Furious--Inversion-Header We’ll start this month’s Furious with wise words from Abraham Lincoln. “How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn’t make it a leg.” Why this quote? Because this month, we’re steamed about people trying to cover an ugly reality with a meaningless word. We have an aversion to this diversion, so this month we’ll give you an immersion into the assertion they make to hide their perversion. It’s an exertion of distortion, a cheap and tawdry conversion, a contortion used as coercion to hide the desertion of the proper dispersion of their responsibility. Please join us on our excursion into evasion, as we take you on a tour of…

INVERSIONS

What is an inversion?

An Inversion is a paperwork trick that allows corporations to avoid US taxes. The US-based corporation buys another company in a foreign (more tax-friendly) country, then moves its official corporate headquarters to the new company. Nothing else changes; not the physical operations, not the management. Nothing changes except the mailing address and the tax liability.

Where did inversions come from?

8/27/14 update- BK is getting flack about their Canadian inversion. “Hold the pickle, hold the lettuce, tax inversions DO upset us!”

Remember the scandal of the single building in Grand Cayman that was the official tax home for 18,857 companies? In 2004 Congress wrote a law to address that. Unfortunately the law has a loophole in Title 26, subtitle F, Chapter 80, Subchapter C, section 7874 that allows companies to do exactly what the law was intended to prevent. Oops. Oh well, whatcha gonna do?

Why would anyone use this cheap trick to evade taxes?

Greed. No, seriously. No person wants to pay more than they have to in taxes, and corporate people are no different from human people in that respect. They just have no counterbalancing ethical sense that might tell them they should participate in supporting the society they benefit from. These “people” have the power to avoid things human people consider obligations, and they use it. Human people call that greed.

Doesn’t the US have the highest corporate tax rate in the world?

No, but we’re pretty darn close. On a list of global tax rates for 145 countries our corporate tax rate is 40%, but as of 2014 the United Arab Emirates had a 55% rate. (In all fairness they were the only country higher than the US). Corporate tax rates vary by source; some sources peg our rate at 35%, and some at 39% including state and local taxes. However, all these numbers all these are numbers for the official tax rate while the effective tax rate is far lower. Estimates for the effective rate for corporations also vary widely but most estimates range around 10-16%, around the bottom 20% worldwide. Of course, that doesn’t give an accurate picture, either. Many corporations pay 0%, and some ‘pay’ a negative rate.

Who cares if a corporation slimes its way out of a few tax dollars?

Anyone else who pays taxes to support civilization in the US. In 1934, individuals and corporations paid roughly the same percentage of Federal revenues through their taxes. In 2011 the share had changed to 47.3% for individuals and 7.8% for corporations. Money has to come from somewhere, and governments get their money through taxes. If corporate ‘people’ aren’t paying it then human people are.

What can human people do about this?

Congress has the power to fix this loophole, but they have shown no interest in doing so. President Obama may have the power to close the loophole under his Executive Powers, but there may be problems with that as well. For now, public knowledge about the issue and public pressure on corporate boards may be most effective cure. Walgreens was preparing to move to Ireland to execute an inversion until 300,000 people signed an online petition against it. They changed their mind.

Gosh, I’m still not Furious. Can you tell me anything else to make me a little more livid?

Of course. Here’s just a few articles to get you started. Some were sources for our article, and others are an opportunity to go even deeper into the sewer on your own. Have fun!