Blue-ribbon corporations are deserting our country "to avoid paying taxes but expect to keep receiving the full array of benefits that being American confers, and that everyone else is paying for," Fortune magazine reports. That's right, Fortune wrote it; not Pravda.
In a scathing article titled "Positively Un-American" by Allan Sloan and published last July with too little fanfare, Fortune denounces "inversion"---the practice of corporations reincorporating in low tax-rate countries as Ireland (12.5%) to escape paying America's 35% tax rate.
"Inversion also makes it easier to divert what would normally be U.S. earnings to foreign, lower-tax locales," Sloan says, adding: "But being legal isn't the same as being right. If a few companies invert, it's irritating but no big deal for our society. But mass inversion is a whole other thing, and that's where we're heading."
In a sidebar titled "10 Top American Corporate Tax Avoiders," Fortune names Carnival of Miami, (Panama and Britain;) XL Group of Stamford, Conn., (Ireland); Eaton of Cleveland, (Ireland); Intersoll Rand of Davidson, N.C., (Bermuda); Perrigo, of Allegan, Mich., (Ireland); Nabors Industries, of Houston, (Bermuda); Garmin of Olathe, Kans., (Switzerland); Invesco of Atlanta, (Bermuda); Allegion, of Carmel, Ind., (Ireland); Actavis of Parsippany, N.J., (Ireland.)
Asked why they incorporated abroad, a number, including Carnival Corp., which operates out of Miami, replied they had never incorporated in the U.S., earning them the dubious distinction of what Sloan calls "never-heres." By Fortune's count, some 60 U.S. firms have chosen the never-here or the inversion route "and others are lining up to leave."
This reminds this reporter of Thomas Jefferson's remark some 200 years ago, that "Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains."
These dodge-em policies threaten "to undermine our tax base, with projected losses in billions" and "to undermine the American public's already shrinking respect for big corporations," Sloan says.
"Inverting a company, which is done in the name of 'shareholder value'---a euphemism for a higher stock price---is way more offensive to me than even the most disgusting (albeit not illegal) tax games that companies like Apple and GE play to siphon earnings out of the U.S. At least those companies remain American".Inverters are deserters."
Sloan points to Medtronic, Inc., a Minnesota multinational medical-device firm "but now proposes to move its nominal headquarters to Ireland by paying a fat premium price to purchase Covidien, itself a faux-Irish firm that is run from Massachusetts except for income-tax paying purposes. For that, it's based in Dublin." He notes that Medtronic keeps $14 billion offshore, "money on which U.S. income tax hasn't been paid."
Congress's Joint Committee on Taxation says that failing to reign in inversions with cost the U.S. Treasury nearly $20 billion over the next decade, a sum Sloan thinks is low-ball "given the looming stampede" to bolt out of the corral.
To remedy these woes, Sloan proposes corporations be required to make public their U.S. taxable income for a given year and how much they owed; plus loophole-tighteners such as the Republican congressional plan to impose a tax of 8.75% a year on cash held offshore and 3.5%a year on other retained offshore earnings.
Oh, and one more suggestion from yours truly: when local governments give incoming corporations tax breaks and other favors to settle in their communities, those breaks should be repaid with interest and with allowance for inflation if the company moves out of the community. Capitalism supposedly is a system where you don't get something for nothing. #