Democrats and Tax…Inversions

Walgreen Co looked hard at doing one of these—buying an overseas company and then reincorporating in that overseas jurisdiction to lower its US tax bill, a bill flowing from a world-leading 35% tax rate. Indeed, Barclay’s had estimated that Walgreen would save $797 million a year in taxes if it carried through. They were brow-beaten out of the move, though, by the Federal government.

Now, Senator Chuck Schumer (D, NY) and his Senate cronies are looking at getting in the way of inversions generally.

The proposal…would restrict the practice of earnings stripping, where US companies borrow money from overseas parents and deduct the interest expense on US taxes.

Other proposals look at blocking outright such inversions.

This is an area where the supposedly low-tax Republican Party isn’t helping. House Republicans don’t want a (short-term) measure to interfere with inversions, but for the wrong reason: it would make U.S. companies vulnerable to a foreign takeover.

This is the Republicans’ own error. They shouldn’t be cracking down on inversions at all; they should be looking to make them economically useless by lowering corporate tax rates, instead. If we had competitive or better business tax rates (Ireland’s, for instance, is 12.5%), foreign companies would be looking to come here with their jobs, their business, their innovation, instead of our companies looking to go there.

Of course Senate Democrats (and their House colleagues) aren’t moving to lower business tax rates as a means of reducing the rate of inversion, either, as tax reductions are inconceivable to Democrats.

One thought on “Democrats and Tax…Inversions

  1. Agree – attack the source of the problem (the tax code itself). Every tax on corporations is ultimately paid by the purchasers of their products – which makes corporate taxes consumptions taxes.

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