Burger King, corporate deserter?
Thatís what President Barack Obama would call the fast-food giant now that itís buying Tim Hortons Inc., the Canadian coffee and doughnut chain.
But the epithet is hard to swallow. The $11.4-billion deal announced Tuesday will allow the Miami-based Burger King Worldwide Inc. to slash its United States tax bill by moving its corporate home to a foreign country, a strategy known as inversion. At least 21 companies have announced or completed such deals since the beginning of 2012, according to Bloomberg News. Obama castigated them last month for doing business as usual in the United States while renouncing their citizenship to avoid taxes.
Heís wrong to vilify corporations for legally reducing their tax bills. Corporations exist to make money. Their executives have a fiduciary duty to shareholders to maximize profits. Rather than trying to shame them, the United States can slow inversions by reforming the U.S. tax code to make the strategy less appealing.
The top federal corporate tax rate in the United States is 35 percent. Thatís among the highest in the world, although many corporations actually pay much less and those most successful at exploiting loopholes pay zero. In Canada the top federal tax rate is 15 percent.
Congress should tilt the playing field in our favor. Eliminating the corporate tax would be the best approach, as long as reformers also scrap the lower rate for capital gains and dividends, and tax that income the same as income from work. Cutting the corporate tax rate while closing loopholes would work, too, or enacting a territorial system in which only profits earned in the United States would be taxed by the United States.
Of course, any of that would require Congress to take on contentious tax reform, something it hasnít had the courage to tackle. Until it does, the message to corporations like Burger King is, have it your way.
Notice about comments:
Aiken Standard is pleased to offer readers the enhanced ability to comment on stories. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We ask that you refrain from profanity, hate speech, personal comments and remarks that are off point.