I don’t normally use words like “BLASTS,” “EVISCERATES,” or “DESTROYS” in headlines because I find them hyperbolic, and often an exaggeration of the actual story. In this case, “Blasts” is a pretty accurate description of Senator Elizabeth Warren’s harsh words for corporations like Walgreens that are moving their headquarters overseas to get out of paying their fair share of taxes. This is a practice known as “corporate inversion” and it is becoming a more common practice with corporations facing ever-increasing demand from shareholders to produce higher and higher dividends.
The practice of maximizing shareholder value is something that has caused numerous American jobs to be shipped overseas in order to slash operating costs. This story from the Washington Post describes how moving operations to places like India has helped maximize dividends and CEO compensation, but at the cost of local economies that depended on companies like IBM.
Here’s Senator Warren’s opinion of corporate inversion:
Tax lawyers call this process a “corporate inversion.” But don’t let that bland name fool you – these companies are renouncing their American citizenship, turning their backs on this country, simply to boost their profits.
If a person did that, we’d call them a freeloader and insist that they pay their fair share. And that’s exactly what our tax laws do for people who renounce their American citizenship. But when corporations do it, they don’t suffer any consequences at all. Forget whether corporations are people – in this corner of the tax code, we’re treating corporations better than people. (Source)
So what is “corporate inversion”? Investopedia.com has the following definition:
Re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. Corporate inversion as a strategy is used by companies that receive a significant portion of their income from foreign sources, since that income is taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country that has lower tax rates and less stringent corporate governance requirements. (Source)
Some people would argue that reducing costs through outsourcing operations or manufacturing not only guarantees more money for shareholders, but it also allows products to be sold at lower prices and U.S.-based employees can get paid more. However, there’s little evidence of the benefit to employees. Not only are companies like Wal-Mart not paying their workers a living wage, they’re also depending on the U.S. taxpayers to pick up the tab for covering their healthcare and food stamps – all while exploiting every possible loophole to avoid paying taxes on their profits. Granted, Wal-Mart still has their corporate headquarters in Arkansas, but other companies like Caterpillar have relocated their headquarters to Switzerland in order to pay less in taxes – all while continuing to enjoy all the benefits of our infrastructure and workforce. Jon Stewart explains more about how this works below:
You and I don’t have the money to hire expensive lawyers and accountants to minimize our tax burden, or even find ways to qualify for millions of dollars in subsidies. Yet, many conservatives look down on the working poor who receive government assistance while at the same time making excuses for corporations who take advantage of every loophole that they can find. These companies want to use our roads to transport their goods, our schools to educate their future employees, and our police departments to protect their stores and assets – except they want everyone else to pay for these services provided by the government on our tax dollars.
Senator Elizabeth Warren sums it up:
The companies that are pursuing these corporate inversions know all of this. That’s why they are not actually leaving America behind. They just don’t want to pay for it. Our achievements aren’t magic. They didn’t simply happen on their own or through dumb luck. America works – our government works – our democracy works – because we all pitch in and do our part to build the things that none of us can build alone. The things that give everyone a chance to succeed. We’ve had enough of rich corporations taking whatever they want and expecting everyone else to pick up the pieces. The time for freeloading is over. (Source)
As long as we keep on allowing corporations to shirk their tax obligations while paying their workers as little as possible, this places a continual burden on the ever-shrinking tax base and adds to our ever-growing national debt. As much as many conservatives like to talk about “fiscal responsibility,” they’re being hypocrites by making excuses for these companies while referring to underpaid workers receiving government assistance as “moochers” and “freeloaders.”
If you’re tired of this hypocrisy like I am, please sign on to show your support for the Stop Corporate Inversions Act for which Senator Elizabeth Warren is a co-sponsor – and then remember to make sure you’re registered to vote this November. We can stop corporations from avoiding their tax responsibilities and we can get rid of the politicians that are in their pockets, but it won’t happen unless we vote. It’s as simple as that.
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