http://www.politico.com/magazine/story/2014/08/warren-buffett-betrays-america-110404.html#.U_8qTGMjDiFWarren Buffett Betrays America
By RICH LOWRY
August 27, 2014
It must have been a bitter moment for President Barack Obama when he got the news that his favorite economic guru not only doesn’t like paying taxes but hates America.
Warren Buffett, whose eponymous rule was a staple of Obama’s 2012 reelection campaign, is underwriting Burger King’s proposed move to Canada that the left is denouncing as practically the most dastardly plot since the Rosenbergs helped the Soviets get the atomic bomb.
Burger King is acquiring the Canadian coffee and doughnuts chain Tim Hortons in what is called a “corporate inversion.” At least that’s the technical term for it. Obama and the left prefer to call it by names usually reserved for spies and AWOL soldiers before they get a last cigarette and a blindfold.
The practice of corporate inversion, or relocating overseas to avoid the burden of U.S. taxes, offends the president’s sense of “economic patriotism,” as he put it in a speech a few weeks ago. He referred to firms that make this move as “corporate deserters” taking advantage of an “unpatriotic tax loophole.”
Sen. Bernie Sanders, the socialist from Vermont, says companies like Burger King are betraying America’s veterans, and “have absolutely no loyalty to the people of the United States and our government.” Sen. Sherrod Brown, a Democrat from Ohio, has called for a boycott. Online petitions are targeting the chain for its rank abandonment of the United States.
This outpouring of patriotic fervor is something to behold, especially from the same sort of people who used to think expecting a politician to wear a flag lapel pin was a crudely nationalistic imposition.
The left almost universally scorns the idea that a closely held family business might have religious motivations — and was outraged by the Supreme Court’s Hobby Lobby decision for this reason — yet believes that enormous globe-bestriding corporations should have patriotic feelings.
Burger King is owned, by the way, by a Brazilian private equity firm. Its Brazilian patriotism should be in doubt, too, since it showed no sign of sinking into a months-long funk after Germany crushed Brazil in the World Cup semifinal.
In most other contexts, Obama is a proud “citizen of the world.”
Except when it come to taxing businesses. Then, he is transformed into the Giuseppe Garibaldi of American progressivism. For him, patriotism is the last refuge of the taxman.
It should give him and his allies pause that Canada — boring, socialistic Canada — is a tax haven compared to the United States. How did that happen?
We now have a corporate tax system that combines the highest nominal rate in the developed world, at 35 percent, with loopholes that benefit special interests and the politically connected. Two Obama-appointed commissions have suggested major reform. On top of this, the U.S. — in a rarity for the developed world — imposes its tax rate on overseas earnings.
It is this latter factor that, as Matt Levine of Bloomberg View explains, was probably decisive. As he writes, the thought process is, “If we’re incorporated in the U.S., we’ll pay 35 percent taxes on our income in the U.S. and Canada and Mexico and Ireland and Bermuda and the Cayman Islands, but if we’re incorporated in Canada, we’ll pay 35 percent on our income in the U.S. but 15 percent in Canada and 30 percent in Mexico and 12.5 percent in Ireland and zero percent in Bermuda and zero percent in the Cayman Islands.”
Burger King says it is making a purely business decision, and it is true that the merger makes sense on the merits outside of any tax considerations.
But Burger King could have made exactly the same business decision and kept its headquarters in Miami. For that matter, it could move its headquarters to New York City and pay higher taxes still, in an awe-inspiring act of patriotic commitment.
It is not that Burger King is “shirking” on taxes on its U.S. business through its move. It will have to pay U.S. rates on that regardless. It is avoiding paying the high U.S. taxes on its overseas business, and avoiding what would in effect be a tax increase for Tim Hortons by making it subject to the U.S. system.
If this seems unscrupulous, consider the wisdom of the Sage of Omaha, Obama’s go-to economic mascot, whom he has used many a time to make arguments from authority.
Despite his support for the “Buffett rule,” which would impose a 30 percent minimum tax rate on the wealthy, Warren Buffett has no use for taxes himself and will undertake any lawful expedient to avoid them.
“I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe,” he told Fortune magazine earlier this year. He was emphatic: “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate.”
So it shouldn’t be a surprise that he evidently has no compunction about helping to finance a deal widely derided for minimizing Burger King’s taxes.
Despite all the yowling and patriotic chest-beating, our corporate tax system isn’t the Declaration of Independence. It isn’t Yosemite Park or the Golden Gate Bridge. It isn’t the Four Freedoms or the GI Bill. It is an ungainly, politicized disgrace that is a burden on American business.
The best way to keep American companies from wanting to flee it is simply to reform it. It’s either that, or try Warren Buffett for treason.
