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Posts Tagged ‘Corporate tax’

Most of us will never be directly impacted by the international provisions of the internal revenue code.

That’s bad news because it presumably means we don’t have a lot of money, but it’s good news because IRS policies regarding “foreign-source income” are a poisonous combination of complexity, harshness, and bullying (which is why only taxpayers with lots of money can afford the lawyers and accountants needed to navigate this awful part of the internal revenue code).

But the bullying and the burdens aren’t being imposed solely on Americans. The internal revenue code is uniquely unilateral and imperialistic, so we simultaneously hurt U.S. taxpayers and cause discord with other jurisdictions.

Here are some very wise words from a Washington Post column by Professor Andrés Martinez of Arizona State University.

Much of his article focuses on the inversion issue, but I’ve already covered that topic many times. What caught my attention instead is that he does a great job of highlighting the underlying philosophical and design flaws of our tax code. And what he writes on that topic is very much worth sharing.

The Obama administration is not living up to its promise to move the country away from an arrogant, unilateral approach to the world. And it has not embraced a more consensus-driven, multipolar vision that reflects the fact that America is not the sole player in the global sandbox. No, I am not talking here about national security or counter-terrorism policy, but rather the telling issue of how governments think about money — specifically the money they are entitled to, as established by their tax policies. …ours is a country with an outdated tax code — one that reflects the worst go-it-alone, imperialistic, America-first impulses. …the…problem is old-fashioned Yankee imperialism.

What is he talking about? What is this fiscal imperialism?

It’s worldwide taxation, a policy that is grossly inconsistent with good tax policy (for instance, worldwide taxation is abolished under both the flat tax and national sales tax).

He elaborates.

The United States persists in imposing its “worldwide taxation” system, as opposed to the “territorial” model embraced by most of the rest of the world. Under a “territorial” tax system, the sovereign with jurisdiction over the economic activity is entitled to tax it.  If you profit from doing business in France, you owe the French treasury taxes, regardless of whether you are a French, American or Japanese multinational.  Even the United States, conveniently, subscribes to this logical approach when it comes to foreign companies doing business here: Foreign companies pay Washington corporate taxes on the income made by their U.S. operations. But under our worldwide tax system, Uncle Sam also taxes your income as an American citizen (or Apple’s or Coca-Cola’s) anywhere in the world. …Imagine you are a California-based widget manufacturer competing around the world against a Dutch widget manufacturer. You both do very well and compete aggressively in Latin America, and pay taxes on your income there. Trouble is, your Dutch competitor can reinvest those profits back in its home country without paying additional taxes, but you can’t.

Amen.

Indeed, if you watch this video, you’ll see that I also show how the territorial system of the Netherlands is far superior and more pro-competitive than America’s worldwide regime.

And if you like images, this graphic explains how American companies are put at a competitive disadvantage.

Professor Martinez points to the obvious solution.

Instead of attacking companies struggling to compete in the global marketplace, the Obama administration should work with Republicans to move to a territorial tax system.

But, needless to say, the White House wants to move policy in the wrong direction.

Looking specifically at the topic of inversions, the Wall Street Journal eviscerates the Obama Administration’s unilateral effort to penalize American companies that compete overseas.

Here are some of the highlights.

…the Obama Treasury this week rolled out a plan to discourage investment in America. …the practical impact will be to make it harder to make money overseas and then bring it back here. …if the changes work as intended, they will make it more difficult and expensive for companies to reinvest foreign earnings in the U.S. Tell us again how this helps American workers.

The WSJ makes three very powerful points.

First, companies that invert still pay tax on profits earned in America.

…the point is not to ensure that U.S. business profits will continue to be taxed. Such profits will be taxed under any of the inversion deals that have received so much recent attention. The White House goal is to ensure that the U.S. government can tax theforeign profits of U.S. companies, even though this money has already been taxed by the countries in which it was earned, and even though those countries generally don’t tax their own companies on profits earned in the U.S.

Second, there is no dearth of corporate tax revenue.

Mr. Lew may be famously ignorant on matters of finance, but now there’s reason to question his command of basic math. Corporate income tax revenues have roughly doubled since the recession. Such receipts surged in fiscal year 2013 to $274 billion, up from $138 billion in 2009. Even the White House budget office is expecting corporate income tax revenues for fiscal 2014 to rise above $332 billion and to hit $502 billion by 2016.

