President Barack Obama says it’s “not fair” and “not right” for U.S. companies to set up overseas to avoid taxes. Except when it benefits him politically.
The president calls these companies “corporate deserters.” He says they are “still using all the services and all the benefits of effectively being a U.S. corporation,” but have “just decided” to go through the “paper exercise” of corporate inversion, in which U.S. companies with foreign subsidiaries can reduce their tax bill by becoming foreign companies with U.S. subsidiaries.
“I think it’s something that would really bother the average American,” he said recently, “the idea that somebody renounces their citizenship but continues to entirely benefit from operating in the United States of America just to avoid paying a whole bunch of taxes.”
Many companies are planning to flee the country because the United States of America has the highest corporate tax rate — 35 percent — in the developed world. It simply makes sense for them to do so. They are obligated to shareholders to be as competitive and profitable as possible.
But this fact hasn’t altered the president’s resolve.
“My attitude is I don’t care if it’s legal — it’s wrong,” he said in July. “You shouldn’t get to call yourself an American company only when you want a handout from American taxpayers.”
He wants to put an end to what he calls an “unpatriotic tax loophole,” perhaps through overreaching executive action.
But his public campaign to stop corporate inversion has masked the fact that his own administration used the same “loophole” to help a multibillion-dollar American company back in 2009.
As part of the auto industry bailout, the Treasury Department spent $1.7 billion in government funds to help Delphi Automotive, a bankrupt Michigan auto parts manufacturer, get in the black by becoming a British company. Executives still run Delphi from Detroit, but, on paper, the company is now headquartered in England, saving it more than $100 million in corporate taxes each year.
That the Obama administration actually practiced what it now publicly condemns is just another example of the president demanding that others do as he says, not as he does. The administration didn’t care about the tax ramifications of Delphi’s move at the time because it was needed to save jobs. Now the president wants to rescind the tax benefits of the very deal it helped facilitate — at the expense of jobs — giving the already less-than-credible administration even less credibility when it comes to tax and economic policy.
It goes without saying that America needs more jobs. A solid first step in putting more Americans back to work would have the Obama administration and Democrats in Washington dial back their attacks on business. Instead of incessantly demonizing the “rich” and companies that employ millions of people — causing more and more companies to want to leave this country — Washington needs to give employers a reason to stay. The United States needs a much lower corporate tax rate as part of a much simpler, smaller tax code. Tax reform would create private-sector jobs.
That would be change (and dollars) we can believe in.