JMHO Loc: Utah

President Obama will deliver a speech today railing against corporate inversions. That is the process whereby a U.S. business merges with a foreign business and moves the new joint business’s headquarters to the foreign country. Inversions have been a hot topic recently because well-known businesses such as Walgreens, P****r, and Medtronic have been looking to engage in the process.

The president, like others before him, decried this practice because he believes it displays a lack of patriotism. However, inversions have nothing to do with love of country. They are all about U.S. businesses keeping up with their global competition.

When a U.S. business inverts it continues paying the same amount of tax it always has on its U.S. income. Any business, no matter where headquartered, pays the 35 percent U.S. corporate tax rate – which is the highest corporate tax rate in the world — on income earned within our borders.

The policy causing all the problems is the extra tax the U.S. levies on the income its businesses earn in foreign countries. This is known as a worldwide tax system. The U.S. is the only industrialized country that taxes the foreign earnings of its businesses.

The worldwide system makes it difficult for U.S. businesses to compete with their international brethren because those businesses don’t face an extra layer of tax when they invest in a growing new market. The extra tax U.S. businesses face makes certain investments unattractive for U.S. businesses that remain attractive to their competitors.

As I explained in a recent paper:

Foreign businesses unencumbered by the worldwide U.S. tax system are free to make investments that the U.S. worldwide tax system makes unprofitable for U.S. businesses. In these situations, U.S. businesses decline in standing compared with their foreign competitors because foreign businesses enjoy increased earnings and enhanced global efficiency from making investments that the U.S. worldwide system forces U.S. businesses to forgo.

If U.S. businesses don’t do anything to remedy this disparity, their relative profitability will fall as they take a pass on more and more growth opportunities their foreign competitors eagerly chase. Eventually this would put the viability of their businesses in jeopardy.

The preferred liberal fix to this problem is to make it harder for businesses to invert by requiring foreign shareholders to own a larger portion of a merged business (50 percent compared to 20 percent under current law) before the headquarters can be moved from the U.S. This change would only make matters worse.

Business will still find ways to remain competitive, such as by selling themselves outright to foreign competition. Raising the threshold could backfire by sending the message to businesses that the U.S. tax system will remain uncompetitive and could become more hostile to investment, causing more to want to flee our shores.

The only fix for this problem is tax reform that reduces the corporate tax rate and stops taxing the foreign income of U.S. businesses. Instead of demonizing U.S. businesses that are trying to do best by their shareholders, employees, and customers, Obama would better serve the country by spending his time working with Congress to make tax reform a reality.

Curtis Dubay

cesspool jones Loc: atlanta

try telling this to far-left liberal l***hes...according to them, all businesses are evil because they actually make money by the form of capitalism.

Dummy Boy Loc: Michigan

It's funny, most corporations do not pay taxes and have a pretty good method going to "hide the weanny" on profits. In a way, I would argue that it is, disingenuous for this author to suggest that they aren't being unpatriotic by finding a way to permanently sever job creation in the US. It is clear that this is a way to profit renters and further erode job growth...what's patriotic about that? Wouldn't we be concerned if it were defense contractor?

CharlesRabb

There should be no taxes at all for individuals or corporations- just consumption taxes. Corporations from all over would move here, and there would be plenty of jobs!

bmac32 Loc: West Florida

Now why they might try and hide those profits? Might it have something to do with the tax rates? We have some of the highest corporate tax rates in the world, while we have companies that pay nothing or very little.

http://www.huffingtonpost.com/2014/02/25/corporation-tax-rate_n_4855763.html

Rules and regulations written by whom, their friends in Congress.

JMHO Loc: Utah

Okay, let's make them all come back to the USA, pay all those taxes, and let them go broke...that'll teach them by golly. Then, you liberals will be crying about having no jobs, and probably still blame it on those big old evil corporations. Talk about stupid!

cesspool jones Loc: atlanta

thatz why the IRS needs to be put to pasture and the 'fair tax' needs to be implemented.