Third, it’s either laughable or unseemly that companies are being lectured about “fairness” and “patriotism” by a cronyist like Treasury Secretary Lew.

It must be fun for corporate executives to get a moral lecture from a guy who took home an $800,000 salary from a nonprofit university and then pocketed a severance payment when he quit to work on Wall Street, even though school policy says only terminated employees are eligible for severance.

Heck, it’s not just that Lew got sweetheart treatment from an educational institution that gets subsidies from Washington.

The WSJ also should have mentioned that he was an “unpatriotic” tax avoider when he worked on Wall Street.

But I guess rules are only for the little people, not the political elite.

P.S. Amazingly, I actually found a very good joke about worldwide taxation. Maybe not as funny as these IRS jokes, but still reasonably amusing.

P.P.S. Shifting from tax competitiveness to tax principles, I’ve been criticized for being a squish by Laurence Vance of the Mises Institute. He wrote:

Mitchell supports the flat tax is “other than a family-based allowance, it gets rid of all loopholes, deductions, credits, exemptions, exclusions, and preferences, meaning economic activity is taxed equally.” But because “a national sales tax (such as the Fair Tax) is like a flat tax but with a different collection point,” and “the two plans are different sides of the same coin” with no “loopholes,” even though he is “mostly known for being an advocate of the flat tax,” Mitchell has “no objection to speaking in favor of a national sales tax, testifying in favor of a national sales tax, or debating in favor of a national sales tax.” But as I have said before, the flat tax is not flat and the Fair Tax is not fair. …proponents of a free society should work towardexpanding tax deductions, tax credits, tax breaks, tax exemptions, tax exclusions, tax incentives, tax loopholes, tax preferences, tax avoidance schemes, and tax shelters and applying them to as many Americans as possible. These things are not subsidies that have to be “paid for.” They should only be eliminated because the income tax itself has been eliminated. …the goal should be no taxes whatsoever.

In my defense, I largely agree. As I’ve noted here, here, here, and here, I ultimately want to limit the federal government to the powers granted in Article I, Section 8 of the Constitution, in which case we wouldn’t need any broad-based tax.

Though I confess I’ve never argued in favor of “no taxes whatsoever” since I’m not an anarcho-capitalist. So maybe I am a squish. Moreover, Mr. Vance isn’t the first person to accuse me of being insufficiently hardcore.

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People pay every single penny of tax that politicians impose on corporations.

The investors that own companies obviously pay (more than one time!) when governments tax profits.

The workers employed by companies obviously pay, both directly and indirectly, because of corporate income tax.

And consumers also bear a burden thanks to business taxes that lead to higher prices and reduced output.

Keep these points in mind as we discuss BEPS (“base erosion and profit shifting”), which is a plan to increase business tax  burdens being advanced by the Organization for Economic Cooperation and Development (OECD), a left-leaning international bureaucracy based in Paris.

Working on behalf of the high-tax nations that fund its activities, the OECD wants to rig the rules of international taxation so that companies can’t engage in legal tax planning.

The Wall Street Journal’s editorial page is not impressed by this campaign for higher taxes on employers.

The Organization for Economic Cooperation and Development last week released its latest proposals to combat “base erosion and profit shifting,” or the monster known as BEPS. The OECD and its masters at the G-20 are alarmed that large companies are able to use entirely legal accounting and corporate-organization strategies to shield themselves from the highest tax rates governments try to impose. …The OECD’s solution to this “problem” boils down to suggesting that governments tax the profits arising from operations in their jurisdiction, regardless of where the business unit that earned those profits is legally headquartered. The OECD also proposes that companies be required to report to each government on the geographic breakdown of profits, the better to catch earnings some other country might not have taxed enough.

What’s the bottom line?

This is a recipe for investment-stifling compliance burdens and regulatory uncertainty…the result of implementing the OECD’s recommendations would be lower tax revenues and fewer jobs.

By the way, I particularly appreciate the WSJ’s observation that tax competition and tax planning are good for high-tax nations since they enable economic activity that otherwise wouldn’t tax place (just as I explained in my video on the economics of tax havens).

