The DC catchword of the week is "tax inversions", which is where a company that makes money in the US and around the world tries to limit it's tax liability in the the United States. Sounds downright un-Amerrrican doesn't it? Well, let's look at this and I'll try to keep it simple as most people are turned off by the details of tax law, usually getting rev'ed up by ideological talking points: "keep my taxes low and let someone else pay for the roads and schools!" or "tax those rich bastards and corporations because they know how to get around paying anyway!"
I'm having a bit of fun, and alas, there is truth to each argument, but do we need to apply knee-jerk ideology to every problem? Corporate taxes are a funny thing, made more complicated by the Supreme Court's "Citizen's United" ruling that gave corporations "life" - they are people too. So in my thinking, since I am taxed as an individual, the argument that Corporations just pass along the tax to the people that buy their products doesn't hold water anymore. Corporate boards are made up of people who get an extra income depending on how the stock price does, and stockholders like myself also benefit from the stock prices directly. Hopefully the workers will benefit from a rising stock price, but that's debatable since the price could go up because they have fired some of the workers in order to keep profits, and the stock price, up.
|The Right to Life Movement Just Took a Weird Turn|
So let 's keep it simple. We agree that some sort of tax needs to be applied to corporations because they are people too. That aside, if someone moves abroad to take advantage of better tax laws, they lose their citizenship but also pay a tax on any money made in the US. Fine. But this is where corporations get the shaft from the US tax laws as currently formed: they pay a tax on money made in the US and pay the other country's tax where they've expanded to - fair enough I would say. Here's the trick - the US a few years ago decided to tax the money made abroad AS WELL...making our corporate taxes THE HIGHEST IN THE WORLD. That's not good for anyone.
Now, I'm for squeezing every dime I can from those evil corporate entities making decisions in a Star Chamber to control the universe - but c'mon, this is America! Darth Vader has rights and businesses DO create jobs - and as we found out with the"Free Trade" agreements of the 80s and 90s, if this continues, they can move jobs AND tax dollars to other countries. No matter what Mr. Obama says, capital, per John Locke, Adam Smith and his friend Cardoso, all agree that corporations HAVE NO LOYALTY to any flag (economic patriotism Mr. Lew? Really? Standard Oil used the CIA to help get control over Iran, but I doubt it was to further Western democratic values by assassinating an elected president and supporting a monarchy with a fictitious lineage) .
Capital, in the form of rational thought of humans, will find the best environment to make more capital (it's the beauty and terror of the system as you look at it). So nasty, but smart, little countries like Ireland and the Netherlands have told American Companies, "Hey, we won't tax you at all! We just want the jobs! Come here and be welcome!" It turns out Irish accountants know our tax system better than our legislators...why am I not surprised? And talk about a nimble government - they went from being a case study for a nation with too much debt, to a case study in recovery and doing what needs to be done for their long-term security.
But, What?! No taxes on a corporation? You mean, you would rather have the jobs, with no income tax and just tax individuals on their consumption? Why...that's UN-AMERRRICAN! "Of course", say the Irish and the Dutch, "we're the Irish and Dutch and don't give a fig about ideology. We just want the jobs that you, apparently, do not need. The taxes from consumption related to a higher income will do us just fine."
Company after company, most notably Apple, are not paying ANY taxes by re-incorporating their businesses overseas where this form of "tax inversion" opportunity exists (some Caribbean countries are now home to some of the largest companies in the world). Seriously speaking, I'm not actually a fan of taxing corporations as in truth, they ARE NOT people. They are vehicles for enterprising individuals to invest in risk once a small company decides to grow to into a larger company - using the money from stockholders to advance it's interests. We need to tax those individuals, whether they make money from a 5% CD or from trading stocks, whether working a $14 hour job or a $200 an hour job as well - tax them on their consumption.
We need a consumption tax that doesn't care how you make your money or how much you have - only that if you buy a huge house on the Outer Banks of North Carolina one will pay more tax on that purchase than if you buy a modular home on the edge of a corn field in Iowa. If one buys a Lamborghini or a Fusion, there will be a difference in what you pay in tax depending on how big the sale.
This is even different that Steve Forbes' notion of a "flat tax", because I don't care if you are hermit gazillionaire waiting for the Apocalypse in a cave with all his money in gold (what he will buy with all that gold is another question...I'd rather eat popcorn during an apocalypse), encouraging people to save for a rainy day or retirement is always a good thing.
So what do we have, then? No IRS for one. Both the Left and the Right would like to see THAT, but I'm sure that the accounting community may not like the idea of a simplified tax code for individuals and companies, but I think we could offer some kind of temporary assistance for them to transition into another field, say, farming pot?
Seriously, we would have a simpler and more transparent tax regime where an increase in taxes is immediately felt by all. I'm glad that the White House and Congress have woken up to threat to our economy posed by our demented tax system only when it affected the income of the government and not the jobs lost from this gaping loophole . But the president's idea to close the "inversion loophole" is only a band aid to the overall problem of corporate tax reform, and makes it punitive as well - punitive in the sense of making it retroactive to May, serving to unwind all those deals made prior to the legislation, and unfair to those who were simply doing what was in the best interest of their companies in an increasingly competitive global environment.
If we want to create more jobs and attract more companies, lowering or getting rid of the corporate tax is something Democrats and the Left should look at through different lenses - we get that corporations are not people, but only people should be taxed and taxed on what they consume, not what they produce. Mr. Obama doesn't need another "election issue" to rail against corporate America, he needs to look at this as an opportunity to open the gates for companies to access our talent and our increasingly cheaper energy. I don't see President Obama using this issue in a positive way at this point though, he's too caught up in the insidious partisan game that kills the idea of any legislation by making it a campaign issue rather than policy initiative. I am tired of waiting for another election Mr. Obama - and I know some in the GOP who don't want to accomplish anything while this president remains in office.
This is yet another opportunity that the Congress and the president will not fail to miss.