Tag: General Electric

Not Just a War on Tax Inversions, but also a War on the Middle Class

 

shutterstock_374291029Does the US government want to help American business or not? Does the administration want to help middle-income wage earners or not? Does Team Obama want to grow the American economy at its historic 3.5 percent long-term trend or not? Apparently, President Obama’s answer to all three questions is “no.”

Those are the real issues behind the Treasury’s latest militant attack on so-called tax inversions, where a US company merges with a foreign firm in order to take advantage of the foreign firm’s lower corporate tax rate. In this case, the attack is aimed at Pfizer, pending the $160 billion takeover of Allergan. Allergan is based in Ireland, which has a 12.5 percent corporate tax rate. Pfizer is based in New York. So the new combined entity will pay the Irish corporate rate, which is nearly three times less than the 35 percent US federal corporate rate. Obviously, a huge savings.

The answer here is simple: Slash the US corporate tax rate and then the problem goes away. It’s by far the highest of the major countries worldwide. We are not competitive. Canada is 15 percent, China is 25 percent and Europe averages 25 percent. These companies owe it to their shareholders and their work forces to act in a fiduciarily responsible manner. But no, Team Obama wants to wage war against them.