Existing tax rules have been a counterintuitive boon to high-tax countries because companies can shield themselves from the worst excesses of the tax man while still running R&D centers, corporate offices and the like—and hiring workers to staff them—in places like the U.S. and France.

The editorial also suggests the BEPS campaign against multinational firms may be a boon for low-tax Ireland.

All of which is great news for Ireland, the poster child for a low corporate tax rate.

The Ireland-based Independent, however, reports that the Irish government is worried that the OECD’s anti-tax competition scheme will slash its corporate tax revenue because other governments will get the right to tax income earned in Ireland.

The country’s corporation tax is under scrutiny due to the multinational companies locating here and availing of our low 12.5pc tax rate – or much lower rates in some cases. US politicians have accused Ireland of being a “tax haven”… The OECD, a body made up of 34 western economies, is drawing up plans to restrict the ability of multinationals to move their income around to minimise their tax bill. …a draft Oireachtas Finance Committee report on global taxation, seen by the Irish Independent, contains warnings that Ireland’s corporation tax revenues, which amount to €4bn every year, will be halved under the new system. …Tax expert Brian Keegan is quoted in the report as saying: “Some of the OECD proposals would undoubtedly, result in that €4bn being reduced to €3bn or €2bn. That is the threat.”

So which newspaper is right? After all, Ireland presumably can’t be a winner and a loser.

But both are correct. The Irish Committee report is correct since the BEPS rules, applied to companies as they are currently structured, would be very disadvantageous to Ireland. But the Wall Street Journal thinks that Ireland ultimately would benefit because companies would move more or their operations to the Emerald Isle in order to escape some of the onerous provisions contained in the BEPS proposals.

That being said, I think Ireland and other low-tax jurisdictions ultimately would be losers for the simple reason that the current BEPS plan is just the beginning.

The high-tax nations will move the goal posts every year or two in hopes of grabbing more revenue.

The end goal is to create a system based on “formula apportionment.”

Here’s what I wrote last year about such a scheme.

…the OECD hints at its intended outcome when it says that the effort “will require some ‘out of the box’ thinking” and that business activity could be “identified through elements such as sales, workforce, payroll, and fixed assets.” That language suggests that the OECD intends to push global formula apportionment, which means that governments would have the power to reallocate corporate income regardless of where it is actually earned. Formula apportionment is attractive to governments that have punitive tax regimes, and it would be a blow to nations with more sensible low-tax systems. …business income currently earned in tax-friendly countries, such as Ireland and the Netherlands, would be reclassified as French-source income or German-source income based on arbitrary calculations of company sales and other factors. …nations with high tax rates would likely gain revenue, while jurisdictions with pro-growth systems would be losers, including Ireland, Hong Kong, Switzerland, Estonia, Luxembourg, Singapore, and the Netherlands.

Equally important, I also pointed out that formula apportionment would largely cripple tax competition for companies, which means higher tax rates all over the world.

…formula apportionment would be worse than a zero-sum game because it would create a web of regulations that would undermine tax competition and become increasingly onerous over time. Consider that tax competition has spurred OECD governments to cut their corporate tax rates from an average of 48 percent in the early 1980s to 24 percent today. If a formula apportionment system had been in place, the world would have been left with much higher tax rates, and thus less investment and economic growth. …If governments gain the power to define global taxable income, they will have incentives to rig the rules to unfairly gain more revenue. For example, governments could move toward less favorable, anti-investment depreciation schedules, which would harm global growth.

Some people have argued that I’m too pessimistic and paranoid. BEPS, they say, is simply a mechanism for tweaking international rules to stop companies from egregious tax planning.

But I think I’m being realistic.Why? Because I know the ideology of the left and I understand that politicians are always hungry for more tax revenue.

For example, from the moment the OECD first launched its campaign against so-called tax havens, I kept warning that the goal was global information sharing.

The OECD and its lackeys said I was being demagogic and that they simply wanted “upon request” information sharing.

So who was right? Click here to find out.

Not that I deserve any special award for insight. It doesn’t (or shouldn’t) take a genius, after all, to understand the nature of government.

Let’s close with some economic analysis of why the greed of politicians should be constrained by national borders.

P.S. The OECD, with the support of the Obama Administration, wants something akin to a World Tax Organization that would have the power to disallow free-market tax policy.

P.P.S. And the OECD also allied itself with the nutjobs in the Occupy movement in order to push class-warfare taxation.

