I have never put up anything by the Chicago Tribune before, but when you’re right, you’re right…
Boost the economy. Create jobs. Fix the tax code
July 30, 2014
In coming weeks, Walgreen Co. is expected to decide whether it will proceed with the purchase of a big European drugstore chain. That deal would enable Walgreen to relocate from north suburban Deerfield to Europe, where it would pay a lower tax rate.
Walgreen is one of several prominent American companies laying plans to cut their tax bills by moving their headquarters abroad. In these “inversions,” as they’re called, U.S. corporations merge with partners in foreign countries, which they then call home. Inversions aren’t new, but a recent wave of transactions has prompted a call to action on Capitol Hill — and a few cheap shots too.
U.S. Sen Dick Durbin of Illinois, Treasury Secretary Jack Lew and other Democrats have bashed the companies involved for their supposed lack of “economic patriotism.” President Barack Obama last week scolded the companies for being “corporate deserters who renounce their citizenship to shield profits.” Speaking about the economy at a trade school in Los Angeles, the president said, “My attitude is, I don’t care if it’s legal. It’s wrong.”
Demonizing American employers who, um, follow the law only will serve to drive them away. The same criticism applies to the supposed quick fixes being pushed by the president and his fellow Dems.
On Tuesday, Durbin and other lawmakers introduced the so-called No Federal Contracts for Corporate Deserters Act. (Where do members of Congress keep the overcaffeinated junior staffers who write bill titles in blood?) The bill aims to bar contracts from going to businesses that incorporate overseas to avoid U.S. taxes, that are at least 50 percent owned by U.S. shareholders, and that do not have substantial business operations in the foreign countries in which they incorporate.
It’s a flimsy bill — and it’s not even clear, by the way, that the inversion Walgreen has in mind would run afoul of it. Suppose Walgreen partners with a retail chain that has substantial business operations where its headquarters might move (perhaps Switzerland or the United Kingdom). And should the bill become law, a legal battle challenging its application to Walgreen might be worth the company’s trouble: A Barclays analyst says an inversion could save Walgreen $783 million in taxes in Year One.
Washington tried to block this flight of U.S. jobs and tax revenues at least twice before. In 1996, the Treasury issued regulations that were supposed to discourage inversions. When that didn’t work, Congress in 2004 approved legislation targeted at the practice. Clearly that didn’t work either.
Now Durbin, Obama and Lew want to add yet another complication to U.S. taxes. Unintended consequences will follow — again. Some experts believe legislation to thwart inversions could make U.S. companies more vulnerable to foreign takeovers, which in some cases would achieve the same tax savings that such a law would be intended to discourage.
The real problem isn’t inversions. It’s an uncompetitive U.S. tax code that makes inversions so attractive.
The real solution: Tax reform.
Comprehensive tax reform was last accomplished in 1986, and with the passage of time and much political fiddling, the tax code has become a mess again. It’s complicated, unfair and out of step with the tax regimes of other countries. Its 35 percent business income-tax rate, in particular, puts American companies at a huge disadvantage. Just ask Walgreen, or North Chicago-based AbbVie, or any other U.S. company under pressure to serve its shareholders by moving.
The Democrats say tax reform is too difficult to accomplish in an election year. We reject that conventional — and, for incumbents such as Durbin, politically convenient — thinking.
On the contrary, Americans would welcome strong leadership on this issue. As Durbin & Co. well know, U.S. Rep. Dave Camp, chairman of the House Ways and Means Committee, offered just such a comprehensive plan in February. Thanks to Washington inertia in general and election-year caution in particular, Camp’s plan has languished.
Consider the economic benefits that would flow from tax reform. It’s hard to think of any action from Congress that would do more to improve the U.S. economy and boost the nation’s competitiveness worldwide. That boils down to more jobs. Wouldn’t that help the authors of such progress to win elections?
As Doug Oberhelman, chairman and CEO of Illinois’ Caterpillar Inc., noted in a recent interview, “Full-blown tax reform in this country is absolutely needed and will absolutely stimulate growth.”
Shame on politicians who admit the need for tax reform but who won’t fight to make it happen now.
An accurate write up on the U.S. Chamber of Commerce’s assault on principles. The first paragraph is from Leon Wolf, the second paragraph is from RedState:
“See, conservatives have always stood for a level playing field for business and generally a less onerous regulatory environment in which entrepreneurship might grow. Private business is and always has been the engine of the American economy. But somewhere along the line, many businesses – especially the largest ones – came to demand not just a level playing field and fair regulatory environment but rather an active place at the government feeding trough. At that moment, when corporations lined up for money from TARP, then the Obama bailouts, then Stimulus pork, conservatives revolted against these policies and the politicians (including Republicans) who supported them. As offensive and ineffective as the Democrats’ welfare-for-individuals policies were, these welfare-for-enormous companies policies were even worse.
This is the fault-line. While conservatives have not suddenly turned anti-business, or even anti-big business, big business as personified by the Chamber of Commerce has become anti-liberty and a purveyor of corporate welfare and crony capitalism.”
Democrat Mike Hymes — running in the 38th District State Senate special election — just showed his true colors by coming out in favor of hand gun registration and banning AR-15s.
In the Tuesday, August 19 special election, show Hymes that Southwest Virginians are too smart to be fooled by his flip flopping!
What did you do today? We made a Cuccinelli slip ‘n slide!
I’ve edited this post. I almost never ask you all this, but PLEASE read this article, and then PLEASE share it with everyone you know - including your left wing friends. There is so much that is so deeply meaningful and important in this article, everyone that cares about America and their fellow Americans needs to read it.