Dummy Boy Loc: Michigan

My point is: No corporation pay those taxes either through purported tax breaks for "innovation", local and state tax abatements, and schemes to off-shore part assembly and engineering.

Guess you don't work in a large corporation?

On the other hand, small businesses they get nailed! Screwed! But large corporations with staffers of tax lawyers pay maybe 1% of their Gross earnings.

Go read some the discussions with Apple, the Senator Levin had with the CEO, who stated (after also admitting that Apple pays little in the way of taxes): "...we pay all the taxes as required by law....", which happen to be none.

Dummy Boy Loc: Michigan

Again, you are claiming I'm a liberal, when I've presented facts that have NO political undertones.

Large corporations don't pay anywhere near the corporate tax rate, the reason the rate is the highest in the world is to get something out of them, but due to all of the loopholes in the corporate tax code most companies pay nothing, take Apple or Caterpillar for instance, they hire tax firms to set up offshoring business and then import parts that were actually made in the US.

I don't disagree with your assertion that the tax rate should be lower, but if you actually believe they pay anywhere near the current rate, you are wrong. I submit tax saving ideas each year for "innovation", so I don't know if you've done that, but each of those projects are funded on the backs of taxpayers.

Dummy Boy Loc: Michigan

...That wouldn't be fair to taxpayers that utilize their home as a write off...and would you tax unprepared food, or prepared food? Would that be fair to restaurants?

New tax code:

Tax = Income X 0.10: simple enough for you?

Dummy Boy Loc: Michigan

What's the fair tax....?

I think no tax, such as not paying social security would be fair, but I know at least 2 retirees would be pissed if I stopped paying...

What if one makes the low end of the poverty line, they don't pay taxes now, it's pretty fair to them (in their eyes)...oh surprise, you've never paid taxes, here's your bill...hmmm don't think that will work???

Currently, my mortgage is deductible, oh sorry, you gotta pay now....hmmm

Your plan cannot be implemented, bankruptcy would be faster....and underground economy emerges.....just like in North Korea.

JMHO Loc: Utah

Talks like a liberal, espouses liberal rhetoric, loves taxes, must be a liberal.

No, pal...you're flat out wrong! You lefties love to say corporations do not pay taxes, and it's a false narrative. Corporations either pay the tax, or pass the cost onto the consumer. If their competition is not great, it's easy to pass it on to the consumer. Some of the larger corporations, the ones who contribute heavily in campaign donations, or have lobbyist's on their payroll, succeed in some tax breaks enacted by Congress. You cite Caterpillar as having these breaks, instead they are a big example as to why companies move offshore, their global competition is stiff. As long as we maintain the highest corporate tax rate in the world, companies will continue to move off shore. You don't have to disagree with me, all you have to do is just watch them move...they're doing it everyday. If they thought the tax picture was as good as you claim, they wouldn't move.

bmac32 Loc: West Florida

What's large, 50,000 world wide. Taxes are one of the reason's, that with the never ending changes in regulations is the main reason's there left the country. They started moving right after NAFTA was passed.

Corporations don't pay taxes because of lawyers and special favors bestowed by Congress.

JMHO Loc: Utah

I have a tax plan, and it is simple; liberals and Democrats pay a flat 50%, and conservatives pay 10% with deductions. You liberals love to pay taxes, so that should make you happy.

For the past two fiscal years (the second one is still two months from ending) the treasury coffers have brought in a record amount of tax dollars. Yet, we still are running a huge deficit. There just isn't enough tax money for you liberals is there? You take in record amounts and you still want more. In the meantime we're heading for another recession.

JMHO Loc: Utah

I disagree. It is only the larger Corporations (Apple, GE, Wal Mart, etc) who succeed in paying little taxes. But, try and tell that to the smaller corporations who don't have the deep pockets. They either have to pass the cost onto the consumer, or absorb the cost and hope they can stay in business. Don't lump all corporations into one group.