P.P.P.S. Your tax dollars subsidize the OECD’s left-wing activism.

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I’ve complained over and over again that America’s tax code is a nightmare that undermines competitiveness and retards growth.

Our aggregate fiscal burden may not be as high as it is for many of our foreign competitors, but high tax rates and poor design mean the system is very punitive on a per-dollar-raised basis.

For more information, the Tax Foundation has put together an excellent report measuring international tax competitiveness.

Here’s the methodology.

The Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. …No longer can a country tax business investment and activity at a high rate without adversely affecting its economic performance. In recent years, many countries have recognized this fact and have moved to reform their tax codes to be more competitive. However, others have failed to do so and are falling behind the global movement. …The competitiveness of a tax code is determined by several factors. The structure and rate of corporate taxes, property taxes, income taxes, cost recovery of business investment, and whether a country has a territorial system are some of the factors that determine whether a country’s tax code is competitive.

And here’s how the United States ranks.

The United States provides a good example of an uncompetitive tax code. …the United States now has the highest corporate income tax rate in the industrialized world. …The United States places 32nd out of the 34 OECD countries on the ITCI. There are three main drivers behind the U.S.’s low score. First, it has the highest corporate income tax rate in the OECD at 39.1 percent. Second, it is one of the only countries in the OECD that does not have a territorial tax system, which would exempt foreign profits earned by domestic corporations from domestic taxation. Finally, the United States loses points for having a relatively high, progressive individual income tax (combined top rate of 46.3 percent) that taxes both dividends and capital gains, albeit at a reduced rate.

Here are the rankings, including scores for the various components.

You have to scroll to the bottom to find the United States. It’s embarrassing that we’re below even Spain and Italy, though I guess it’s good that we managed to edge out Portugal and France.

Looking at the component data, all I can say is that we should be very thankful that politicians haven’t yet figured out how to impose a value-added tax.

I’m also wondering whether it’s better to be ranked 32 out of 34 nations or ranked 94 out of 100 nations?

But rather than focus too much on America’s bad score, let’s look at what some nations are doing right.

Estonia – I’m not surprised that this Baltic nations scores well. Any country that rejects Paul Krugman must be doing something right.

New Zealand – The Kiwis can maintain a decent tax system because they control government spending and limit government coercion.

Switzerland – Fiscal decentralization and sensible citizens are key factors in restraining bad tax policy in Switzerland.

Sweden – The individual income tax is onerous, but Sweden’s penchant for pro-market reform has helped generate good scores in other categories.

Australia – I’m worried the Aussies are drifting in the wrong direction, but any nations that abolishes its death tax deserves a high score.

To close, here’s some of what the editors at the Wall Street Journal opined this morning.

…the inaugural ranking puts the U.S. at 32nd out of 34 industrialized countries in the Organization for Economic Co-operation and Development (OECD). With the developed world’s highest corporate tax rate at over 39% including state levies, plus a rare demand that money earned overseas should be taxed as if it were earned domestically, the U.S. is almost in a class by itself. It ranks just behind Spain and Italy, of all economic humiliations. America did beat Portugal and France, which is currently run by an avowed socialist. …the U.S. would do even worse if it were measured against the world’s roughly 190 countries. The accounting firm KPMG maintains a corporate tax table that includes more than 130 countries and only one has a higher overall corporate tax rate than the U.S. The United Arab Emirates’ 55% rate is an exception, however, because it usually applies only to foreign oil companies.

The WSJ adds a very important point about the liberalizing impact of tax competition.

Liberals argue that U.S. tax rates don’t need to come down because they are already well below the level when Ronald Reagan came into office. But unlike the U.S., the world hasn’t stood still. Reagan’s tax-cutting example ignited a worldwide revolution that has seen waves of corporate tax-rate reductions. The U.S. last reduced the top marginal corporate income tax rate in 1986. But the Tax Foundation reports that other countries have reduced “the OECD average corporate tax rate from 47.5 percent in the early 1980s to around 25 percent today.”

This final excerpt should help explain why I spend a lot of time defending and promoting tax competition.

As bad as the tax system is now, just imagine how bad it would be if politicians didn’t have to worry about jobs and investment escaping.

