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Monday, July 28, 2014

The Rant - Costs Cause Business Inversion

Costs Cause Business Inversion
Congress is getting ready for an extended recess but the economy keeps tanking. These facts just raise the anger level for many ordinary folks.
The United States used to be the place enterprising people came to create a business venture. Now it is the place businesses are fleeing because of the ever-growing, completely-strangling mountain of regulations.
Regulations are killing us and our economy. But do the people who oversee this put the blame where it belongs? N-O-P-E!!! Instead the drive is to make leaving the U.S. a crime. Golly, gee and whillikers! color me surprised. Another liberty gone.
Those parked firmly in this 'ban' camp are the same group that doesn't recognize when a border is open one way it is also open the other way. When a tax burden becomes too onerous to bear, companies will leave for greener pastures. That is what made America so attractive for 220 years. Now the shoe is on the other foot and the comments coming from those who oppose the "inversion" practice are laughable.
Last week Obama-dah-Dumb-a urged Congress to address tax inversions caused by companies fleeing the reach of the bureaucracy. Treasury Secretary Jacob (Jack) Lew agrees as does Nobel-winning economist Paul Krugman. They want to make it illegal for companies to flee, then take the time to address the reform problem necessary. But all three support the continual move towards socialism in the country and veto any and all efforts to reverse costly programs.
Here's a novel idea for the Magi trio, understand why the companies are leaving first. The problems with remaining in America, when you have the option to leave, are becoming legendary.
There's the looming, ever-rising cost of providing government-approved health care to employees or pay a fine for CEOs to consider. Then there is the left-wing push to get a minimum wage put in place so those 'graduating' from the no-know education system--that teaches nothing but how important individual self-esteem is--can actually pay some sort of tax when they are older. This skill gap means fewer and fewer Americans in the 18-34 bracket can actually contribute to the profit of a company so they have to look at foreign sources anyway. Why not shift their operations to where there is a larger percentage of the population to draw upon? Lastly there is the red tape produced by the EPA, BLM, Homeland Security, NSA, IRS, Health and Human Services and EEOC to deal with and it is just easier for companies to go someplace less demanding of business time required to deal with regulation.
But the guys who helped put the problems in place just want to ban companies from leaving the country.
Krugman made an idiotic remark. "We are heading towards a world in which only the human people pay taxes," he wrote in the New York Times. This is a world-famous economist making a fundamental economic error. Fundamental Economic Law 1: People pay taxes, not corporations. If a corporation pays a tax the cost is passed on to the customers in line. That is why companies deem the 35% rate here excessive when they can get a rate of 15% or less elsewhere.
Krugman claims those fleeing because of the outrageous rate are "shirking their civic duty." Paul, Paul, Paul, you should have been a taxi driver as I said years ago. Companies fly no flag but their own. They have a duty first to their shareholders to turn as big a profit as possible. Duty to a country is well down the list if it exists at all. 
But Secretary Lew's remarks went a step further. "It is so important that we reform our business tax code to make the U.S. economy more competitive and to accelerate economic growth and job creation. But we have a tax loophole that rewards U.S. corporations with substantial tax benefits when they buy a foreign company and declare they are based overseas. These activities should be based on economic efficiency, not tax savings."
Again, Dis-Ingenuous Secretary, you made the case for them to move. America gives foreigners tax benefits citizens don't get. The tax savings you decry equate to economic advantages for foreigners against American companies. Plus foreign companies don't have the worry of Obamacare biting what profits they can make if they are overseas.
The bottom line for inversions, companies are finding places more hospitable to business than the United Socialist States of America.
Look at how this started. The IRS, in its zeal to find every dollar to support the resource-draining socialist programs installed, pokes into every corner to find American-held assets. To avoid this, Americans (please note, Mr. Krugman, individual people) are denouncing citizenship at a rapid rate if they have the option. Why did the Magi trio expect corporations not to follow suit?
The inversion trend will make the U.S. even less competitive in years to come as less and less profit from retail sales will stay in the country. About the only place looking to make a profit from this trend is Wall Street. The Wall Street Journal on Sunday offered some tips for investors on how to make money from the trend. If this sounds familiar remember TARP, the bailouts and the stimulus--all legislative actions taken by the government to help America but the aim was bad. Putting a ban on inversions without tackling the underlying reasons for such activity is going to be as fruitless for the goal of collecting more tax because more of the top 1% will leave America as well.
The economy is still in a recession, no matter how the government tries to spin the numbers and facts. That the business portion of the economy which has to live or die with profits is abandoning the sinking ship is just another indicator the economy we knew is going away fast.
Vernon Smith, another Nobel economist, asserts "The [bank bailout] rescue had a hidden cost for the economy. Economic activity is hobbled if it is not freed from the burden of sharing its return with investors who bore risks that failed but paid no penalty. [Our} economic system was organized on loss as well as profit principles of motivation." But the 'inversion ban' crowd doesn't recognize this as it puts them and their ideals in the failed category.
When Congress comes back from vacation in about five weeks, the problems it is abandoning now will only be bigger. One way the staffers and elected officials could help--leave their unearned paychecks behind, as a contribution to the welfare state they've created. Maybe with that slush fund we could entice one of the inverters to stay or pay for another dozen illegals.
"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson 

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