Monday, July 28, 2014


It's funny how everyone gets the same idea at the same time.  The Leader, his almost completely unknown Secretary of the Treasury, Jacob/Jack Lew, the editorial page of the New York Times and the op-ed page in the form of Little Paulie Krugman all decided that this was the day to educate us all about the absolute horrors on inversions--you know, the changing of a corporate domicile to some place over seas in order to improve the tax outlook.  It seems that this avoidance of taxes is simply un-American and un-patriotic and un…well, un-something.

Now when I was growing up tax evasion was a bad thing, indeed it was a crime but avoidance was in the spirit of the good ol' American way.  OK, times have changed and out tax laws are riddled with loop-holes, some so specific--and clearly paid for--that they apply to just one or two corporations.  But that in the broader sense is not the problem.  Our tax code is the problem and whenever someone wishes to have a serious discussion about overhaul, The Leader engages in personal attacks or as in the case of his own commission headed by the Georgia Peach and the Wyoming Wing-Nut who came up with pretty good stuff he ignores it.  Tax reform to him means only greater income distribution methods…more for the Federal government to collect and spend either in theory or in practice, nothing else.

Now the funny thing about all this is that The Leader is pretty much a sports nut or so he would have us believe.  But the one thing about all successful sports teams is that they study their opponents, I mean how many times do we hear coaches tells us of the hours they spend in the "film room"  scouting their opponents?  The Leader, when he comes to world markets seems to think that everyone else in the world is using our play book.  This administration seems to have no idea what the rest of the world is doing and as a consequence gets it's brains beat in every week.

But not so the corporations.  When up against the highest tax rate in the world and the concept of global application  of the same, they vote with their feet.  Now the administration can have that so they send out their apologists for a series of truly stupid remarks designed to appeal only to the lowest common denominator of voter, rather than attacking the problem at it's source.

Let us be honest: it is a sad day when U.S. corporations decide to change their citizenship because their country is unprepared to compete.  But having done so, lets is point out that the  effect on the collection of income to the Treasury is practically nil because all operations that remain in the U.S. and earn income are taxed in exactly the same manner; the real benefit of an inversion accrues only to the so-called overseas operations and their profits which, if they remain off-shore, are not subject to the double taxation of the U.S.  Oh sure, there are fiddles such as loans back into the U.S. operations which can be off-sets to the higher U.S. rates after an inversion, but under the present tax code the IRS has wide discretion in determining whether such loans are merely tax dodges or in the normal course of business.  In the former case the interest deduction would be disallowed and has been.  By the way, when the shoe was on the other foot, American executives stationed overseas in higher taxed locals were allowed to enter into schemes with local banks where by their salary was deposited in the U.S but a local bank would make them a "loan" which surprisingly was easily covered as to principal and interest by the salary--and the exec would be allowed a deduction on the interest.  It was nickels and dimes to the U.S. Treasury but boy, did we train a lot of people in the World of business.  But in those days the Treasury was interested in promoting American business not social engineering.

And so, Little Paulie moralizes, The Times wails and Jacob/Jack writes nonsense in the WSJ.  A new "wedge issue" emerges.  Strikes me as being a hell of a way to run a railroad, then again have you ever seen how well the railroads run in Europe?  Perhaps other things do as well and perhaps we should try to learn just what.

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