Posted on 07/31/2002 4:26:56 PM PDT by Libloather
Democrats Take on Tax Havens Issue
Wed Jul 31, 8:17 AM ET
By CURT ANDERSON, AP Tax Writer
WASHINGTON (AP) - Republicans are scrambling for a response to U.S. companies moving their headquarters to foreign tax havens after Democrats scored political points with voters by painting the exodus as yet another example of corporate irresponsibility.
In what's known as a "corporate inversion," a company sets up a shell headquarters in a tax haven such as Bermuda while keeping most operations and jobs in the United States, potentially saving millions of dollars in U.S. taxes. The practice is legal.
Initially dismissive, congressional GOP leaders are now taking the issue so seriously that House Speaker Dennis Hastert, R-Ill., has promised a vote on it this year, a spokesman said.
The heightened interest follows a surprising vote last week on an effort to bar these firms from getting contracts with the yet-to-be-created Homeland Security Department. More than 100 Republican House members switched their votes at the last minute when Majority Whip Tom DeLay, in a rare move, released them to vote for it.
Senate Majority Leader Tom Daschle, D-S.D., said Tuesday the issue was one of patriotism with the Sept. 11 anniversary approaching.
"If I were a corporate CEO, one way would be to say that you're proud to be an American company and you're not going to go offshore to avoid taking some share of your responsibility to see that this country remains strong," Daschle said.
In the House, Democrats have obtained 187 of the 218 signatures needed on a petition to force consideration of a bill to eliminate corporate inversions.
Dozens of U.S. corporations have relocated their headquarters to Bermuda or other tax havens in recent years or are in the process of doing it. The Stanley Works tool company, Tyco International, Ingersoll-Rand, Accenture, Cooper Industries and Fruit of the Loom are among the companies that have or want to set up shop in Bermuda, according to the House Ways and Means Committee.
It is safe to say that the GOP position has evolved on corporate expatriates. A few months ago, most Republican leaders, backed by the Bush administration, said tackling this issue would require a long-term overhaul of corporate tax laws. They suggested that corporations were being driven offshore for competitive reasons by an unreasonably high U.S. tax burden.
In floor debate last week, House Majority Leader Dick Armey, R-Texas, said it is "the burden of our taxes that make American corporations take regrettable action."
The Bush administration has held the view that a fundamental overhaul in corporate tax law is needed, but the White House now is urging action much more quickly than it had previously.
White House spokesman Ari Fleischer ( news - web sites) told reporters Tuesday that President Bush ( news - web sites) believes Congress should tackle the corporate tax issue before adjourning this fall.
"The president thinks that the problem is with the tax code, and the tax code needs to be changed," Fleischer said.
But a shift in Republican attitude was apparent last Friday night, when Rep. Rosa DeLauro ( news, bio, voting record), D-Conn., used a parliamentary maneuver to force a vote on her measure preventing these firms from getting any contracts with the yet-to-be-created Homeland Security Department.
In 2001, 26 companies now located in Bermuda or another tax haven had over $1 billion in federal contracts, according to Democratic research. More than two-thirds were related to defense or homeland security missions.
Armey was the only Republican to speak in opposition to DeLauro's bill, and he is retiring. At one point during the vote, 205 lawmakers had voted against. But as the measure appeared ready to pass anyway, 100 Republican lawmakers lined up at the speaker's podium to change their votes to yes.
The amendment passed, 318-110.
"This issue is resonating across the country," said Rep. Richard Neal ( news, bio, voting record), D-Mass.
Still, Republicans say the issue is far too complicated to have much political impact in all but a handful of House races. Far more important, they say, was recent passage of legislation boosting penalties for corporate fraud and document shredding.
Yet it is a major issue in Connecticut — home of Stanley Works — where Democratic Rep. Jim Maloney and Republican Rep. Nancy Johnson ( news, bio, voting record) are running against each other in a newly drawn district. Corporate expatriates also have come up in New Hampshire, former home of Tyco, as well as races in Kentucky, Iowa and Pennsylvania.
