Economy, Regs, & Taxes

There's Tax Aversion, and There's Tax Evasion

Who's up for another Obama lecture on fairness?

Lewis Morris · Apr. 6, 2016

In a surprise appearance at the daily White House press briefing Tuesday, Barack Obama took the opportunity to use the release of the Panama Papers to press his case for international tax reform.

“We shouldn’t make it legal to engage in transactions just to avoid taxes,” Obama told reporters, adding that they should praise “the basic principle of making sure everyone pays their fair share.”

There’s that concept again: paying their fair share. Obama rode this phrase into the White House in 2008, and he has been using it ever since as a cudgel to browbeat wealthy individuals and large corporations into paying higher taxes to fund the federal government’s socialist expansion. The fair share that the upper class and the big companies should be paying is defined not by a percentage of total tax revenue that citizens are responsible for, but by how much the next social welfare entitlement costs.

The Obama administration’s focus recently has been tax inversions, a so-called loophole that allows American companies to merge with foreign companies, then move to another country to avoid the U.S.‘s high corporate tax burden.

This procedure is not illegal, and with the exorbitant U.S. corporate tax rate — highest in the developed world — it is no surprised that companies are taking advantage of inversion so that they can keep a larger percentage of their profits. Those days may be coming to an end, though.

The Treasury Department announced Monday that it will place new restrictions on inversions, including how earnings are distributed and the tax rates placed on profits.

These companies “effectively renounce their citizenship,” Obama said. “They declare that they’re based somewhere else, thereby getting all the rewards of being an American company without fulfilling the responsibilities to pay their taxes the way everyone else is supposed to pay them.”

Democrat Sen. Chuck Schumer added, “These regulations will make potential inverters and foreign acquirers think twice before making the leap.” Unfortunately, it may also make foreign companies think twice about engaging in mergers with U.S. companies, which is yet one more thing to hamper the free market.

Schumer, Obama and Treasury Secretary Jack Lew are patting themselves on the back for their righteous actions in defense of American taxpayers tax revenue. They are using companies that are acting within the bounds of the law as scapegoats, arbitrarily labeling them as corrupt for doing what every free thinking person wants to do — pay as little tax as possible. And rather than make the U.S. a more desirable place to do business, they’re just making it illegal to leave.

It turns out that the release of the Panama Papers demonstrates that the corrupt class has more in common with those who make the laws than those who live under them.

The 11 million documents absconded from Panamanian law firm Mossack Fonseca demonstrate a number of instances of shady corporate dealings, but there are also an alarming number of questionable transactions involving members of the ruling class from around the world. Close associates of Vladimir Putin, the sons of the Chinese president and the Malaysian prime minister, the Saudi King, Iceland’s prime minister (who resigned after the news broke), and several former members of the British Parliament all figure prominently in the Panama Papers.

These documents confirm for many just how corrupt the ruling class can truly be, and it’s not surprising to see the extent to which they will go to keep their own money from being subjected to the laws of the masses.

Investor’s Business Daily notes the hypocrisy: “So while one group of people is condemned to high taxes, 'austerity,’ and stiff regulations in countries like Greece — and sternly lectured to about their obligations to the state — another group of people — their ‘leaders” — escape by putting their assets in shell companies. It’s the rich, the powerful and the well-connected who are in the latter group, while ordinary citizens — whether of Iceland, Congo, Ecuador, Ukraine, Britain, Nigeria or China — just have to take it.“

Obama’s actions to force companies to carry a larger burden for the cost of the ever-growing federal government, and the economic double-dealing that goes on behind the scenes exposed by the Panama Papers is not fooling anyone. What is worth wondering at this point is how much deeper does the corruption go, because we all know that the Papers are only scratching the surface.

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