Saturday, September 13, 2014

Corporate Tax Inversion is an Act of Economic Justice.

Burger King’s high-profile tax inversion has been red meat for statist predators and their supported. One letter-writing supporter had this to say in the 9/2/14 New Jersey Star-Ledger:

Businesses are taxed to cover their piece of the commons, aren’t they? The public pays for schools that educate their employees, roads one travels to reach them, and police, fire protection, and courts they need. Burger King benefits from all this [and] should not be allowed to avoid its share of taxation.

I left these comments:

“Burger King . . . should not be allowed to avoid its share of taxation.

This is a hollow slogan.

To begin with, U.S. corporate income tax rates are by far the highest among the thirty-three industrialized nations comprising the Organization for Economic Cooperation and Development (OECD)—39.1 % in the U.S. vs. the OECD average of 25%. Furthermore, U.S. taxes extend to profits earned outside the U.S. Taxes “dodged” through inversion pertain only to profits earned outside the U.S. Inverting companies still pay the full confiscatory rate on their American earnings. Even after inversion, these companies pay more taxes than they would anywhere else. They’re hardly “dodging” their “share.”

But it gets worse. Corporate taxes represent double taxation. Keep in mind that corporations are voluntary legal associations of individuals cooperatively working toward common productive goals. Corporations are not separate entities apart from their owners and employees. Contra LaRegina’s assertion, businesses don’t use schools, roads, police, fire protection, or courts. A legal entity, as such, doesn’t use anything. Only corporation owners and employees do—all of whom are taxpayers. Yet, owners are taxed once as a corporation and again as individual shareholders. How many other taxpayers would stand for the injustice of being taxed twice on the same earnings? Would Jim LaRegina?

Then there is the economics. Inverting companies have hundreds of $billions in foreign profits parked overseas. American tax collectors can not touch that money as long as it remains parked overseas. It is only subject to tax if and when it is “repatriated.” But to repatriate—bring that money back to the U.S. to invest—they must pay $billions in taxes before putting that money to work—this, on top of foreign taxes already paid on the money. So, instead of reinvesting in America, growing their businesses and creating valuable products and jobs, our tax code makes those investments uneconomical. Far from committing “economic treason”, as one imbecilic slogan puts it, these companies invert so they can reinvest their foreign profits in the U.S. If they intended to invest abroad, they wouldn’t need to invert. With all of the handwringing over our weak economy, you’d think encouraging reinvestment in America by lowering tax rates would be an obvious solution. But these political phonies are not interested in a stronger economy, just the tax money to make big government stronger. Those Leftists who are spearheading the drive to criminalize tax inversion are the real economic traitors.

At least on the level of taxes, American multi-national corporations are treated far worse than almost any other OECD country. Shame on our legislators for devising a tax code that makes it a matter of moral and economic sense for American companies to re-incorporate abroad. And shame on the Jim LaReginas of the nation for siding with the tax-lusting, power-hungry statists politicians against the productive companies that underpin our economy. Tax inverting companies are not villains. Their inversions are acts of economic justice.

Related Reading:

“Citizens for Tax Justice” vs. Rational Patriotism

The Clinton Inversion Conversion—NY Post

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