Obama builds a corporate tax prison

Washington Examiner ^ | 4/7/16

[markomalley]

The Treasury Department issued two new rules Monday to make it much more difficult for American companies to leave the country. Technically, what the companies do is a "tax inversion," taking over a foreign firm and adopting its target's address as its headquarters.

By doing this, it can pay only the foreign tax rate on the profits it makes abroad. This is attractive because taxes in other developed nations are invariably lower than those in the United States. Yes, ours are the highest in the world.

Monday's two rule changes were President Obama's third attempt to end corporate inversions and stop the exodus of corporations fleeing his economic mismangement. The effects of this latest move will be far the most far-reaching, indeed they already have been, for Pfizer immediately dropped its $160 bilion takeover of Allergan, a drug company in Dublin.

The first new rule targets "serial inverters," which are companies created by one inversion after another. (The phrase "serial inverter" is a deft piece of propaganda, echoing "serial killer," suggesting something heinous even though inverters have simply been following the law.

The second rule limits "earnings stripping," another legal process by which one part of a company makes a loan to another and thus converts taxable income into non-taxable debt.

The moves are intended to reduce or end a trend in which companies find ways to escape American taxes, which hinder their ability to compete with foreign rivals.

None of this would be necessary if the U.S. weren't now such an inhospitable place to do business. The recent wave of inversions and mergers are a direct result of America's 35 percent corporate tax rate. On top of that, America's tax system is not confined within U.S. shores, as most tax systems are, but instead reaches out to try and tax American corporations and citizens wherever they are in the world. This leads to double taxation of overseas profits, first by the foreign tax jurisdiction in which the U.S. corporation operates, and then by Uncle Sam.

It's distressing to see so many U.S. companies move abroad. But Obama's fixes don't address the problem. They attack a symptom without producing a cure. The remedy is a government that stops viewing American business as its own fatted calf to be slaughtered again and again. Companies are merely looking out for the interests of their investors when they leave the U.S. Rather than move out, they'd move in if the tax code were reformed.

President Obama has called for reform, but when he and congressional Democrats talk of reform, they really mean changes that will sluice yet more revenue into the Treasury to finance their spending plans. Republicans in Congress are seeking a larger overhaul of America's illogical and overly burdensome tax code, something that polls shows most Americans want. Under a Republican plan, reform would include reductions in both the corporate tax rate and taxes on the foreign earnings of American companies.

In 2014, when the Treasury first issued rules to try to cut down on companies moving abroad for tax purposes, Obama called the practice "unpatriotic." But it's not unpatriotic for corporations to reduce their burden and maximize the wealth of American investors. By the same token, it certainly isn't patriotic to insist on a ruinous corporate tax rate that taxes companies so heavily that it drives them into exile, and encourages them to keep as much income as possible out of the country to avoid a tax bill that, by some estimates, would not amount to some $2 trillion, more than 10 percent of GDP.

Donald Trump has courted controversy this campaign season by proposing to build a "big beautiful wall" to keep out illegal immigrants. But with this move President Obama is building a wall of his own to keep companies in. That's what prisons are. He wants to subject American business to the highest tax rates in the world. They are competing with global rivals with one hand tied behind their backs.

[markomalley]

Next move will be to tax all earnings, both foreign and domestic, of any company that does any business at all in the US, even if they are genuinely foreign companies.

[ExSES]

The noose of "Capital Controls" gradually tightens here as in many countries of the world.

[Cvengr]

Next they’ll build a wall to keep us in and claim it’s to keep others out.

[Iron Munro]

How dare companies use legal tactics to escape the oppressive taxation of the democrats Wealth redistribution State.

What an insufferable bastard Obama is!

And the same brain dead human lemmings who voted him into the White House twice are ready to vote Big Bottom Rodham in to replace him.

[nathanbedford]

When leftists like Barack Obama undertake to launder merit out of the education system, he invokes the ideal of equality which in the leftists' mind is the most important value. To achieve that value the left invokes the power of government and sacrifices personal liberty for the goal of equality.

When Obama attacks "inversions" he will support often draconian measures on the basis of "fairness" and equality. The problem is the more "fair" Obama is, the less fair the government is, the more oppressive the government is, the more Obama plays the tyrant.

Putting aside the reality of the rule of unintended consequences, we create an ever more tyrannical apparatus in the illusory hope of achieving equality. In our educational system we create an ineffectual, deadening, achievement killing apparatus in order that all children can be above average.

