American Elephants

The Treasury Department could act as early as next week to stop companies from moving their headquarters out of the United States for tax purposes. “Economic Patriotism.” Where is these companies’ economic patriotism? Representative Sander Levin, ranking Democrat on the House Ways and Means Committee, which has jurisdiction over tax issues warned that “They’re preparing to act and they’ll act as soon they are ready.”

Treasury Secretary Jack Lew told Levin on Wednesday that he would not necessarily wait for Congress to go home before he would take unilateral action.  Wonder where he learned that trick?

With his brother Senator Carl Levin, (D-MI) Sander Levin has written legislation to” tighten the rules restricting so-called tax inversions, which are tax maneuvers in which U.S. businesses buy a company in a low-tax country to move their headquarters there.”

It’s the Burger King deal with Tim Horton’s Coffee Shops, and the move of their corporate headquarters to Canada, where total tax costs will be 46.4 percent lower, that has driven Democrats to start writing more confiscatory laws immediately. Burger King will continue to pay taxes on business done in the United States.

The Obama administration and Congressional Democrats have raised the alarm over possible consequences to the U.S. tax base.  Republicans  have been suggesting for some time that they should lower or eliminate the corporate tax, because the U.S. corporate tax is not only the highest in the industrial world, but the U.S. also taxes income earned abroad —which no other country does.

There is a long history going back to Martin Van Buren, of administrations that helped an economy to recover from a recession by cutting taxes. Cutting taxes allows companies more confidence in the future, and they are more apt to grow, expand, and hire — creating a better business climate— which in turn grows the economy.  Canada’s corporate tax was 43 percent in 2000, and is 26 percent today, and their economy is booming.

Democrats are fundamentally unable to grasp the idea that cutting taxes could  produce more income and make the economy grow. It simply does not compute. Treasury Secretary Jack Lew trained as a lawyer, but has simply moved through the corridors of government as a bureaucrat in one office or another. He got all huffy about the Burger King move, in a video at Bloomberg, mentioning all the advantages the U.S. provides —roads and bridges (you didn’t build that) and infrastructure!

So far as I can tell only 9 companies have actually done a tax inversion. A number have started to and backed out after being threatened.

Speaker John Boehner and Senate Finance Committee ranking member Orrin Hatch have warned that any Treasury measure that would be effective would likely lie beyond Lew’s authority.