Corporations fleeing Obama's idea of 'economic patriotism'
There's been a rash of US corporations renouncing their US citizenship and taking their headquarters overseas, and many more to come, says the Washington Post. The reason? The highest corporate tax rate in the developed world.
President Obama doesn't like this notion of companies making a decision to take their operations offshore to avoid taxes - a practice known as inversion - and wants these corporations to practice his idea of "economic patriotism."
That notion is likely to open the floodgates for a mass exodus of US companies.
So far this year, about a dozen U.S. companies — including such well-known brands as Medtronic medical devices and Chiquita bananas — have merged with foreign firms and shifted their headquarters offshore to avoid U.S. taxes, analysts say.
Dozens of additional deals are in the works, according to administration and congressional officials, and other companies are quietly contemplating the move. Last month, CVS Caremark chief executive Larry Merlo met with Sen. Charles E. Schumer (D-N.Y.) and urged him to act to stop the rash of expatriations. Otherwise, Schumer said that Merlo warned him, CVS “might be forced to do it, too,” to duck a total tax bill expected this year to approach 40 percent.
“What we’re seeing is one more manifestation of why the business tax structure needs to be fixed,” said John Engler, president of the Business Roundtable, an association of chief executives at some of the nation’s largest corporations. “We’re the proverbial frog that’s being boiled in the water, and a few frogs have decided to jump out.”
Last month, President Obama loudly questioned the patriotism of inverted companies, calling them “corporate deserters” who are abandoning their country “just to get out of paying their fair share of taxes. . . . My attitude is, I don’t care if it’s legal. It’s wrong.”
On Tuesday, Democratic Sens. Elizabeth Warren (Mass.), Richard J. Durbin (Ill.) and Jack Reed (R.I.) urged Obama to “use your authority to reduce or eliminate tax breaks associated with inversions.”
Treasury officials confirmed that they are exploring their options for “administrative actions” that could block inversions or “meaningfully reduce” the associated tax benefits. But any move by the Treasury Department would amount to a “partial fix,” the officials said, adding that “legislation is the only way to fully address inversions.”
No doubt there are going to be many corporations who will get while the going is good. One idea advanced by Jonathan Alter is for corporate "loyalty oaths." Not taking one would prevent a company from doing business with the government. Alter writes:
That’s because efforts to stop desertion aren’t populist or socialist but nationalist, a much more powerful force in American politics. Unbridled nationalism is a menace; it leads to trade wars and, all too often, real wars. But properly channeled, nationalism and patriotism are matters of the heart that cut to our deepest ideas of who we are.
Ah, properly channeled nationalism. You see, when you do it it’s just a bunch of dangerous jingoist rubbish. When we do it … America! And after five years of conflating patriotism and left-wing economic policy, you are expected to treat a completely legal tax designation as an attack on the homeland. Unless, of course, you’re a seditious weasel who’s betting against America.
Now, I suppose, a conservative might ask: Can we really trust politicians who offered legislation to limit free expression and religious freedom (as defined by the Supreme Court, which still decides these issues) to be arbiters of American patriotism? Or is it only the president who’s tasked with deciding who deserves special status? A liberal might ask, what happens when the next administration, one with different views on “nationalism,” begins divvying out golden stars? When the future GOP president punishes companies that aren’t helping fight the war on Iran, for instance, will that be cool, as well?
If the government doesn't want corporations to flee the country because of high taxes, the solution is to reform corporate taxes, not chain companies to the shore. If they can do it to a corporation, they can do it to you.
Suppose Congress pulled a France and upped the top individual tax rate to 75%? Any earnings over $200,000 would be taxed at that rate. I suspect the exodus of the rich from America would be huge - unless the government refused you permission to go.
"Economic patriotism" in the world according to Obama means sit down, shut up, and pay up.