Wednesday, July 16, 2014

Can't force patriotism...

So what happens if Walgreen relocates to tax-friendlier Switzerland? Well, it'll obviously save a few bucks in taxes, but not on profits it earns in the U.S. Those profits will yet be exposed to the highest corporate tax rate on the planet. Of course, that said, it'll exploit every opportunity to shift expenses, etc., around in a manner that would take full tax advantage of its new domicile.

The net effect, if Treasury Secretary Jack Lew doesn't get his way (he's pushing for retroactive measures that would put a stop to such venturing), would be less money to the Treasury and more in the coffers of a growing global company that does 70% of its business in the U.S. I.e., more capital to expand---here and abroad---serving customers, expanding economies, creating jobs and growing fortunes.

Lew, in a letter to Dave Camp, the Republican chairman of the tax-writing House Ways and Means Committee, wrote:
Congress should enact legislation immediately . . . to shut down this abuse of our tax system. What we need as a nation is a new sense of economic patriotism, where we all rise and fall together.

I don't suspect that "a new sense of economic patriotism" will be engendered by force. Walgreen, for example, owes its loyalty to its shareholders, whom it serves best by serving best its customers and employees. As for rising and falling: perhaps as more companies pursue rising profits through tax inversion we'll at last see U.S. corporate tax rates begin to fall.

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