You may have seen the headlines about corporate inversions. I think The New York Times article, White House Weighs Actions to Deter Overseas Tax Flight, clarifies what this is all about.
The Obama administration is weighing plans to circumvent Congress and act on its own to curtail tax benefits for United States companies that relocate overseas to lower their tax bills, seeking to stanch a recent wave of so-called corporate inversions, Treasury Secretary Jacob J. Lew said on Tuesday.
Thanks to Elizabeth Warren for urging President Obama to take action and for highlighting this issue on her Facebook page.
It is very important to get this issue before the public in a way that is easy to understand. I think this article does it for me. I hope people understand that the countries that are making these deals are stealing our tax money. All these companies will have to do is to establish a mail drop in the receiving country. The companies pay a substantial fee to the receiving country and the receiving country has to provide absolutely no costly benefits in return. Of course it is a good deal for everyone except the true home country that provides the infrastructure, legal system, and security that these companies depend on, but would rather not pay for. What are they going to do when they suck their home country dry? They’ll probably do the same thing that bankers do who suck their companies dry with bad loans while feathering their own nests with fat bonuses. They’ either retire quite comfortably, thank you very much, or they will go on to pull the same stunt at a new company or country.
Once guys like Mitt Romney figured out how to use debt to strip assets out of a company, it was probably only a matter of time until someone figured out how to use debt to avoid taxes in the way mentioned in the article.
By the way, corporations don’t only use money from their customers and employees to pay corporate taxes. Competition for business, if anti-trust laws were enforced, would put limits on this behavior with respect to cutomers. Corporations can get money from their stock holders by reducing dividends and using the money saved to pay the corporate taxes. As far as getting money from their employees, they could get it from the excessive executive pay rather than from the minimum wage workers if only our personal and corporate income tax structure was fairer.