P.S. If there was a way of measuring tax policies for foreign investors, I suspect the United States would jump a few spots in the rankings.

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There’s lot of criticism of the IRS and the tax code on the Internet. Indeed, I like to think I contribute my fair share.

But I’m surprised at (what I consider to be be) the limited amount of humor on those topics.

As I look through my archives, I can find only a few cartoons about the overall tax code.

Regarding tax reform, all I have is this Barack Obama flat tax that I created.

Here are a few cartoons about tax policy negotiations.

I found a bit more to choose from on the IRS scandal (see here, here, here, here, and here).

And I do have a decent number of cartoons about Obama’s class-warfare tax policy (see here, here, here, here, here, here, here, and here).

But that doesn’t seem like a lot, particularly since I’ve been blogging since 2009.

So let’s augment the collection with some humor about corporate inversions.

But just like you’re supposed to eat your vegetables before dessert, here’s one bit of serious info before we move to the cartoons.

For those who want to see the Cato Institute in action, here are my remarks about the issue of corporate inversions to Capitol Hill staffers.

If you want to see the full event, which would include the commentary of David Burton and Ike Brannon, click here.

Now that the serious stuff is out of the way, let’s enjoy some laughs.

This Nate Beeler cartoon is my favorite of today’s collection because it correctly implies that the entire U.S. corporate tax code is a festering sore.

Michael Ramirez notes that America is the “king” of the wrong kind of realm.

Here’s a contribution from Dana Summers, who cleverly mocks the grotesque hypocrisy of Warren Buffett.

Chip Bok addresses the same theme in this cartoon.

I can’t resist closing with one additional serious observation. If we don’t like our corrupt tax system, there is a very good solution.

Addendum: I forgot to include this example of death tax humor.

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It boggles the mind to think that the United States now has the highest corporate tax rate in the industrialized world.

But it’s even more amazing that America arguably has the most punitive corporate tax rate in the entire world.

Here’s some of what I wrote on the topic for today’s U.K.-based Telegraph.

…the United States has the highest corporate tax rate in the developed world (and the highest in the entire world, according to KPMG, if you ignore the United Arab Emirates’ severance tax on oil companies). …The central government in Washington imposes a 35pc rate on corporate income, with most states then adding their own levies, with the net result being an average corporate rate of 39.1pc. This compares with 37pc in Japan, which has the dubious honour of being in second place, according to the tax database of the Organisation for Economic Co-operation and Development (OECD). …if you broaden the analysis, it becomes even more evident that the United States has fallen behind in the global shift to more competitive corporate tax systems. The average corporate tax for OECD nations has dropped to 24.8pc. For EU nations, the average corporate tax is even lower, with a rate of less than 22pc. And don’t forget the Asian Tiger economies, with Singapore, Taiwan and Hong Kong all clustered around 17pc, as well as the fiscal paradises that don’t impose any corporate income tax, such as Bermuda and the Cayman Islands.

I also explain that America’s system of “worldwide” taxation exacerbates the anti-competitive nature of the U.S. tax system for companies trying to compete in global markets.

And I warn why making “inversions” illegal is a misguided and self-defeating response.

Blocking inversions…is like breaking the thermometer because you don’t like the temperature. It simply masks the underlying problem. In the long run, the United States will lose jobs and investment because of bad corporate tax policy, regardless of whether companies have the right to invert.

In other words, America desperately needs a lower corporate tax rate.

The crowd in Washington, however, says American can’t “afford” a lower corporate tax rate. The amount of foregone revenue would be too large, they claim.

Yet let’s look at what happened when Canada lowered its corporate tax burden. Here’s a chart prepared by the Tax Foundation.

The Tax Foundation augmented the chart with some important commentary on why companies are attracted to Canada.

Part of the attraction is the substantial tax reforms that occurred over the last 15 years in Canada. First among these is the dramatic reduction in the corporate tax rate, from 43 percent in 2000 to 26 percent today.

What about tax revenue?

The U.S. currently has a corporate tax rate of 39 percent, but lawmakers are reluctant to do what Canada did, i.e. lower the tax rate, for fear of losing tax revenue. …According to OECD data, corporate tax revenue increased following Canada’s corporate tax rate cuts that began in 2000. …Corporate tax revenue as a share of GDP in Canada has averaged 3.3 percent since 2000, while it averaged 2.9 percent over the years 1988 to 2000, when Canada’s corporate tax rate was 43 percent.

