American Corporations Too Busy Cheating Taxpayers to Actually Produce Good Products

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http://www.alternet.org/american-corporations-too-busy-cheating-taxpayers-actually-produce-good-products




Treasury Secretary Jack Lew’s announcement of a series of new rules to reduce the financial incentives behind corporate inversions tells you a lot about where our economy sits right now. Productivity and growth scarcely matter as much as what I would call the “gimmick economy.” Companies now spend an inordinate amount of time figuring out not how to beat their competition, but how to prosper from tricks and loopholes their accountants find buried in the law. Every corporation has become, at the root, a financial company, adept at moving money around on paper and little else. And the government has to scramble in a never-ending race to keep up with the innovations.

To start with, understand what a corporate inversion is: an on-paper transaction involving a merger between a larger U.S. company and a smaller counterpart abroad. No worker moves overseas as a result of the merger. No production facilities or corporate offices transfer. Instead, the address on the corporate masthead changes from America to the low-tax alternative where the overseas company is headquartered. It’s a completely fictitious pretension, no different than if I used a handicapped placard to park in good spots everywhere I went, and then limped around after getting out of the car.

CEOs claim that America’s burdensome 35 percent corporate tax rate forces them to be creative, and in absence of fundamental tax reform, they must reluctantly renounce their corporate citizenship to stay competitive with their overseas counterparts. First of all, in actuality, corporate taxes are not much of a burden; thanks to all the loopholes and credits, corporations pay on average a 12.6 percent tax rate, according to a 2013 Government Accountability Office paper. Second, by that logic, if I think a bank vault unfairly denies me access to lots of money, I should be allowed to use creative strategies to bust it open.

In reality, corporations’ reasons to invert have nothing to do with staying competitive, as USC law professor Ed Kleinbard explained in a recent paper. It’s merely about preventing the unintended consequences of one gimmick, by loading up on another gimmick.

[DetlefK]

1. Reminds me of the Futurama-episode with the 1980s-banker taking over Planet Express.

"The company is flourishing!"
"We haven't had a single delivery since this guy took over."
"The image is all that counts!"