in pursuit of lower tax rates.