Posted on 08/26/2014 8:16:31 AM PDT by Squawk 8888
Speaking as someone who has eaten there, Burger King is one of the saddest places on earth. Abandon digestion and pimple-free skin, all ye who enter there. To me, Burger King isn't just a lousy place to eat but a sort of existential black site that drains the life out of you (well, me) on every level: All the products are just lousier versions than what's offered at better fast-food joints. The ads, even those old fake-hip ones with the weird Burger King, are awful to the nth degree (anyone else remember the "Where's Herb?" campaign?).
Yet I find the attacks on Burger King's purchase of Tim Horton's "Cafe & Bake Shop" even more saddening. By picking up the Canadian-owned maker of the terribly-named "Timbits" (donut holes named after the Canadian hockey player and drunk-driving cautionary tale who co-founded the chain), Burger King can escape U.S. corporate taxes that are much higher than those in most other countries. This is the so-called tax inversion process, by which a U.S. company picks up a foreign one and then moves its corporate headquarters there to take advantage of lower taxes. "Voila, higher profits!" clucks The Daily Beast's Daniel Gross. The Department of Treasury estimates that over the next decade such inversions could mean a loss of $20 billion in corporate taxes. To put even that self-evidently puny amount in even clearer context, the Congressional Budget Office (CBO) figures the corporate income taxe will raise $4.5 trillion over the same period. "In other words," notes Kyle Pomereau of the Tax Foundation, "corporate inversions are predicted to cost 0.5 percent of the corporate tax base over ten years."
The White House and a number of Democrats are trying to stymie tax inversions through legislation and the bully pulpit. Just earlier this month, President Obama floated the idea of an administrative action that could spike such deals and he's blasted tax inversions as "unpatriotic."
But this is all b.s. until the U.S. gets its corporate tax rate into line with what other countries are charging. According to KPMG, which has a comprehensive chart of corporate tax rates (including average state and regional rates), the U.S. total comes to 40 percent. Canada's comes to just 26.5 percent:
"The corporate income tax rate is 26.5%. It comprises a 15.0% federal tax component and an 11.5% provincial tax component. Depending on the province, the combined general corporate income tax rate ranges from 25% to 31%. Lower corporate income tax rates are available to Canadian-controlled private corporations (CCPCs) on their first CAD$500,000 (CAN$350,000 to CAD$425,000 for certain provinces) of taxable active business income. A 2014 representative tax rate for a CCPC on its first CAD$500,000 of active business income is 15.5% (an 11% federal tax component and a 4.5% provincial tax component). Depending on the province, the 2014 combined active business income tax rate ranges from 11% to 19%."
Read more, including a breakdown of the U.S. figure, here. There's no shame or infamy in moving to where conditions are better, whether for your family, your job, or your business. Such freedom of mobility is, in fact, typically celebrated as one of the things that makes America exceptional. And it goes without saying that since tax inversions are perfectly legal, there's not even a hint of impropriety here.
As Gross points out in The Daily Beast, Burger King won't save its corporate skin simply by shuffling off to Canada. It's a poorly run company and it's really kind of a miracle it's lasted as long as it has (did I mention how sad-inducing BK is?). But for god's sake, are Democrats and other economic nativists really so dumb as to think they can gain ground in a global economy by making it harder for all businesses to do business in America (whether through higher taxes or ownership rules or other regulations)? That way madness lies—and continued economic lassitude.
I’m perfectly fine with it so long as this does not mean they’ll start tossing cheese curd on my fries.
“Didn’t Burger King come out with the gay burger? Rainbow burger whatever?”
I think you’re referring to their new “Bowel Burger Au Jus.” I won’t eat at Booger King.
LOL they do in Canada!
The business model is what it is.....truth is if we have to pay full price at a burger joint we can eat at a better restaurant. It’s all a monetary thing for us and a lot other people in our situation.
The “Proud Burger” Ha Ha Ha!
(I’ve never heard anybody order one!)
“But it directly impacts the ability to pay shareholders, hire, grow, R&D, etc.”
And where do those monies come from? The only money a corporation has is the result of what they charge. If they cannot cover the cost of shareholders, employment, growth, R&D, etc. they raise prices and or go out of business. You pay that price when you buy that good or service.
When the minimum wage is raised, does BK eat that cost or is it passed on to the customer? Of course it is passed on as are all costs including taxes. Watch the Friedman video; there are no free lunches.
Why do you understand that taxes feed the beast but prices don’t account for taxation? I shoe horses. If there were a $20 per horse tax, I would not eat that. You would see the cost of shoeing rise more than $20 a head as there are other costs involved in collecting and paying taxes and you the consumer pay for it. There are no corporate or business taxes.
Warren Buffett promotes higher taxes in the US and then will make a killing financing corporations moving away.....
hhhmmmmm
MANY Hortons stores here in Western NY .... I’ve always enjoyed their fare, and the HQ location was inconsequential — hell, I used to work for a Canadian-based firm.
As long as BKC doesn’t screw with the menu or pricing, I’m all for sending the Government notice about Corporate tax policy.
The USA should meet or beat the deal. USA should always be the most business friendly.
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