Maybe it’s time to get really tough, my fellow Americans. Without a doubt, someone needs to be creative in coming up with ways to punish those corporations that are bailing on the United States of America — a place where they made their fortunes — and renouncing their citizen responsibility to pay the going tax rate at home.
The tactic is known as “inversion.” American corporations, such as Chiquita Bananas or the medical-device giant Medtronics, merge with or buy into a company in some country with a much lower corporate tax rate than the U.S. imposes (before loopholes). Ireland is an example of such a country. They then declare that their headquarters are located in the overseas company and, presto chango, they suddenly can be taxed as if they were a foreign corporation. While they live this accounting fiction, they continue to be based in the good old U.S. of A. and continue to enjoy all the stability and benefits they get here. Actually, it’s not a simple transaction — anything but — but that’s what accountants and lawyers are for. The tax-shelter sleight of hand has gone on for decades. It’s just one of the scams we like to call “loopholes” that the rich have arranged through their lobbying and campaign-finance bribery to get written into the code. But the practice is metastasizing, as more and more conglomerates discover the virtue of having no virtue.
It’s a gimmick, but a very costly one to all of us, nearly $20 billion in tax revenue. The corporations say that until America changes its tax regs (translation: lower the business rate they pay), more and more of them are going to jump the ship of state. President Barack Obama can call them “corporate deserters” all he wants, but the executives argue they have a responsibility to their stockholders to maximize profits by every means possible, certainly in their minds that includes minimizing taxes by hook or what should be crook.
Responsibility to stockholders is such a handy rationalization. It can explain away all sorts of bad behavior. Cigarette manufacturers use it all the time. General Motors can utilize it to explain its deadly actions in concealing an ignition problem. In this case, companies are using it as justification for ditching their homeland, in effect declaring that the bottom line trumps everything, including patriotism.
So what is to be done? In fact, our officeholders agree that the tax code needs major improvement. But try to reform anything these days. If it involves politicians, as New Yorkers say, “fuggedaboutit.” Besides, what they’re talking about is incredibly complex. What we need right now is to come up with ways to make some of these guys pay a price, make them squeal a little.
Here’s one approach: Maybe those corporate entities that want to relocate, while continuing to prosper because of the infrastructure and system of laws that protect them here, should pay for those services. How about some sort of law where they are charged huge fees for the streets that serve their plants and the police who offer security and the schools that educate their workforce.
That’s not going to happen either, not with most politicians in their back pockets. So maybe it’s time for a little citizen action, like scrounging enough money for ads that identify the corporate defectors, so the rest of us can decide whether we’ll continue to patronize them.
In addition, let’s make it an election issue. Let those of us who are holding the bag decide if we really want to vote for those who block solutions to this kind of economic injustice. Until these insidious inversions are brought under control, they’re another way ordinary citizens are played to be suckers. In our country, the one these corporations are abandoning, we still have a right to vote. This is another reason to use it.
Bob Franken is a longtime broadcast journalist, including 20 years at CNN.