Tuesday, July 29, 2014

A few important points about why US businesses go overseas

Did you know that if the gummint were able to get its socialist hands on all the money that it currently doesn't because of these "inversions" (corporations merging with foreign companies and establishing headquarters elsewhere to avoid the developed world's highest corporate tax rate), it would only bring in a quarter of one percent of the federal tax base?

That's just one of the noteworthy points Leon H. Wolf makes in his Red State post about this.  Some others:


First, A more rational and doubtless more efficacious method to retain the corporate tax base would be to lower the insanely high corporate tax rate which creates the incentive for companies to perform “inversions” in the first place, especially in light of the fact that attempts to essentially declare that these companies are American companies when they are, in fact, not American companies anymore is a tactic that is both dubious Constitutionally and highly likely to lead to a) widespread noncompliance b) actual outsourcing of jobs as companies physically flee America to remove themselves from American jurisdiction over this question.
Second, I guess it’s understandable why people get their hackles up over companies leaving America to lower their tax burden, at least in a superficial sense. It does really seem like a facially transparent ploy to avoid tax burden by doing nothing that actually benefits the economy. On the other hand, it is considerably less insane as a tax avoidance device than a number of other “loopholes” that the Democrats are NOT complaining about. See here for a partial list just from the last fiscal cliff deal andhere for some of the more bizarre ones overall. Heck, if you are a major donor to the President you can even get tax subsidies to build solar power devices on a business plan that everyone knows will never result in a profit.
Therefore the objection to inversions specifically seems to be that no major political donor has paid good money into the lobbying system for the creation of this “loophole.” Congress has created all sorts of bizarre tax avoidance devices that make little or no rational sense from an economic standpoint, and that very obviously exist for the sole reason that K Street did their job well. No one accuses these companies of unpatriotic behavior for trying to keep more of their own money.
If the Obama Administration really wants to do something that will actually work to stop inversions, they ought to remove the incentive to inversions in the first place and lower American’s insanely high corporate taxation rate. 

But stopping this activity would deprive the overlords of a prime bogeyman, and Freedom-Haters always need to gin up accusations of greed.  It's how they obscure the basic truth that a person's or organization's money is actually theirs and not the state's.

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