by Dr. Roy Cordato
Senior Economist, Emeritas
It baffles me that corporations like Burger King, that are moving their headquarters out of the United States to avoid a punitive corporate income tax, are being referred to as unpatriotic or, in the words of President Obama, corporate deserters, while politicians that continue to impose this tax system get to play it high and mighty. There is nothing unpatriotic about a company living up to its fiduciary responsibility to its shareholders. What is unpatriotic, i.e., inconsistent with American principles of economic liberty, is the creation of a tax environment that incentivizes companies to look for greener pastures in other countries and attempts by politicians to forcibly stop those companies from doing so. Indeed, as is implicitly pointed out in today’s Washington Examiner, what companies are doing is searching for an economic environment that looks more like one we all should expect from the United State.
[The]…latest wave of inversions…involves companies bidding America adieu not for a tiny, insular tax haven festooned with brass nameplates, but for another industrialized country with a more attractive tax system. Most developed nations have aggressively pursued tax reform over the past 30 years, offering not just low rates but also the benefits of a modern economy and open trade.
Canada, for example, which will be Burger King’s new home once the deal is approved by antitrust regulators, has reduced its combined corporate tax rate from 43 percent to 26 percent over the past 15 years.
This is why when it comes to economic freedom Canada is ranked 6th in the world and the United States is no longer even in the top 10. Freedom is an attractive force, not only for immigrants and their families, but also for companies.