Wednesday, July 30, 2014

A Taxing Experience

In the most recent Weekly Address from the White House, President Obama addressed the issue of corporate tax loopholes.

Obama opens his address by noting the extent of his economic recovery:

"Hi, everybody. Our businesses have now added nearly 10 million new jobs over the past 52 months. The unemployment rate is at its lowest point since September 2008 – the fastest one-year drop in nearly 30 years. 401(k)s are growing, fewer homes are underwater, and for the first time in more than a decade, business leaders around the world have declared that the world’s number one place to invest isn’t China; it’s the United States of America – and our lead is growing."

He notes a problem:

"But there’s another trend that threatens to undermine the progress you’ve helped make. Even as corporate profits are as high as ever, a small but growing group of big corporations are fleeing the country to get out of paying taxes. They’re keeping most of their business inside the United States, but they’re basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share."

And he is right. Chiefly through a practice called inversion, many large companies move overseas to a more hospitable environment in respect to taxes. And he is right to compare this practice to renouncing citizenship. The directors of many large corporations appear more beholden to their company and its stockholders than to their own country. We have witnessed this already in the flight of companies to China in order to utilize a more docile and less demanding work force. The leader in this trend has been Walmart, which severs business transactions with American electronics and textile firms that pay more than $10 per hour in favor of Chinese based suppliers who pay their labor about $1.75 per hour. (I am still waiting for a congressman with the right amount of snark to give a tongue-in-cheek speech lamenting that American companies can no longer exploit their workers and so have to forced to move the communist workers' paradise of China in order to realized all the surplus value profit off the labor of the working class.)

As usual, however, the President stumbles over himself. 

After demanding that these American companies pay "their fair share," he notes the unfairness of American tax law. 

The best way to level the playing field is through tax reform that lowers the corporate tax rate, closes wasteful loopholes, and simplifies the tax code for everybody. But stopping companies from renouncing their citizenship just to get out of paying their fair share of taxes is something that cannot wait. That’s why, in my budget earlier this year, I proposed closing this unpatriotic tax loophole for good. Democrats in Congress have advanced proposals that would do the same thing. A couple Republicans have indicated they want to address this too, and I hope more join us.

The President claims that such reforms cannot wait. Then why has he waited for six years?

Yes, you saw it coming. Its Taxman . . .

No comments: