Burger King is apparently pursuing a so-called “tax inversion” as part of its merger with Canadian company Tim Horton. (Tax inversion is when a company re-incorporates to a country for tax reasons by means of mergers and acquisitions.) The Left has been going apocalyptic the tax inversion trend.
The New Jersey star-Ledger’s John Farmer is one such Leftist, writing that Burger King pulls a Benedict Arnold on America. Farmer writes, in part:
The implications for ordinary Americans are not inconsiderable. “With every new corporate inversion,” Sen. Dick Durban, an Illinois Democrat, warned, “the tax burden increases on the rest of us to pay what these corporations don’t.”
In this globalized world with few or no real economic borders, we’d best gear up for more of the same. It’s all the rage among corporate tax lawyers these days.
In truth, much of the beef with Burger King is the product of misunderstanding. For one thing, many of these departing companies, including Burger King, are operated by an ownership that’s not altogether American or not American at all.
For another, their “loyalty,” if we can call it that, is legally owed not to the country but, as I’m told by my lawyer friends (I actually have some), to its stockholders.
I left these comments:
“[Corporate boards’] ‘loyalty,’ if we can call it that, is legally owed not to the country but, as I’m told by my lawyer friends . . . , to its stockholders.”
And that’s as it should be, because it’s also a moral responsibility owed to shareholders. Corporations are voluntary associations of individuals. America is founded on the principle that the individual is sovereign over his life and property, holding inalienable rights to pursue his happiness, with government as servant charged with the task of protecting the liberty to do so. It is not the collective—the “country”; i.e., the state—that is sovereign, to which the individual owes his loyalty. This is what makes America historically unique. It’s the true meaning of “American Exceptionalism.” In truth, those who abandon American principles are the real Benedict Arnolds.
Farmer’s inverted moral priorities are plainly evident. He condemns Burger King’s use of legal means to hold onto more of its own earnings as a “lust for money”. But, politicians’ seizing those earnings through the world’s highest corporate tax rates—and then extending those taxes to a corporation’s worldwide earnings—is, apparently, not “lust.” Durben, in turn, claims that because of corporate inversions, “the tax burden increases on the rest of us to pay what these corporations don’t.” Yet, Burger King and other inverters seek only to shield profits earned abroad from Washington tax collectors. Earnings inside America will still be fully subject to U.S. corporate income taxes, the highest in the world. In truth, American corporations have long carried more than their share of the tax load. Add to that the fact that the corporate income tax subjects shareholders to double taxation—with profits taxed at both the corporate and personal levels—and it’s clear that corporate inversion is an act of tax justice.
Loyalty to America does not equate to loyalty to American tax collectors. It means loyalty to the individualist principles America stands for. Inverting companies, by legally minimizing their taxes, are the true patriots. Anyone who claims he wouldn’t do the same—and doesn’t legally minimize his own taxes, to the extent he can—is either a fool or a hypocrite. Certainly not a patriot.
Shame on this unconscionable smear of Burger King. It is a moral inversion. It is American tax authorities that are betraying America, by creating tax policies that make it morally and economically rational for companies to leave our shores.
Toward Less-Unfair Corporate Taxes