Last week, fast food giant Burger King swallowed up Tim Horton’s, a chain of donut and coffee stores popular throughout Canada, and growing in strength throughout the northeastern United States. one of the main reasons Burger King purchased the Canadian company was so that they could move their operations to Canada and save money on taxes, because apparently Canadian corporate taxes are a bit lower.
A few weeks earlier, Walgreens, one of the largest drug store chains in he country, purchased a smaller British chain, and considered basing their country inside the UK, to — do I even have to say it? — save money on taxes, primarily on international sales.
In both cases, tremendous pressure from the buying public caused their corporate honchos to switch gears and “do the right thing,” maintaining their headquarters in the US. we have a serious problem. Sure, we can play whack-a-mole on corporations that do something like this on a grand scale, and coerce them into keeping their presence here, thus keeping the tax base intact, but really; what sense does that make? The fact that they even had a choice to make points up a major problem with corporate tax policy in this country.
This is an excellent piece detailing the problem with black-and-white thinking when it comes to tax policy.
We need a sensible corporate tax system that balances he country’s needs with the needs of corporations to make a profit and reinvest in their own companies. As author Josh Barro points out, you can’t expect corporations – who are not people – to be patriotic, especially those that operate all over the world. a corporation’s job is to make money for its stockholders. Its only responsibility is to stockholders, at least when it comes to financial matters. No, I don’t expect corporations to do anything completely unpatriotic, like sell arms to Syria, or knives to ISIL. But the concept of taxes as patriotism is a somewhat controversial one; it’s not really as cut and dried as many of you would like to believe.
Burger King’s decision to buy up Tim Horton’s was a business decision that actually makes a lot of sense. Burger King is floundering in the market for crappy fast food, and Tim Horton’s was dominating their market in Canada, and they were making huge inroads in the United States as well. Put simply, Tim Horton’s makes money and Burger King makes Whoppers. Walgreen’s is making a lot of money and they’re putting stores everywhere they can find an empty street corner. There is a good chance they are running out of streetcorners in the United States, and expanding into other countries just makes good business sense. The decision by both companies to forego inversion is, at best, a temporary measure. You know damn well that both companies will change their minds at some point in the future, when no one is looking closely. Worse, the decision to not shift headquarters overseas is the exception, not the rule.
At some point, we have to acknowledge the fact that our corporate tax code is not competitive and we have to change it. That means aligning it with the tax codes in other countries. That may mean treating sales outside of the US differently than sales inside the US, and lowering tax rates while simultaneously providing fewer loopholes. Put simply, we need a new corporate tax code; one that balances the country’s needs with the needs of corporations. I know, that concept probably sticks in the throats of those who hate corporations, but at some point someone has to look at this with common sense. Reducing corporate taxes somewhat to match what other countries are collecting makes a lot more sense than doing nothing and watching thousands of corporations stream overseas in order to save a few bucks.
Of course, we’ll never get a reasonable tax code with Republicans in charge. The current GOP won’t actually be happy until corporate tax rates are 0%, and they certainly wouldn’t actually care if every US company moved overseas to get their tax bill lower. When Democrats were in charge, much of our tax code made sense. We can’t go back to the old tax code, because times have changed, and we have to compete. But we can still create one that makes sense in the current competitive climate. We just can’t do it with the GOP in charge.
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