Inversions

The issue of corporate inversions, where American companies buy a foreign firm and shift its official base to that country for tax purposes while remaining as American as ever in all other ways in order to avoid paying corporate taxes, is a major problem. President Obama has openly criticized it, calling the CEO’s of these corporations “unpatriotic.” Of course, CEOs are only patriotic to their shareholders, which we would all be better off understanding. But how do we stop this? The problem is that the U.S. has a high corporate tax rate compared to other industrialized nations, but one that is full of loopholes and one is that is replacing our very low tax rate on the wealthy. So it makes all the sense in the world to lower the corporate tax rate if it will keep these companies in the U.S. and raise more money in the end. That’s what Michael Hitlzik proposes. My worry is that lowering the corporate tax rate alone with just lower the revenue the government brings in from corporations unless it is paired with other measures to increase revenue from the wealthy through higher income and capital gains taxes. But given that those are extremely unlikely to pass, I don’t want to then just reward corporations for fleeing the U.S. But it’s a sticky situation without easy answers.