My colleague Chris Edwards also reviewed this issue (and he’s a former Canadian, so pay close attention).

Here’s his chart showing the corporate tax rates imposed at the national level by both the U.S. government and the Canadian government.

As you can see, the rates were somewhat similar between 1985 and 2000, with the Canadians having a slight advantage. But then Canada opened up  a big lead over America by dropping the central government tax rate on corporations to 15 percent.

So what happened to corporate tax revenue?

As you can see from his second chart, receipts are very volatile based on economic performance. But the Canadian government is collecting more revenue, measured as a share of total economic output, than the American government.

In spite of having a lower tax rate. Or perhaps it would be more accurate to say the Canadians are generating more corporate tax revenue because of the lower tax rate.

In other words, the Laffer Curve is alive and well.

Not that we should be surprised. Scholars at the American Enterprise Institute estimate that the revenue-maximizing corporate tax rate is about 25 percent, far below the 39.1 percent rate imposed on companies in the United States.

And Tax Foundation experts calculate that the revenue-maximizing rate even lower, down around 15 percent.

P.S. Don’t forget that when politicians impose high tax burdens on companies, the real victims are workers.

P.P.S. And since America’s corporate tax system ranks below even Zimbabwe, we’re in real trouble.

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Since I’ve been in Washington for nearly three decades, I’m used to foolish demagoguery.

But the left’s reaction to corporate inversions takes political rhetoric to a new level of dishonesty.

Every study that looks at business taxation reaches the same conclusion, which is that America’s tax system is punitive and anti-competitive.

Simply stated, the combination of a very high tax rate on corporate income along with a very punitive system of worldwide taxation makes it very difficult for an American-domiciled firm to compete overseas.

Yet some politicians say companies are being “unpatriotic” for trying to protect themselves and even suggest that the tax burden on firms should be further increased!

In this CNBC interview, I say that’s akin to “blaming the victim.”

While I think this was a good interview and I assume the viewers of CNBC are an important demographic, I’m even more concerned (at least in the short run) about influencing the opinions of the folks in Washington.

And that’s why the Cato Institute held a forum yesterday for a standing-room-only crowd on Capitol Hill.

Here is a sampling of the information I shared with the congressional staffers.

We’ll start with this chart showing how the United States has fallen behind the rest of the world on corporate tax rates.

Here’s a chart showing the number of nations that have worldwide tax systems. Once again, you can see a clear trend in the right direction, with the United States getting left behind.

Next, this chart shows that American companies already pay a lot of tax on the income they earn abroad.

Last but not least, here’s a chart showing that inversions have almost no effect on corporate tax revenue in America.

The moral of the story is that the internal revenue code is a mess, which is why (as I said in the interview) companies have both a moral and fiduciary obligation to take legal steps to protect the interests of shareholders, consumers, and employees.

The anti-inversion crowd, though, is more interested in maximizing the amount of money going to politicians.

Actually, let me revise that last sentence. If they looked at the Laffer Curve evidence (here and here), they would support a lower corporate tax rate.

So we’re left with the conclusion that they’re really most interested in making the tax code punitive, regardless of what happens to revenue.

P.S. Don’t forget that your tax dollars are subsidizing a bunch of international bureaucrats in Paris that are trying to impose similar policies on a global basis.

P.P.S. Let’s end with a note on another tax-related issue.

We’ve already looked at evidence suggesting that Lois Lerner engaged in criminal behavior.

Now we have even more reasons to suspect she’s a crook. Here are some excerpts from the New York Observer.

The IRS filing in federal Judge Emmet Sullivan’s court reveals shocking new information. The IRS destroyed Lerner’s Blackberry AFTER it knew her computer had crashed and after a Congressional inquiry was well underway. As an IRS official declared under the penalty of perjury, the destroyed Blackberry would have contained the same emails (both sent and received) as Lois Lerner’s hard drive. …With incredible disregard for the law and the Congressional inquiry, the IRS admits that this Blackberry “was removed or wiped clean of any sensitive or proprietary information and removed as scrap for disposal in June 2012.” This is a year after her hard drive “crash” and months after the Congressional inquiry began. …One thing is clear: the IRS has no interest in recovering the emails. It has deliberately destroyed evidence and another direct source of the emails it claims were “lost.” It has been blatantly negligent if not criminal in faiing to preserve evidence and destroying it instead.

