Reply to Ronald Dixon on Corporate Tax Inversions

Ronald Dixon, columnist for the Mn Daily, is out with a new Piece discussing corporate tax inversions. I've tried twice now to post my reply on the Mn Daily website, but they won't accept it. Anyways, here it is:

It's a gold mine. Thank you, Ronald.

I'll begin with your first pronouncement:

"After fostering their business in an environment that allows them to thrive..."

Wait, isn't that why they're inverting their businesses in the first place? To be "in an environment that allows them to thrive"? If it were so great here, why would they leave? The reality is, these companies thrived IN SPITE OF the burdensome regulations put upon them by Government.

...[C]ompanies like Medtronic are ignoring their civic duty and dodging, in aggregate, billions of dollars annually in taxes."

Actually, corporations have a duty to their shareholders. That duty is to maximize profits. The fact that the Federal Government (and some states) "receive" tax benefits from this activity, is a by-product. They are not in business to "pay" taxes.

"Republicans have blamed this phenomenon on America’s allegedly high corporate taxes."

Way to give yourself away as a complete partisan. "Allegedly" we have the highest corporate tax rate in the developed world. Facts are not red or blue. Some countries are actually cutting their corporate taxes to attract businesses. Are they complete morons?

 "When we consider that corporate profits are at historically high levels..."

How are these profits so high? Could it be the federal reserve's historically low interest rate policy, as well as three rounds of quantitative easing? When interest rates go up, the game is over, and so are the profits. Even if everything else stayed the same, on paper, profits would go down, due to the higher cost of debt and a higher discount on asset prices.

Also, it's foolish to look at corporate profits in aggregate and conclude that government should restrict the behavior of consenting adults. Not all corporations are making record profits, and many who are, are only doing so because of government protections and subsidies. 

"... [W]e have reached Gilded Age-degrees of income inequality..."

Was 1929 the gilded ages? http://piketty.pse.ens.fr/files/capital21c/en/pdf/F0.I.1.pdf

 "...[T]rying to solve this problem by further pampering the rich will only exacerbate income disparities and further drive their disproportionate influence in politics and the economy."

So now "pamper" means: to not steal from. Got it. How would it exacerbate income disparities? What if they take the money they saved on taxes and invest it in new production?

"Alternatively, there are two solutions that will require companies to pay their fair share of taxes."

"Fair share." That's rich (no pun intended). What about the people who literally pay no taxes, and actually consume much of the recourses taxed away from productive individuals? Are they paying their "fair share"? 

"First, Congress should act to close the tax loophole that allows these companies to claim foreign status, whereby enjoying all of the benefits of operating domestically while dodging the tax costs. A business should be unable to have its cake and eat it too."

You've got it backwards. It's the government that is trying to have someone's cake and eat it too. 

These corporations still pay taxes on the income they make in America. The only difference is, the money they make abroad is now only taxed by the country it was made in. They no longer have to pay Uncle Sam for the money they make outside the US. And why should they? Even if we accept your premises, it doesn't follow that they should give the government a cut for the money made in other countries.

"Second, we should follow the advice of former Secretary of Labor Robert Reich and treat all income made in the U.S., whether it’s from domestic or international companies, the exact same, especially in an era when a business’s nationality has become blurred and ultimately meaningless in the 21st century."

If I'm reading Reich correctly, his solution would have the exact same effect as the corporate inversion. The corporations would pay taxes on what they make here, and not on what they make abroad.

Bottom line is, corporate inversions are actually good for the economy. Many U.S. corporations have a ton of cash sitting outside the country, because to repatriate it would mean paying almost 40% tax. It's much cheaper for them to just borrow the money they need for short-term domestic investment. So corporations are forced to hold cash or invest those foreign profits abroad. With an inversion, the corporation can bring that money back to the U.S., and invest. It's really the federal government holding the money hostage. They won't let the money into the country, unless they get their cut.

The most important point you are missing, though, Ron, is that corporations don't pay taxes. People do. The corporation is like a middle man. 

Think about it.  If that money didn't go to the government, where would it go? Either the corporations workers, customers, or shareholders (most likely a combination; it would be different for every business, depending on the specific market conditions they face).

What we need to do is abolish the corporate tax; America will become a Mecca for business again. Remember, Ron, more people bidding for labor equals higher paying jobs.