Guest Editorial: Companies flee from high taxes
Maybe they’re looking for leprechauns. More U.S. corporations are moving their headquarters overseas, in particular, to Ireland. The latest to depart is global car parts supplier Johnson Controls.
Reported the New York Times, “Johnson Controls said … it was renouncing its United States corporate citizenship by selling itself to Tyco International, based in Ireland, a deal struck in large part to reduce its tax bill, which it said should drop by about $150 million annually.” That’s “just the latest effort by corporate America to flee the United States. In the last year, Pfizer said it was leaving for Ireland, as did Medtronic, the medical device maker.”
The moves are called “inversion” in corporate lingo and are made to avoid America’s 35 percent tax on corporate profits.
Other countries’ rates include: China, 25 percent; Japan, 24 percent; South Korea, 22 percent; Russia, 20 percent; Hong Kong, 17 percent; Germany, 15 percent; Canada, 15 percent; and Ireland, 12.5 percent. So a move to the Emerald Isle means a corporate tax cut of nearly two-thirds.
Among Democrats, not only self-proclaimed socialist Sen. Bernie Sanders has attacked the corporate exodus. Last week, Hillary Clinton blasted Johnson specifically for working to “game the tax code and shelter money overseas to avoid paying their fair share.” She promised to “block deals like Johnson Controls and Tyco, and place an ‘exit tax’ on corporations that leave the country to lower their tax bill.”
That reminds us of the “diploma tax” the Soviet Union levied in the 1970 on educated people who wanted to emigrate.
The Republican presidential candidates all have called for addressing corporate flight by cutting the corporate tax rate. For example, Sen. Marco Rubio wants 25 percent, Sen. Ted Cruz proposes 16 percent and Donald Trump, 15 percent. Their approach — encouraging corporations to stay and use their profits to create more jobs — just makes more sense.