Utterly disgusting.

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Last month, I put together a list of six jaw-dropping examples of left-wing hypocrisy, one of which featured Treasury Secretary Jacob Lew.

He made the list for having the chutzpah to criticize corporate inversions on the basis of supposed economic patriotism, even though he invested lots of money via the Cayman Islands when he was a crony capitalist at Citigroup.

But it turns out that Lew’s hypocrisy is just the tip of the iceberg.

It seems the entire Obama Administration was in favor of inversions just a couple of years ago. Check out these excerpts from a Bloomberg story.

President Barack Obama says U.S. corporations that adopt foreign addresses to avoid taxes are unpatriotic. His own administration helped one $20 billion American company do just that. As part of the bailout of the auto industry in 2009, Obama’s Treasury Department authorized spending $1.7 billion of government funds to get a bankrupt Michigan parts-maker back on its feet — as a British company. While executives continue to run Delphi Automotive Plc (DLPH) from a Detroit suburb, the paper headquarters in England potentially reduces the company’s U.S. tax bill by as much as $110 million a year. The Obama administration’s role in aiding Delphi’s escape from the U.S. tax system may complicate the president’s new campaign against corporate expatriation.

But that’s only part of the story.

…his administration continues to award more than $1 billion annually in government business to more than a dozen corporate expats.

And since we’re on the subject of hypocrisy, there’s another Bloomberg report worth citing.

President Barack Obama has been bashing companies that pursue offshore mergers to reduce taxes. He hasn’t talked about the people behind the deals — some of whom are his biggest donors. Executives, advisers and directors involved in some of the tax-cutting transactions include Blair Effron, an investment banker who hosted Obama for a May fundraiser at his two-level, 9,000-square-foot apartment on Manhattan’s Upper East Side. Others are Jim Rogers, co-chairman of the host committee for the 2012 Democratic National Convention; Roger Altman, a former senior Treasury Department official who raised at least $200,000 for Obama’s re-election campaign; and Shantanu Narayen, who sits on the president’s management advisory board. The administration’s connections to more than 20 donors associated with the transactions are causing tensions for the president.

Gee, I’m just heartbroken when politicians have tensions.

But I’m a policy wonk rather than a political pundit, so let’s now remind ourselves why inversions are taking place so that the real solution becomes apparent.

The Wall Street Journal opines, explaining that companies are being driven to invert by the combination of worldwide taxation and a punitive tax rate.

…the U.S. has the highest corporate income tax rate in the developed world, and that’s an incentive for all companies, wherever they are based, to invest outside the U.S. But the current appetite for inversions—in which a U.S. firm buys a foreign company and adopts its legal address while keeping operational headquarters in the U.S.—results from the combination of this punitive rate with a separate problem created by Washington. The U.S. is one of only six OECD countries that imposes on its businesses the world-wide taxation of corporate profits. Every company pays taxes to the country in which profits are earned. But U.S. companies have the extra burden of also paying the IRS whenever those profits come back from the foreign country into the U.S. The tax bill is the difference between whatever the companies paid overseas and the 35% U.S. rate. The perverse result is that a foreign company can choose to invest in the U.S. without penalty, but U.S.-based Medtronic would pay hundreds of millions and perhaps billions in additional taxes if it wanted to bring overseas profits back to its home country. …Keep in mind that the money invested in corporations was once earned by someone who paid taxes on it. And it will be taxed again as dividends or capital gains.

Amen. And kudos to the WSJ for pointing out there the internal revenue code imposes multiple layers of taxation on income that is saved and invested.

That’s very bad news for workers since it means less capital formation.

Let’s close with this great cartoon from Michael Ramirez…

…and also a couple of videos on international taxation.

First we have this video on “deferral,” which is very relevant since it explains why worldwide taxation is so destructive.

And we also have this video about Obama’s anti-tax haven demagoguery.

I particularly like the reference to Ugland House since that’s where Obama’s Treasury Secretary parked money.

But it’s all okay, at least if you’re part of the political class. Just repeat over and over again that rules are for the peasants in the private sector, not the elite in Washington and their crony donors.

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