Tax inversion

tax-inversion

Wednesday 8-6-14, Barrack Hussein Obama called a press conference, and was an hour and 14 minutes late to it. He lost no time (once he got there) in going completely dictator once again. He basically was asserting that he has the executive authority to help the middle class. Also, the companies that are trying to their headquarters overseas to reduce their tax burden in the United States are not responsible, it is not fair. He is saying to the corporate leaders you have to be responsible, you have to pay more taxes because it’s only fair, and it’s a contribution to the community. He sounds like a character out of ‘Atlas Shrugged.’

People have long memories and I’ll show later that the tactic he is now claiming is unfair, and unjust and unpatriotic and these CEO’s are traitors by moving offshore, he has done to the tune of $110 million of your dollars for the past 6 years.

Now ‘inversion’ is the word of the day. All the tribal drums are beating, and everybody on the liberal left is talking today about the ‘inversion process’. What they are talking about is US companies, so far this year about a dozen- Medtronics Medical Devices and Chiquita Bananas being two of the better known, have merged their American-based companies with foreign firms. In the merger, with the foreign firm only being 20% of the total new firm under the current rule, you can move the headquarters of the combined firm to the foreign country.   The effective of that of course, is while you’re still paying US taxes on stuff that you sell in the United States, the stuff that you sell elsewhere including in the country of the merger is taxed at those foreign country rates. The profits made overseas (not in the US which the left tries to combine them both together) are taxed at the lower rate in that country and not at the highest of all corporate rates in the world -the United States.

This is what has happened when Barack Obama said it is time for US corporations to pay their fair share. So he took the corporate tax rate to 39.6%. The British corporate tax rate is 21%. It is just kind of amazing that the liberal response to some companies (out of thousands of who have) doing that to avoid American exceptionally high taxes is that their ought to be rule to prevent them from doing that. They ought to be punished for doing that, as well.

This maneuver, ‘tax inversion’ has been around for decades. It’s been legal with the 20% rule for decades, but it hasn’t been an issue until now. American companies haven’t done that, generally speaking, until they got Obama, massive new regulations and the highest corporate tax rate in the world.

This ‘inversion, campaign is the latest effort to turn around the 2014 election by talking about these corporations, and you know what these corporations do, they do they support Republicans, therefore Republicans, are urging these corporations to become tax evaders, economic deserters as the president called them.   I looked back on my Facebook page and saw 7 different memes about Walgreens, and Chiquita and other companies all jumping on the ‘inversion’ bandwagon.

The Senate won’t do anything about immigration, the economy or anything else that is causing this country to fail, but they are going to bring up a bill in the two weeks when they come back from vacation to do something about the so-called ‘inversion.’ The Joint Committee on Taxation suggests that the US government stands to lose $20 billion in tax revenue over the next decade due to ‘inversion’ or approximately what we can expect in Medicare fraud in the next year.

Walgreens, the nation’s largest drugstore chain, was contemplating moving to Switzerland by absorbing a Swiss company and moving their headquarters there to avoid paying about $4 billion in US taxes over the next five years. They will now stay in Deerfield, Illinois they will kowtow to the political pressure to stay. So to recap, a US firm moves its headquarters, its tax home to a nation with lower rates, either merging or purchasing a foreign company. The new company is still subject to a 39.6% tax on its US earnings, but the profits earned overseas, which were previously subject to US taxes when they were transferred back to the United States, are subject only to the lower foreign rates. Ireland for example, has a corporate tax rate of 12.5%.

Now what’s interesting about this, is that there are variations on this. In some of these deals the foreign company makes a big loan to the new US partner. The US partner makes large interest payments from US earnings, which can be deducted from the company’s tax bill, the interest payments are often not taxed in the foreign country, certainly not in Ireland or Britain. So the interest payments become a double windfall, taxed at a lower rate if at all.

So now the Senate is saying that Obama is right, let’s require 50% control of the company they shift overseas rather than the current 20%. It can be rationally debated endlessly but that is not what is really going on. This is part of the populist movement to generate enthusiasm the leftist base to save the sorry backsides of the senators who will have tough races in 2014. So the actual facts don’t really matter.

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