Who Hijacked Our Country

Wednesday, August 06, 2014

Should President Obama Crack Down on Corporate Inversions?

It was a rhetorical question — i.e. YES.

A corporate inversion is when a large American corporation purchases a much smaller company in a foreign country, and then pretends that it's “relocated” to this other country in order to benefit from that country's lower tax rate.  These American, er I mean “foreign” companies still get all the benefits of America's taxpayer-financed infrastructure and patent protection; they just don't have to pay for it.

Senate Republicans have already filibustered a bill that would have cracked down on corporate inversions.  It's time for another Executive Order, and just in time for the midterm elections.  If the Democrats can't make political hay out of this, they deserve to lose.  Or maybe there's a huge public groundswell of empathy for multi-trillion-dollar corporations that still haven't received enough handouts from U.S. taxpayers, and I just wasn't aware of it.

Senators Richard Durbin, Jack Reed and Elizabeth Warren have sent a letter to President Obama saying:

“Although we will continue to work toward a legislative solution to the problem, we urge you to use your authority to reduce or eliminate tax breaks associated with inversions.  Yet these companies claim to be foreign corporations when it’s time to pay their tax bill – denying the United States billions of dollars in tax revenue and thereby increasing the tax burden on other U.S. taxpayers.”

According to a former U.S. Treasury official, Obama could invoke a 1969 tax law to remove the incentive for these corporate inversions.  He said Obama not only can do this, but he should do it ASAP in order to prevent further corporate inversions that are in the works as we speak.

Conservatives argue that instead of crushing the Freedom of corporations (they're people, after all), the U.S. should compete with these other countries by lowering America's corporate tax rate.  The three above-named senators answer this argument with:

“Companies will still chase lower tax rates in jurisdictions like Ireland where the corporate tax rate is 12.5 percent.  This is a race to the bottom the United States simply can’t win and should not be lured into entering.”

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Anonymous Anonymous said...

I fail to understand why the corporations have to take the foreign route when renting a PO Box in a haven like the Cayman Islands and calling it your Corporate HQ is not only cheaper, simpler, but seems to save more in Taxes.


August 8, 2014 at 9:45 AM  
Blogger Tom Harper said...

Erik: LOL. Good question. A P.O. Box in the Cayman Islands seems to offer all the advantages of citizenship without the taxes. I don't know the details; these inversions probably have other advantages that make it worth the effort and paperwork.

August 8, 2014 at 2:26 PM  
Anonymous Anonymous said...

I would do it if I owned a company . How else can you compete in a Global Market? I blame our complicated tax system.
Lower the rates ad no loopholes. But we have to make sure we do both

August 10, 2014 at 5:23 PM  

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