A favorite argument among government bureaucrats is that corporations aren’t people. Tell that to the employees who put in at least 40 hours a week to keep a company profitable in hopes that there will be a raise or bonus come year end.
But when government sees companies as nothing more than a name, employees suffer. Such is what is happening to American workers. Taxes on American corporations are the highest in the developed world. When companies have high taxes, there is less money for expansion, hiring, to invest in employees and pay shareholders.
Now, a flood of American companies have discovered a way out of paying the highest corporate tax rate in the developed world — 39.1 percent in state and federal taxes. And that doesn’t include the burden of taxes and penalties levied by the Affordable Care Act and other regulations of the past six years.
Dozens of U.S. corporations are taking their headquarters offshore or merging with foreign businesses, primarily in Europe, to reduce their tax burden.
This has President Obama branding them unpatriotic.
What is unpatriotic is taxing companies so much that they are forced to flee the United States. Government should not feel entitled to take so much revenue that it harms business or forces them to shop for a more welcoming place to do business.
U.S. Treasury Secretary Jack Lew has called on Congress to close a loophole in federal tax law that allows these so-called “inversions” or the ability of U.S.-based, multi-national companies to combine with a foreign company and reorganize in a country with a lower tax rate while still operating here.
True patriotism would be for Obama to lead Congress to corporate tax reform so we can retain and attract new business to the United States. We now have a global marketplace and companies will always search for the most attractive place to conduct business, particularly when it comes to taxes.
The Congressional Research Service says that about 50 American companies, many in the health care sector, have recently combined with offshore business in places such as Ireland, the Netherlands and Great Britain to save billions of dollars in corporate taxes.
In recent weeks, Pfizer has attempted to purchase AstraZeneca based in the United Kingdom to reduce its tax rate to 21 percent. Walgreen Co., the nation’s largest drugstore chain, is considering the purchase of a European drugstore chain to relocate its headquarters to Switzerland.
KPMG reports that Switzerland, one of the most vibrant economies in Europe, has a corporate tax rate of 17.9 percent. Many European nations have slashed their corporate tax rate, some as much as 30 percentage points, over the last 20 years.
The Economic Index of Freedom published annually by the Heritage Foundation and the Wall Street Journal ranked the United States No. 12 in the world for economic freedom in 2014 with Hong Kong, Singapore, Australia and Switzerland at the top of the list. Our score has dropped each of the past seven years, primarily due to fiscal policy and increasing regulatory burdens, according to the authors of the index.
Closer to home, North Fulton has been an attractive place to do business and is fortunate to have three Fortune 500 companies headquartered here: UPS, Newell Rubbermaid and First Data Corp. Several Fortune 1000 companies are headquartered in North Fulton as well. Think of how many more we could attract with corporate tax cuts.
If our leaders in Washington felt as passionate about sparking the economy as they do in taxing companies, then foreign companies would be searching for their passports – looking to move to American shores and create much-needed jobs and investment.
Burkhalter is a senior strategic advisor and independent consultant in the National Government Affairs practice of McKenna Long & Aldridge LLP. He also leads the firm’s public affairs and economic development initiatives in the United Kingdom. Burkhalter is the former speaker of the House and speaker pro tempore who spent 18 years representing Johns Creek in the Georgia General Assembly.