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August 14, 2014

Fairness, Corporate Inversions, and the Level Playing Field

Progressives like to talk about fairness and the importance of having a level playing field. But oddly, their public policy prescriptions for American businesses - the job creators we so desperately need to maintain a robust job market and provide employment for American workers - almost always involve markedly unfair and inequitable treatment of American business owners:

We've written for years about how 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. Medtronic's work-around is essentially to become Covidien so it can more easily increase its investments in the U.S.—and the firm has promised to invest an additional $10 billion in America over the next decade.

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. The point is that the U.S. government wants to tax U.S. business profits far more than other countries do. Inversions allow U.S. firms a level playing field that the U.S. tax code otherwise denies them.

Meanwhile, the President continues to suggest that corporations who take advantage of perfectly legal foreign mergers (among them are many high dollar contributors to his own campaign) are "refusing to play by the rules". If he truly believes some of his biggest donors/supporters have done something unpatriotic and morally wrong, one might expect him to return their ill-gotten donations.

One would, of course, be wrong to expect Obama's actions to match his rhetoric:

President Barack Obama won’t return campaign donations to executives, advisers and directors who have profited from offshore mergers that reduce corporate taxes using a technique he has called “unpatriotic.”

Responding to a Bloomberg News report that described connections between more than 20 Obama donors and the tax-cutting transactions, White House Deputy Press Secretary Eric Schultz said the president will keep the cash.

"I see nothing wrong with taking unfairly earned money from unpatriotic American corporations who have renounced their American citizenship and refuse to play by the rules the rest of us follow every day" doesn't exactly smack of moral conviction, does it? But then the Democrats seem to see little utility in actually following the rules they'd like to force on the rest of us:

On both sides of the aisle, there is a racial pay gap in campaign politics. Asian, Black and Latino staffers are paid less than their white counterparts, according to an analysis by the New Organizing Institute. For example, African-American staffers on Democratic campaigns were paid 70 cents for each dollar their white counterparts made. For Hispanic staffers in Democratic campaigns, the figure was 68 cents on the dollar.

And a recent study by PowerPAC+, funded by a major Democratic donor, revealed that less than 2 percent of spending by Democratic campaign committees during the past two election cycles went to firms owned by minorities.

What's the only time disparate impact is not - we repeat, NOT! - introvertible evidence of racially or sexually discriminatory hiring practices?

When it's practiced by Democrats, natürlich.

Posted by Cassandra at August 14, 2014 07:38 AM

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"What's the only time disparate impact is not - we repeat, NOT! - introvertible evidence of racially or sexually discriminatory hiring practices?

When it's practiced by Democrats, natürlich."

I see you're finally not only getting, but also reading, the memo's now.
About time.

Posted by: DL Sly at August 14, 2014 10:57 AM

I see you're finally not only getting, but also reading, the memo's now.

Memos? I never read those things.

Oh! Look at the time! I've got a fundraiser to attend. Toodles!

Posted by: Barack "The Lightworker" Obama at August 14, 2014 07:58 PM

Sarc really is the only balm for hypocrisy at this level

Posted by: CAPT Mike at August 18, 2014 03:59 AM