Few people — other than maybe a few masochists — enjoy paying their taxes each year. Generally, we feel the government is taking a big bite out of our paychecks and leaving us poor souls with scraps. Despite our moaning and groaning, most of us pay what we owe, and our threats to evade taxes or flee the country never come to fruition.
That last sentence is true for most average citizens, but when we start talking about the corporations of our great nation, some would rather abandon the U.S. entirely than pay their fair share to the federal government. Most recently, Miami-based fast-food giant Burger King made national headlines after it acquired Tim Horton’s, a Canadian burger joint, and told investors Burger King’s corporate headquarters was heading across the border.
By moving its headquarters, Burger King can avoid paying federal taxes through a process called inversion. Essentially, American-based companies buy foreign companies and then move their headquarters overseas. It’s a giant loophole in the corporate tax structure, and it’s costing our country dearly.
If Burger King were an individual and not a corporation, moving overseas would not remove the King from his tax liability. He would still owe the American government for the income he made in the U.S.—and for Burger King, it’s a sizable share of its business. If the King refused to pay his income taxes, he could be charged with tax evasion, facing a hefty fine and possible jail time.
If it sounds ludicrous that a corporation can get away with this but an individual can’t, that’s because it is. There is no reason why any corporation based in the U.S. should be able to exploit this loophole, leaving the federal government and the American people to pick up the tab.
You might be a government-hating Tea-Party conservative, but if the corporate tax base continues to leave the U.S. in droves, it’s going to affect all of us. None of us wants higher taxes, but we the people will pay the price for the actions of companies like Burger King.
Sure, we can continue to cut the federal budget down to the bone to make up for lost revenue, but eventually we’re going to need to pay for our infrastructure, care for our veterans and support other essential government programs and departments. This is not about a liberal or conservative argument about how high or low tax rates are or should be, nor is this about the size and scope of government. This is about how, for all intents and purposes, American corporations reject their citizenships in order to avoid complying with the law.
For what it’s worth, Burger King denies its purchase of Tim Horton’s has anything to do with American taxes, but the purchase and move to Canada highlights the continued disconnect between American citizens and American corporations.
What needs to happen now is a closing of the tax loophole that allows for inversions, which would keep American companies in the U.S. and force them to pay their fair share of taxes. Do that, and it’s likely that the corporate tax rate—a prime reason so many companies are leaving—will likely go down.
It seems simple enough, and politically, you would think both Republicans and Democrats would agree. Just a few weeks ago, President Barack Obama called on Congress to end tax inversions, which means only one thing: partisan gridlock. Which means no solution.
For now, companies are free to leave the U.S. if they wish, and all of us, regardless of our ideology and partisanship, will have one thing in common—we’ll continue getting screwed as a result.
Joel Mendelson is a UF graduate student studying political campaigning. His columns run on Fridays.
[A version of this story ran on page 6 on 8/29/2014 under the headline "Corporate tax inversions hurt America"]
