The Patriot Post® · Uncle Sam Picks Pockets, Sets New Rules Against Avoiding It

Some countries build walls to keep people from leaving. Barack Obama simply issues edicts. On Tuesday, Obama acted with his customary oblivion to the existence of Congress and issued new regulations to prevent inversions, the process by which U.S. companies acquire or merge with foreign firms and then move their headquarters offshore in order to minimize the impact of exorbitant U.S. corporate tax rates.

Determined to halt such economic un-patriotism by whatever means possible, constitutional or not, the administration this week announced a series of new tax regulations. According to The Wall Street Journal, the rules would “make it harder for companies that invert to use cash accumulating abroad – a big draw in recent deals,” as well as make it “more difficult to complete these overseas mergers.” The president’s dicta took effect immediately and will impact any inversions currently in the works.

Treasury Secretary Jack Lew insists, “Inversion transactions erode our corporate tax base.” And, of course, since the primary purpose of government is to squeeze as much tax revenue as possible out of the American people (Article 1, Section something, we’re sure…), this is simply unacceptable. Or perhaps what’s truly unacceptable to Lew is the falsity of his claim. As the Journal notes in a separate editorial, “Corporate income tax revenues have roughly doubled since the recession. Such receipts surged in fiscal year 2013 to $274 billion, up from $138 billion in 2009. Even the White House budget office is expecting corporate income tax revenues for fiscal 2014 to rise above $332 billion and to hit $502 billion by 2016.” So, if the corporate tax base isn’t suffering, what is?

Well, reinvestment into the U.S. economy, for one thing. The new regulations make it more difficult for companies earning money overseas to reinvest in the U.S. economy. As the U.S. Chamber of Commerce notes, “Many U.S. companies earn profits overseas and want to invest those profits in America. However, by having the world’s highest corporate tax rate and a worldwide system of taxing overseas profits, the United States discourages that. … Treasury’s proposed guidence [sic] will only further complicate our antiquated tax code.”

Indeed, this gets to the crux of the problem and the reason companies are pursuing inversions to begin with: The U.S. corporate tax rate is the highest in the developed world. Even former President Bill Clinton, the very one who signed the bill to raise corporate taxes, admitted the detrimental effect those rates have. “Like it or not, this inversion, this is their money,” he explained, adding that publicly traded companies in particular “feel duty bound to pay the lowest taxes they can pay.” No doubt to the ire of the Obama administration, Clinton continued, “We have the highest overall corporate tax rates in the world, and we are now the only OECD [Organization for Economic Cooperation and Development] country that also taxes overseas earnings. A lot of these executives – even if they wanted to bring the money home, they think this is crazy.”

Yes, crazy is precisely the correct word for it. To levy a nearly 40% tax on corporations and then accuse them of unpatriotic behavior for wanting a lower tax bill and to reinvest in America, well, yes, that is just crazy.

The sane solution is to lower corporate tax rates and create an environment that actually incentivizes business to keep a U.S. mailing address. What a thought.

The problem was never that people wanted to leave. That was only the symptom. The problem was an utter lack of an environment in which people wanted to – or could – stay. And that’s something no burdensome regulations will ever create.