Author Topic: 'Inversion' and Economic Patriotism as the Last Refuge of Stupid Pundits and Lazy Politicians  (Read 121 times)

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'Inversion' and Economic Patriotism as the Last Refuge of Stupid Pundits and Lazy Politicians
J.D. Tuccille|Jul. 8, 2014 11:53 am

Unpatriotic American corporations are fleeing the United States for foreign climes in a suddenly headline-grabbing practice called "inversion." It's desertion, damnit. Or as Fortune's Allan Sloan puts it in breathlessly stupid form, "Bigtime companies are moving their 'headquarters' overseas to dodge billions in taxes … that means the rest of us pay their share."

He continues:


    Ah, July! What a great month for those of us who celebrate American exceptionalism. There’s the lead-up to the Fourth, countrywide Independence Day celebrations including my town’s local Revolutionary War reenactment and fireworks, the enjoyable days of high summer, and, for the fortunate, the prospect of some time at the beach.

    Sorry, but this year, July isn’t going to work for me. That’s because of a new kind of American corporate exceptionalism: companies that have decided to desert 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.

    Yes, leaving the country–a process that tax techies call inversion–is perfectly legal. A company does this by reincorporating in a place like Ireland, where the corporate tax rate is 12.5%, compared with 35% in the U.S. Inversion also makes it easier to divert what would normally be U.S. earnings to foreign, lower-tax locales. 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.

It's legal to emigrate? When the bleep did that happen? And you still have access to the old digs' markets? For shame.

Yeah. I was feeling bad about leaving my former fellow New Yorkers holding the bag for that state's mugging-worthy tax take when I split for Arizona. Not. I got out of that abusive relationship, thank you.

I'm not exactly sure what "pay their share" of taxes means, though I hear that particular whine a lot when people and their businesses flee from the U.S. to Singapore, California to Texas, or from Maryland to Pennsylvania. Everybody left behind supposedly has to pick up the remainder of some fixed tab.

But except for extortions of fixed weights of gold and gems imposed by conquerors of antiquity on their prostrate subjects, taxes are rarely set as sums to be divvied among the suffering masses, but rather as percentages of economic activity. If the local powers that be make their digs so unattractive—say, with a corporate tax rate of 35 percent while the competition asks 12.5 percent—there's going to be less economic activity to get a share of.

Not that there would be anything wrong with fleeing a fixed sum.

We see the same phenomenon within the United States, with people migrating from state to state. The migrations appear to be heavily driven by both taxes and respect for personal freedom (politicians can bleep things up in lots of ways, and not all of them involve tax rates).

What's Sloan's solution?

My answer: Fight to fix the tax code, but don’t desert the country. And I define "fiduciary duty" as the obligation to produce the best long-term results for shareholders, not "get the stock price up today." Undermining the finances of the federal government by inverting helps undermine our economy. And that’s a bad thing, in the long run, for companies that do business in America.

Yeah, well. This country was settled by people who "deserted" some place else because things were better here. If the powers that be can't find it in themselves to keep things better, there's no good reason to not desert again—ludicrous appeals to self-sacrificing patriotism notwithstanding.

J.D. Tuccille is managing editor of
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