There can be no progress without inequality. It is the very inequality of capitalism that spawns competition and generates innovation. There can be no ultimate equality in politics without tyranny and there can be no liberty without inequality. (As an aside, it should be noted that there can be no ultimate political or economic equality, that does not exist even in North Korea or in Stalinist Russia.)

[Iron Munro]

Next they’ll build a wall to keep us in and claim it’s to keep others out.

Shh... Keep that thought to yourself.

If the democrats had thought of that they would have been demanding that George Bush build The Wall with Mexico back in 2001.

[Truth29]

"Next they’ll build a wall to keep us in and claim it’s to keep others out."

Spot on. He is already creating a virtual wall that makes it much more difficult for expats to establish and maintain bank accounts. Obama's goal seems to be to turn the US into Venezuela with the glorious revolution of socialist equality being the sharing of misery.

[Fhios]

I think Obama is only doing this now because of the Trump effect. Trump has used corporate inversion and corporations moving factories to cheaper labor.

Obviously many people on this thread are globalists. I’ll tell you what a nationalist thinks.

- When a corporation in the U.S through whatever means moves to a foreign country, they lose all their intellectual property. Much of that IP comes from government subsidies and tax breaks on R&D, or through Universities — again funded mainly by the Government.

You really want to live in a United States where everything critical to our security and safety is sourced overseas? That’s a recipe for disaster.

[Sirius Lee]

It never occurs to libtards to do the simple thing which is to lower corporate taxes and make the U.S. a more attractive place to do business and hire people.

[fella]

If 1 government lawyer (usually can’t make it in the real world) can dream up a convoluted business regulation then 10 real world business lawyers can figure a way around it. It’s the nature of capitalism.

[ronnie raygun]

They need to turn around and work with others to put him in prison

[fruser1]

Yup, the wall is going up.

One of the ways you know you’re not in a free country is that you are not allowed to leave.

[Alberta's Child]

That's exactly right.

There's also a legitimate question of what kind of effort Congress is making to fix the problem. Some things are very simple to fix just by inserting a single line into a broader bill that the president can't possibly veto.

I saw this up close over the last couple of years with the trucking industry's complaints about increasingly onerous rules established by the Federal Motor Carrier Safety Administration (FMCSA). The FMCSA rules were legitimately imposed, in that the law establishing the FMCSA gave it the discretionary authority to make these rules for the trucking industry. But it eventually got to the point where a couple of them were seriously impacting the efficiency of the industry.

So ... under pressure from the trucking industry, Congress simply inserted a line in the major budget bill last December that said, in effect: "Rules X and Y imposed by the FMCSA are null and void."

That was the end of it. I deal with Federal bureaucrats as a matter of course in some of my work. For all the legitimate complaints we may have of them, I've never had a case where any of them stepped beyond the statutory limits of their authority.

[Buckeye McFrog]

Bad economics, but good politics.

These moves will be widely popular with vast swaths of the population.

[cuban leaf]

That was so good I’m posting it on my facebook page.

[i_robot73]

>Next they’ll build a wall to keep us in and claim it’s to keep others out.

You mean like the TSA, NSA, etc.?

[i_robot73]

>>When a corporation in the U.S through whatever means moves to a foreign country, they lose all their intellectual property. Much of that IP comes from government subsidies and tax breaks on R&D, or through Universities — again funded mainly by the Government.

Correction: Funded by U.S. taxpayers, unwillingly and ILLEGALLY, through the Fed. govt.

2: Tax breaks don’t *cost* ‘govt’ squat. Tax breaks are entities keeping their OWN $$.

Here’s one Constitutionalist to a Nationalist: How ‘bout placing blame where blame is due...GOVT.

Fascist, Socialist, nanny-state, bloated, ineffective, unproductive, unconstitutional GOVT.

[i_robot73]

>It never occurs to libtards to do the simple thing which is to lower corporate taxes and make the U.S. a more attractive place to do business and hire people.

And show that the Free Market and Freedom/choice WORKS? I want what you’re having/smoking/drinking /s

[Mr. Jeeves]

He is already creating a virtual wall that makes it much more difficult for expats to establish and maintain bank accounts.

And the GOP is all for it. Rand Paul is the only candidate that even talked about partially rolling back FATCA.

[MortMan]

So, by changing a “rule”, Obama is allowed to change the law.

And here I thought we weren’t beholden to a king any more.