Just how Congress might deal with corporate relocations is unclear. The Senate Finance Committee recently approved a bipartisan bill that would treat such companies as U.S. firms for tax purposes if they do no substantial business in their new host country.
In the House, Ways and Means Committee Chairman Bill Thomas, R-Calif., has been pushing for a relocation moratorium combined with measures addressing both tax shelters and a tax dispute with Europe. It is possible, a spokeswoman said, that Thomas will decide to move the expatriate bill separately.
How would he know?
Tom Daschle, Libdem/Chicom-S.D., said Tuesday the issue was one of patriotism with the Sept. 11 anniversary approaching.
Yeah right, that's the ticket. ;^)
Republicans are scrambling for a response to U.S. companies moving their headquarters to foreign tax havens after Democrats scored political points with voters by painting the exodus as yet another example of corporate irresponsibility.
Fortunately the job creators and market providers chose only to move the books off shore and not the jobs and manufacturing. How long until the U.S. government makes it such a competitive disadvantage that businesses move their entire operations offshore? More on the tax and privacy unintended consequeces in a minute.
Daschle's criticism of Pitt is also unusual because Mrs. Daschle had a similar career trajectory to Pitt's, going from industry representative to industry regulator. After years of lobbying for aviation interests, Mrs. Daschle became deputy administrator of the Federal Aviation Administration in 1993. Later, she served as acting administrator of the agency.
After leaving office, Mrs. Daschle went back to lobbying for airlines she had regulated. Senator Daschle slams SEC chair for industry ties while wife continues lobbying!
That's a glaring example of how the federal government and Capitol Hill operate by enslaving the business community to engage in colluding with the government. ...To enjoin parasitical politicians and self-serving bureaucrats with political-businessmen seeking unfair competitive advantages. Whereas market-businessmen do not seek the government's monopoly on force to gain unfair advantages. Yet they get stuck paying the price for not bowing to parasitism. They are burdened by government regulators and government-colluding competitors.
The Daschle Duo are the champions. The leftover mascots of their "great" leader, William Jefferson Clinton. Now they're trying to mirror his tactics.
How the collusion pans out.
Congress has created so many laws that virtually every person is assured of breaking more than just traffic laws. Surely with all this supposed lawlessness people and society should have long ago run head long into destruction. But it has not.
Instead, people and society have progressively prospered. Doing so despite politicians creating on average, 3,000 new laws each year which self-serving alphabet-agency bureaucrats implement/utilize to justify their usurped power and unearned paychecks. They both proclaim from on high -- with complicit endorsement from the media and academia -- that all those laws are "must-have" laws to thwart people and society from self-destruction.
Again, despite not having this year's 3,000 must-have laws people and society increased prosperity for years and decades prior. How can it be that suddenly the people and the society they form has managed to be so prosperous for so long but suddenly they will run such great risk of destroying their self-created prosperity?
Supply-side consultant Jude Wanniski, in a letter to clients last Thursday, said: "There is absolutely no doubt that the beating Wall Street is taking is the result of the frenzy in the U.S. Senate to make it a crime to do business in the United States."
Threatened by Congress
Foreign capital is exiting the stock markets too. Here's another example of how the government harms the economy via it's monopoly on force.
"...It gets even worse. Because of the IRS implementation, earlier this year, of "Qualified Intermediary" (QI) Regulations, privacy concerned foreign billionaires (and millionaires), who have until recently been responsible for large amounts of foreign investment in the United States, are now moving their investments to more "private" jurisdictions, as well. The reason is simple. The QI Regulations require foreign financial institutions who invest client money in the United States to reveal the true identity of individual investors or lose the right to serve as a "Qualified Intermediary" for US investments. Those billionaires (and millionaires) who want to preserve their privacy are just directing those financial institutions to invest their money elsewhere...."
http://www.actionamerica.org/taxecon/privfactor.html
He sees the two big political parties competing "to see which can force more morality on the American businessman."
The government is the all time champion of cooking the books and it has the gall to point fingers at the whole business community because of a few bad apples. The entire business community and employees that support it should stand tall against a government feigning to protect the little guy from organizations that cook their books.
