Corporate Tax Inversions Will Cost U.S. Billions and We'll All Pay

dbphoenix

dbphoenix

The hottest trend in corporate America could prove to be extremely costly for the United States.

Chicago-based pharmaceutical company AbbVie, with its pending $53 billion takeover of Irish drugmaker Shire, is just the latest American company to acquire a smaller overseas competitor at least in part to capture the tax benefits of reincorporating abroad. more . . .
 
Reading articles like this makes me smile. Barrak Hussain thinks he is going to tax citizens into oblivion so he can hand out money on street corners.
In letters sent to four lawmakers, Treasury Secretary Jacob J. Lew said....

“The best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes, and simplifies the tax system,”

Brilliant! Whoda thunk it.

“But, even as we work to do that, we should prevent companies from effectively renouncing their citizenship to get out of paying taxes.”

Really Mr. Lew? What are you going to do? Tax their products as imports after they move? America as the largest and wealthiest market in the world is quickly becoming a chapter in the history books. Tax that.

“Short of undertaking a comprehensive reform of the business tax system, there are concrete steps that Congress can take now that would address this urgent issue,” Mr. Lew wrote.

And these concrete steps are.... ?

“The firms involved in these transactions still expect to benefit from their business location in the United States, with our protection of intellectual property rights, our support of research and development our investment climate, and our infrastructure, all funded by various levels of government,” the letter said. “But these firms are attempting to avoid paying taxes here, notwithstanding the benefits they gain from being located in the United States.”

Hysterical. The US wilfully refuses to protect its own borders. Infrastructure is inadequate and ageing. Schools produce students who cant do high school math. And corporations are expected to pay premium to be here? Not going to happen. Trust me normal citizens who don't want to sit in traffic, work a ten hour day and then give their paycheck to Barrak have their eye on the door too. Yes we do.
http://dealbook.nytimes.com/2014/07...o-inversion-deals/?_php=true&_type=blogs&_r=0
 
So what are they going to do? Make it illegal to move the domicile/headquarters of a company? What about after that, make it illegal for a US citizen to give up citizenship? The US is already of the most aggressive tax collectors in the world, more rules and restrictions are likely only to backfire
 
Daal said:
So what are they going to do? Make it illegal to move the domicile/headquarters of a company? What about after that, make it illegal for a US citizen to give up citizenship? The US is already of the most aggressive tax collectors in the world, more rules and restrictions are likely only to backfire
More...

Good questions, and you're likely right. But before one can look at what to do about a problem, if anything, he must first be aware of the problem.

If the issue of moving everything overseas has gone so far that the genie can't be stuffed back into the bottle, then what? Do we then become a feudal society and be content with that? If not, then what?
 
Lower tax rates amongst smaller nation states are obviously nothing more than a form of Economic Terrorism and must be dealt with in an appropriate manner, so McCain and Graham should be dutifully informed so the invasion plans can be properly formulated to correct it, OR we can allow our Corporate Citizens to properly defend themselves with their accumulated wealth around the world. Since others take their tax dollars others should defend their intellectual and other property rights:cool:
 
What costs the U.S. is stupid and corrupt tax policy; you see it manifest in reactions like reincorporation; capital can after all move; just watch.

Our tax on foreign earnings is stupid; there is no nicer way to say it. Properly understood it penalizes multinationals domiciled in the United States for investing foreign after tax profits in the U.S. This stupid structure is so legislators can claim higher revenues in their budget models; they pretend that they will get these revenues, the multinationals would stupidly act to pay this tax when they don't have to. The increased pro-forma revenue allows more spending; they claim it is paid for in the 10 year analysis. That is corrupt, everyone knows it is a lie, but the CBO models it as if it is real under the rules.

It is not like this money is not taxed; it must be earnings from exclusively foreign production and foreign sale, without U.S. contact or the U.S. tax cannot be deferred. So, we are talking about product made and sold elsewhere by a foreign enterprise that happens to be owned by a U.S. domicile company. They pay tax where they make it and sell it according to the sovereign law of those places. The U.S. says that so long as these profits are never invested in the U.S. or applied to any U.S. contact enterprise, then you don't owe any further U.S. tax. Once you leave profits where they are earned you cannot return them to the U.S. without paying the whole U.S. income tax on those profits (35%), you loose the foreign tax paid credit unless you bring the money back in the year it is earned (then you would pay the net of foreign tax and 35%). Tell me this is not the stupidest thing you ever heard?

The profound stupidity of this is that when they reform our extra-territorial tax rules they will have to model it as a tax cut. Imagine that having to cut current expenses, or raise other taxes, because you admit that your projection of future revenue is an intentional lie; you were never really ever going to get the money and now you pretend it is lost.

The truth about the law is that it drives investment out of the U.S. and provides no revenue benefit. We shoot ourselves in the foot simply to make believe that we will get more money in the future than we know we will not. This is another example that we live in a post rational era; the age of the false narrative.
 
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