Paul L. Caron

Friday, April 15, 2016

White House Infographic On Inversions: You Don't Get To Pick Your Tax Rate. Neither Should Corporations.

White House Infographic on Inversions:

Inversions — or tax maneuvers that reward U.S. corporations that declare themselves overseas residents to avoid paying taxes in America — have drawn the ire of many Americans as an example of an unfair corporate tax loophole. The Treasury Department took another step to limit inversions. Get the facts below, and then pass this on.

White House

National Review: White House Puts Out Misleading Infographic on Corporate Inversions, by Veronique de Rugy (George Mason):

This is both a terrible title and a terrible pitch to taxpayers. ... Why can’t I choose my tax rate, Uncle Sam? You think it is okay for me to be trapped in a high tax system? But then there is, of course, the fact is that people actually do make decisions in order to minimize their tax rates such as moving to lower-rate states — ask retirees if there is any tax component to the decision to move to Florida as opposed to staying in New York. ...

The same is true of corporations. Many of them have to resort to inversions in order to avoid the penalty imposed abroad by our punishing corporate income-tax system. Its the tax high rate and worldwide tax structure that is driving U.S. corporations to renounce the equivalent of the their U.S. citizenship by incorporating in a foreign country. The White House knows that and, in fact, it has in the past called for a reform of the corporate tax system. ...

The administration’s plan is basically to do nothing to fix the underlying reasons behind inversions, continue to punish companies as if doing so will have no consequences, and spend more money. However, if I were the administration, I wouldn’t quite spend the money yet. As long as the administration refuses to reform the corporate income-tax system, companies will continue to invert or find ways around the system.

New York Times:  Corporate Tactics to Avoid Taxes, by Reuven Avi-Yonah (Michigan):

The economics literature shows that the top American and top foreign multinationals face similar overall effective tax rates. There is no competitive disadvantage to American multinationals under current law. Inversions are driven by their desire to reduce their effective tax rate to single digits without changing their business operations, and the Obama administration was perfectly justified in trying to block them.

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On the map, it appears that the President considers the Bahamas part of the US?

Posted by: Jeff | Apr 15, 2016 8:42:28 AM