Greetings!
I’ve been hearing a new term bouncing around the media lately. Washington’s most recent faux outrage involves “inversion”. Inversion is a process by which a corporation purchases an overseas competitor or partner, transfers its mailing address to the new country, and then magically becomes a “foreign” company for tax purposes. Nothing else changes; not production, personnel, or management, but the corporation’s tax bill drops radically anyway. These Tax Inversions are a new legal loophole promoting Corporate Tax Evasion.
Understandably, no one likes to pay taxes. We all try to keep our bills to a minimum, but most of us also realize we owe something to the society we live in. As Oliver Wendell Holmes said, “Taxes are the price we pay for a civilized society”, so we all have to balance our self-interest with our societal obligation. We may grind our teeth about paying taxes, but we understand their necessity and live with their benefits every day. For US human people, “…the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.” For our corporate brethren the rules are different, and they’re different for a reason. These corporate citizens have the money freedom of speech to buy persuade politicians so it’s no surprise that laws are written in their favor.
Corporations benefit every day from the things taxes provide… the courts that enforce their contracts, the military that protects their trade routes, the police protecting their facilities, the teachers training their workers, and so much more. All this comes with a cost and if the corporations aren’t paying it then we are. 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. In an era when 18 US firms hold 36% of all US wealth but US wages have been stagnant for over a decade, the tax burden is falling increasingly on the humans least able to pay it.
The actuality of this system is bad enough, but it’s even more offensive when politicians try to cover up the reality with pablum like “inversion”. Go down the list… “Clean Skies” increased pollution, “Defense of Marriage” attacked marriage, “No Child Left Behind” left millions of children behind, the “Patriot” act destroyed everything that a patriot could love about America. Beware… the more a name promises then the less it is likely to deliver.
Our News To Make You Furious this month is all about Inversions. You’ll find info on the process, the technicalities, the history, and the fixes. But through it all, please don’t fall for the diversion! It’s not “inversion”… it’s “evasion”!
Make a great day,