If there was ever a prime example of the fox guarding the hen house it is the government claiming to protect the little guy from organizations that cook their books. President Bush will have to militarily smash down terrorism. For that is his job. It's not the President's, congress or' the government's job to manipulate the economy.
The business community with their employees will have to stand tall against the PC-status-quo fox -- self-proclaimed authorities claiming/feigning they'll use the government to protect the little guy and a complicit media and academia that supports them; for they are all the fox -- to regain their rightful place as the champions of honest business that has always increased the well-being of people.
The government, having already manipulated the economy to almost no-end, President Bush can play the unbeatable five-ace hand of replacing the initiation-of-force IRS and graduated income tax with a consumption tax wherein if you don't want to pay the tax don't buy the item. For example, implement the proposed national retail sales tax (NRST). Not only would that win votes for Bush and republicans in congress it would boom the economy while fighting off a looming economic double-dip inflation/recession headed for depression it would President Bush a 2004 reelection.
Yes, the genie is out of the bottle. Where will it lead?
War of Two Worlds
Value Creators versus Value Destroyers
Politics is not the solution. It's the problem!
The first thing civilization must have is business/science. It's what the family needs so that its members can live creative, productive, happy lives. Business/science can survive, even thrive without government/bureaucracy.
Government/bureaucracy cannot survive without business/science. In general, business/science and family is the host and government/bureaucracy is a parasite.
Aside from that, keep valid government services that protect individual rights and property. Military defense, FBI, CIA, police and courts. With the rest of government striped away those few valid services would be several fold more efficient and effective than they are today.
Underwriters Laboratory is a private sector business that has to compete in a capitalist market. Underwriters laboratory is a good example of success where government fails.
Any government agency that is a value to the people and society -- which there are but a few -- could better serve the people by being in the private sector where competition demands maximum performance.
Wake up! They are the parasites. We are the host. We don't need them. They need us.
Schwartz Bernard L.
2/14/02 $5,000.00
New York, NY 10021
N/A -[[Receipt--exempt from limits]]
DCCCC NON-FEDERAL ACCOUNT #7
[View Image]
Schwartz Bernard L.
3/28/02 $100,000.00
New York, NY 10021
N/A -[[Receipt--exempt from limits]]
DCCCC NON-FEDERAL ACCOUNT #7
[View Image]
SCHWARTZ, BERNARD L
4/13/01 $230,000.00
NEW YORK, NY 10021
-[[Receipt--exempt from limits]]
DCCCC NON-FEDERAL ACCOUNT #7
SCHWARTZ, BERNARD L
6/29/01 $62,500.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
2/23/01 $20,000.00
NEW YORK, NY 10021
-[[Receipt--exempt from limits]]
DCCCC NON-FEDERAL ACCOUNT #7
SCHWARTZ, BERNARD L
2/22/01 $20,000.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
9/14/01 $25,000.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
4/18/01 $20,000.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
6/18/01 $250,000.00
NEW YORK, NY 10021
LORAL CORPORATION -[[Receipt--exempt from limits]]
DNC-NON-FEDERAL INDIVIDUAL
SCHWARTZ, BERNARD L
9/13/01 $10,000.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
3/28/02 $100,000.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
SCHWARTZ, BERNARD L
4/18/01 $42,500.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
12/17/01 $62,500.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
9/13/01 $52,500.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
SCHWARTZ, BERNARD L
6/29/01 $200,000.00
NEW YORK, NY 10021
LORAL CORPORATION -[[Receipt--exempt from limits]]
DNC NON-FEDERAL UNINCORPORATED ASSOCIATION ACCOUNT
SCHWARTZ, BERNARD L
12/17/01 $25,000.00
NEW YORK, NY 10016
LORAL CORPORATION -[[Receipt--exempt from limits]]
DSCC/NON-FED UNINCORP ASSOC
Schwartz, Bernard L. Mr.
