Recently, I wrote that if corporations are people, they need to be better Americans. (blog 8/15/14) They need to pay their taxes, for example. Allan Sloan’s new article in Fortune explains one way some companies are shirking their duty. (“Positively Un-American,” by Allan Sloan, Fortune, July 21, 2014, pg. 70.)
The strategy they use is called an “inversion.” Inversions come in two flavors. 1) An American company buys a foreign one then moves its headquarters abroad so it can shed its U.S. tax obligations. 2) A private American corporation – one not publically traded on a stock exchange – spins off part of its enterprise. Next it moves that branch to a foreign country where the tax burden is lower and takes it public. When they do business in the United States, they avoid paying taxes because, technically, the spin-off has never been in America. (Ibid, pg. 64)
Corporations defend inversions saying they have a mandate is to maximize value for their shareholders. Tax avoidance is one way to enhance value. Meanwhile these companies do business with our government through a number of lucrative contracts. According to the U. S. treasury, if the trend continues, our government will lose approximately 20 billion dollars over the next 20 years.
In the past, businesses that used inversions to dodge taxes couldn’t be listed on the Stand and Poor Stock Exchange (S&P) . But the policy changed 4 years ago because the exchange feared their competitors wouldn’t be so finicky. (Ibid pg. 66) Today there are 28 “non-American/ American” companies trading on the S&P.
The 20 billion dollars our country is projected to lose would, as Sloan points out, be “enough to cover what Uncle Sam spends on programs to help homeless veterans and to conduct research to create better prosthetic arms and legs for our wounded warriors.” (Ibid. pg 68.) Senator Carl Levin has offered proposals to close some of these loopholes but they haven’t gone anywhere in Congress. It looks as if the American taxpayer will be asked to make up the loss.
When there is an income tax, the just man will pay more and the unjust less on the same amount of income. (Plato)
Courtesy of www.ramblingbarbara.com
