WASHINGTON, September 27, 2014 — President Obama is rewriting laws to create a legal fence designed to trap American corporations inside the U.S. The intent is to halt corporate inversions, but what we are witnessing is our government’s attempt to imprison and even enslave corporations.
A corporate inversion is transaction in which a U.S. based multinational restructures so that the U.S. parent is replaced by a foreign parent, in order to avoid U.S. taxes. Current law subjects inversions that appear to be based primarily on tax considerations to certain potentially adverse tax consequences, but it has become clear by the growing pace of these transactions that for many corporations, these consequences are acceptable in light of the potential benefits.
In other words, despite the government’s best efforts to make inversions unprofitable, the tax climate in the United States is so onerous that businesses still are willing to pay the costs of escaping to anywhere else.
A Forbes article explains the new move, announced on September 22 through the Treasury Department:
A spate of tax inversions this year, mostly involving health care companies, has raised the ire of lawmakers and President Obama, who has accused the companies of ‘gaming the system,’ depriving the government of tax revenue while still taking advantage of all the benefits of operating in the United States.
Obama doesn’t like the way the laws are written, so he is acting administratively (and criminally) to create new law. In a CNBC interview, Obama said that companies thrive in the U.S. because of this country’s built-in benefits.
For you to continue to benefit from that entire architecture that helps you thrive, but move your technical address simply to avoid paying taxes is neither fair, nor something that is something that is going to be good for the country over the long term. This is basically taking advantage of tax provisions that are technically legal, but I think that most people would say if you’re doing business here, if you’re basically still an American company, but you’re simply changing your mailing address in order to avoid paying taxes, then you’re not doing right by the country and by the American people…
Don’t sugar-coat it: it’s about collecting all the tax money possible, regardless of the law. And “what most people would say” has nothing to do with his constitutional duty (job description) to “faithfully execute the laws of the United States.” Only a dictator or a supreme monarch would assume that the laws are his to do with as he pleases, even to satisfy the whims of public opinion.
When you find yourself in a hole, it’s best to stop digging, but Obama continued on CNBC, speaking this time to corporations, echoing his “If you’ve got a business — you didn’t build that,” speech delivered during the 2012 campaign:
You continue to benefit in all kinds of ways from being an American company. It is true that there are a lot of things that may be legal, that probably aren’t the right thing to do by the country.
That, of course, is not what drives corporations. Corporations aren’t supposed to be in the job of central planning; in fact, they are specifically excluded from it. The government, to the extent it does its job within the Constitution, is there to plan for the country’s future; that is why it tweaks the laws, and why the laws read as they do.
But Obama dug even deeper: “People are paid to maximize profits, but they are also paid to be good corporate citizens.”
That’s wrong, too: They are paid for no such thing. Being “good corporate citizens” is a byproduct of doing what’s best for the stockholders, to whom corporate leaders have their only responsibility within the law.
But Obama denies this:
“…they’re paid to make sure that, in addition to shareholder value — how do you grow a company over the long term? — and this kind of strategy undermines peoples’ confidence in how companies are thinking about their responsibilities to their country as a whole.”
Set aside the question; the President has no idea how to “grow a company over the long term,” and taxing it more in the short term certainly won’t help. Even if he did know something about business, it’s not in the President’s authority to dictate how private entities conduct their business. It’s also not the President’s job to make new rules and laws whenever he sees people or companies that want to maximize their profits by following the letter of the law.
Obama’s justification for changing the law contains no authorization except his own personal ideas.
USA Today reports that he is doing this, regardless what the laws say. “I’m not interested in punishing these companies,” Obama said. “But I am interested in economic patriotism.”
So, “economic patriotism,” whatever that is, gives him legal authority to write new laws whenever he wants? Mr. President, that’s illegal, and you can’t do it, no matter what your personal ideas of “patriotism” may be!
The President said more to CNBC, that these changes would “allow us to close some of the loopholes that permit companies to artificially shift profits overseas so that they are avoiding tax compliance … It would allow us potentially to have companies that have profits overseas to start bringing some of those profits back and reinvesting them back in the United States.”
That’s economically moronic on its face. If those profits are taxed away, they cannot be reinvested in the U.S. or anywhere else. They’d just be thrown into the bottomless pit of government debt, having no effect whatever on the $17 trillion problem our government’s profligate spending has created. But like the bully who will destroy someone else’s sand castle rather than letting anyone else enjoy it, Obama wants to bleed legally-acting companies dry.
His actions in trying to prevent companies from changing their addresses are analogous to a prison camp director’s hold on the prisoners, or a slaveholder’s grip on his slaves: not allowing the freedom to relocate, to leave his tax prison, is declaring his ownership and right to control. It’s slavery at worst, communism at best. But those are two sides of the same coin.
And he wonders why they want to leave in the first place.