Perry Glasser

Archive for July, 2014|Monthly archive page

INVERSIONS AND OTHER DECEITS

In Business, Economy, EDUCATION, Political Economy, Politics on July 26, 2014 at 10:47 am

Inversions are the corporate strategy to avoid taxes by relocating a firm out of the United States. Inversions are under attack by the Left. The Left deems inversions unpatriotic, an evasion of civic duty, and yet another way for the rich of paying a fair share of taxes.

Dollar$ avoids partisan politics since valuable nap time is lost by heeding bloated weasels who insist their cohort of gangsters is in some way superior to another cohort of gangsters.  Weasels are weasels and gangsters are gangsters, and that is all we know on earth and all we need to know.

Nevertheless, as a selfless act of education, Dollar$ will venture into these waters.

This Weasel is so terrified of exposure, it is disguises as a  mongoose.

This Weasel is so terrified of exposure, it is disguised as a mongoose.

Despite wars in the Middle East, girls kidnaped for sexual slavery in Africa, and airliners filled with tourists being rocketed out of the skies, somehow the mainstream press has found column inches to devote to “inversions,” the practice of US companies hauling ass to foreign countries to avoid taxes in the land of the free and home of the brave.

This issue is a trial balloon, friends, a test issue to see if populist knee-jerk support can be rallied around a non-issue on the table at least since JFK was president, doubtlessly to be dropped once the next presidential election has installed a new Weasel-in-Chief.

The Problem with Inversions

Corporations are a legal machine designed for profit.  Their leadership, Buccaneers of various stripes, has the fiduciary responsibility to optimize profits. At the moment, corporate taxes in the US are the highest in the world, a confiscatory 35 percent. That tax rate is applied only to money brought to these shores by American companies. Money earned abroad is taxed at various rates in the countries where those profits are earned, but remain untaxed in the US as long as the money stays abroad.

Say you are International Widget, incorporated in Delaware. You make a billion here, a billion there, and a half billion in profit in Lower Slobbovia (with thanks to Al Capp and L’il Abner). Since world demand for widgets is predicted to rise, should you build tour next factory in Michigan or Slobbovia?

If you build in Michigan, you will need to pay union wages, benefits, and obey US regulatory laws that will bring your unit cost per widget sky-high. You will also incur shipping costs to Slobbovia as a cost of sales.

If however you build the new plant in Slobbovia, you will sell just as many widgets at the same price, but for less costs and far higher profits.

Note also that the enlightened Weasels of Slobbovia are avoiding civil unrest by attempting universal employment. Slobbovians for Slobbovia! To induce you to locate the new plant in their  country, they tax profit at a piddling 10 percent.

Buccaneers are a lot of things, but none of them is stupid. Profits are left in Slobbovia, investment goes to Slobbovia, employment rises in Slobbovia, and Slobbovia not only enjoys the fruits of capitalism but begins hesitant steps toward democracy.

The Inversion Reality & The Inversion Fix

In the above section, where you read widget, substitute Ford, or iPhone, or dozens of pharmaceuticals.

Trying to ride recent grumblings about “the rich” to political advantage, some progressives Weasels would have you believe these companies are engaged in morally reprehensible behavior. They suggest patriotism and gratitude should guide corporate activity—the same folks who also argue that corporations should not be granted the same rights as people demand human motives.

They also seem to forget that international business makes the definition of American company impossible to fix.  It’s a global economy, Weasels!  Wake up!

The fix requires Weasels bold enough to suggest a corporate tax rate closer to 15%, one that might induce foreign companies to locate in the US to take advantage of the most stable economy in the world.  US companies might be induced to repatriate profits now lying fallow worldwide. This is a no brainer. Fifteen percent of something is fare better than 35% of nothing.

We need to stop exporting jobs because the simple-minded cannot grasp how business is different from running a household budget.