Return to Sanity: Corporations Fleeing Obama's Idea of 'Economic Patriotism'

Saturday, August 9, 2014

Corporations Fleeing Obama's Idea of 'Economic Patriotism'

(Photo credit: Wikipedia)

There's been a rash of US corporations renouncing their US citizenship and taking their headquarters overseas, and many more to come, says the Washington Post. The reason? The highest corporate tax rate in the developed world.

President Obama doesn't like this notion of companies making a decision to take their operations offshore to avoid taxes - a practice known as inversion - and wants these corporations to practice his idea of "economic patriotism."

That notion is likely to open the floodgates for a mass exodus of US companies.

So far this year, about a dozen U.S. companies — including such well-known brands as Medtronic medical devices and Chiquita bananas — have merged with foreign firms and shifted their headquarters offshore to avoid U.S. taxes, analysts say.

Dozens of additional deals are in the works, according to administration and congressional officials, and other companies are quietly contemplating the move. Last month, CVS Caremark chief executive Larry Merlo met with Sen. Charles E. Schumer (D-N.Y.) and urged him to act to stop the rash of expatriations. Otherwise, Schumer said that Merlo warned him, CVS “might be forced to do it, too,” to duck a total tax bill expected this year to approach 40 percent.

“What we’re seeing is one more manifestation of why the business tax structure needs to be fixed,” said John Engler, president of the Business Roundtable, an association of chief executives at some of the nation’s largest corporations. “We’re the proverbial frog that’s being boiled in the water, and a few frogs have decided to jump out.”

Last month, President Obama loudly questioned the patriotism of inverted companies, calling them “corporate deserters” who are abandoning their country “just to get out of paying their fair share of taxes. . . . My attitude is, I don’t care if it’s legal. It’s wrong.”

On Tuesday, Democratic Sens. Elizabeth Warren (Mass.), Richard J. Durbin (Ill.) and Jack Reed (R.I.) urged Obama to “use your authority to reduce or eliminate tax breaks associated with inversions.”

Treasury officials confirmed that they are exploring their options for “administrative actions” that could block inversions or “meaningfully reduce” the associated tax benefits. But any move by the Treasury Department would amount to a “partial fix,” the officials said, adding that “legislation is the only way to fully address inversions.”