3/29/02 $150,000.00
New York, NY 10021
Loral Corporation -[[Receipt--exempt from limits]]
DNC-NON-FEDERAL INDIVIDUAL
Loral Aerospace closed at 69 cents a share today, down from a high of over $25. Bernard Schwartz's other company, Globalstar,is bankrupt. Three years ago, Globalstar traded for in excess of $55 a share.
Our lawmakers, from both parties, seem intent on forcing our largest employers offshore.
It's time that we start changing out lawmakers on both sides of the aisle. That means voting out the incumbents in the primaries and replacing them with Republicans who will put their constituents' wishes ahead of their own lust for more and more power.
Who can cogently explain how setting up headquarters offshore saves US taxes?
I'll try to make is simple, yet complete. It works like this:
To begin with, I will use the maximum tax rates for each country in my example, since most of the companies that we are talking about fall into that category. The tax rate numbers are 2 years old, but they should still be in the ball park and for this example, accuracy is not that important. The key here, after all, is to explain how foreign companies have an advantage over US companies. In that regard, this explanation is a little over-simplified, but it conveys the general idea.
As a US company, your maximum corporate tax rate is 35%. What that means is that you must pay 35% of everything that your company makes, anywhere in the world, to the US government. But, suppose that you are doing business in a country like Canada (29.1% tax) or Hong Kong (16% tax). You must pay tax to those countries on what your company makes there. In that case, the US government gives you a write off of the amount that you paid in tax to those other countries and you must only pay the difference. So, if you paid 16% tax to Hong Kong, you would only owe 19% to the US government on that Hong Kong earned income (16% HK+ 19% US= 35% total).
Where being a foreign company has its advantage, is that you only pay tax in the country where the profit is earned. So, if your company is a Bermuda corporation, you still have to pay the high 35% US tax on income earned in the United States. But, you only pay 16% Hong Kong tax on income earned in Hong Kong. Similarly, your company would only pay 29.1% on income earned in Canada, 30% on income earned in the UK, 25% on income earned in Taiwan and 15% on income earned in Chile, to cite just a few examples.
The disadvantage for US companies is that the US government will tack on whatever it takes to make your tax rate equal 35% in each of those countries. So, if a US company and a foreign owned company each recognized 20% of their gross profits from the US, the UK, Canada, Hong Kong and Chile, their average tax rates would be 35% for the US company and 25.02% for the foreign owned company. That gives the foreign owned company a roughly 10% tax advantage over the US company.
That advantage can be turned into lower prices for products, higher dividends paid to stockholders, higher wages paid to employees, used for more R&D or some combination of those uses. In other words, the foreign owned company is both more competitive and more profitable and can afford to pay higher wages, including those wages are paid to US workers. Remember that, in the case of corporate inversion, the company manufacturing facilities and jobs are staying here.
In short, everybody wins - everybody but the our power hungry lawmakers, that is.
I hope that this helps.
Can you believe how many countries don’t even have an income tax? Many are featured in the left hand column of:
A century ago the USA didn’t have one either. One was “temporarily” enacted for WWI.
Some would claim that a lack of taxes leads to a lack of prosperity. So I think it’s remarkable how the British Virgin Islands (which abolished its income tax in 2006) reportedly has twice the GDP per capita and half the unemployment rate as the neighboring U.S. Virgin Islands (which still imposes an income tax, U.S.-style). These links document it, in the Economy section:
https://www.cia.gov/cia/publications/factbook/geos/vi.html
https://www.cia.gov/cia/publications/factbook/geos/vq.html
BVI’s interesting taxation (or lack thereof) is explained in greater detail here:
http://www.lowtax.com/lowtax/html/jbvpetx.html#income .
And BVI’s hardly the only place on Earth with investment-friendly tax laws, too. Bermuda has the world’s highest GDP per capita and a remarkably low unemployment rate. Like BVI, they have to let Brits relocate there even as the U.S. Virgin Isles claims that their having to let Americans in is the reason for their higher unemployment. Couldn’t be the taxes, of course!
Hopefully OECD pressures won’t continue to encourage countries to tax away prosperity while running up debt like the USA continues to do:
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm
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