Home / Opinion / Snap Poll: Most support crackdown on corporate inversions

Snap Poll: Most support crackdown on corporate inversions

Are U.S. companies that take a foreign address for tax purposes “corporate deserters”? Or are they simply doing what they must to keep pace with competitors from countries with lower corporate tax rates?

The Treasury Department last week issued its third—and most aggressive—set of rules designed to crack down on corporate inversions, in which U.S. companies move their tax residence to lower-tax countries, typically by merging with a smaller, foreign-based firm.

The majority of respondents to this week’s RBJ Daily Report Snap Poll—more than 70 percent—support the federal government’s moves to throttle corporate inversions.

Among the companies that have undergone inversions are Valeant Pharmaceuticals International Inc., parent of Bausch & Lomb Inc., and Allergan PLC, now led by former B&L CEO Brent Saunders. Only days after the new rules were announced, Allergan and Pfizer Inc. called off their record $160 billion merger agreement, which would have relocated Pfizer’s headquarters to Ireland.

In a statement, President Barack Obama said: “As a practical matter, (inverters) keep most of their actual business here in the United States because they benefit from American infrastructure and technology and rule of law (and) from American workers, who are the best in the world. But they effectively renounce their citizenship.” They get all the rewards of being an American company, he added, “without fulfilling the responsibilities to pay their taxes the way everybody else is supposed to pay them.”

Defenders of corporate inversions say that until Congress reduces U.S. corporate tax rates, which are among the highest in the world, many companies—and the U.S. economy overall—will be harmed if they lose the ability to take advantage of this longstanding provision of the tax code.

A vast majority of poll participants think Congress should approve corporate tax reform that lowers rates overall while closing loopholes that allow some companies to pay little or no tax.

More than 560 readers participated in this week’s poll, conducted April 10 and 11.

Do you support or oppose the federal government’s crackdown on corporate inversions?
Support: 71%
Oppose: 29%

In your view, should Congress approve corporate tax reform that lowers rates overall while closing loopholes that allow some companies to pay little or no tax?
Yes: 94%
No: 6%

For information on how the Snap Polls are conducted, click here.
COMMENTS:
I think it’s reprehensible for U.S. companies to use this tax dodge. There should be penalties for those who try.
—Al Schnucker, Schnucker Packaging Inc.

The American tax system is hopelessly complex and needs a complete overhaul. I challenge anyone—government official, elected politician or CPA—to explain the tax system. It’s impossible; no one can do their own returns anymore, no less a business return involving a multimillion-dollar company. You need a computer, but even then there are so many rules you have no idea whether the return you are signing (under severe penalties if you are wrong) is accurate. Reagan did the last major tax reform in 1986, closing loopholes, and it spurred the economy for a decade. We need another round of simplification and rate reduction to get our economy going again.
—Bob Sarbane

This is a bit of silly question, isn’t it? Government makes corporate taxes so high that companies have to entertain the idea of moving out of their own country and hoping to find a local company to merge with or buy. These are not fun things to do; they cost significant amounts of money and they detract from a company’s ability to focus on their core business—and it might fail. Then that same government wants to punish the company for doing what they forced them to do. Does this make sense to anyone?
—Kanyah Burn-Moore, Rochester

Hmm, well, actually I don’t think we should both lower rates and close loopholes. I think we should keep rates the same and close loopholes. In addition, we should tax overseas labor when it is provided as a direct service (for example, call centers, etc). These hours are easily measured, and taxing them to bring the rates more in line with what domestic labor is worth would either create revenue to strengthen our country, or an incentive to hire domestically—both badly needed to maintain our position in the world. Large companies shouldn’t be able to just ship jobs overseas with no penalty.
—Lee Drake

Fix the tax code and corporations won’t be so inclined to engage in this practice!
—Arnie Boldt, Arnold-Smith Associates

The flip side to inversions is certain companies may now have more money to spend on U.S. operations and updating factories and other sites, instead of a third-plus going to taxes. We are just not seeing a lot or enough of it in New York State due to the high tax structure here. States with lower taxes and where companies are looking to expand could see major gains from inversions due to companies having 10 percent to 20 percent more funds at their disposal. I am a fence-sitter on this issue as I understand both viewpoints, but I always encourage our New York State officials to do everything in their power to make doing business in New York State easier (and cheaper).
—Keith Newcomer

I think lowering corporate tax rates is the correct policy. Keeping profits in this country encourages more investment here. Which in turn creates jobs, which generate payroll (and other) taxes and local economic activity. That would more than offset any loss of revenue from corporate tax collections. Companies have a duty to their stakeholders. Laws that entice repatriating profits in the United State (like foreign countries already have) are a far better approach compared to punitive tax policies.
—George Thomas, Ogden

Our current president does not believe in business—but big socialist controlled government. This is what happens when government leaders lack productive (private) business experience!
—John Sackett, Byron

Corporations are not inherently evil. Their purpose is to attract investors and provide a return on that investment. The elephant in the room is our tax code: the highest corporate tax rate in the industrialized world. The cure for inversions is not more laws, more inversion police and court time and legal fees. Simply reduce the corporate tax rate to say 10 percent or zero, which will end the desire or need for inversions. Our tax code already provides a trigger mechanism to tax unreasonable undistributed earnings. Corporations must distribute those earnings through dividends to shareholders (which then get taxed to the individual) or investment in plant and equipment (jobs!). The net result is no loss of income to our huge government (another issue for another day) and retention of existing jobs here and the return of the trillions invested and closeted overseas. Occam’s Razor: The simplest solution is usually the best!
—Art Elting, Palmyra

Are U.S. companies that take a foreign address for tax purposes “corporate deserters”? Or are they simply doing what they must to keep pace with competitors from countries with lower corporate tax rates? In my view, the answer is “both.” The time has come for corporate tax reform. Our nation must wake up and address this issue as soon as possible, but corporate inversions are NOT the answer. It’s a good time to be an elite member of corporate America. The one-two punch of Citizens United and corporate inversions have given rise to greater corporate influence in the American landscape than ever before in history. Responsible corporate efforts should be supported and celebrated, irresponsible actions should be halted. It is contradictory to hold the position that corporate America can use its power and finance to influence American politics, but on the other hand allow it to avoid its civic responsibilities and its obligations to contribute equally to our society. To be a citizen of this nation comes with opportunity and responsibility and this patriotic obligation should not be “trumped” in the name of capitalism. It isn’t right, and it isn’t fair! Can someone please explain to me the difference between a “draft dodger” and a “tax dodger”? Having said that, there is no question that the corporate tax system needs to be overhauled; it has become beyond difficult for many of our corporations to compete in a global marketplace, and we have a responsibility to immediately address this concern. We must look to our current corporate tax structure and create an environment—not just closing a loophole—that eliminates inversions. In my view, inversions are damaging our national economic security, and it is critical that our elected leaders work in haste, and in a bipartisan manner, to create a more responsible tax structure that works to eliminate this problem. The U.S. needs to make it more cost-effective for American companies to bring overseas profits back to the U.S and we need to do it now. It is a national security issue.
—Joe Leone

These are mainly companies that became successful because of the U.S.A. and now don’t want to pay their fair share of taxes. Granted, our government needs to clean their own house on wasteful spending, but taxes are what keep America strong. Too many of these same companies say they are paying too much in taxes while they have their hands out to the government for funding dollars and exemptions from taxes. At the same time they are making big profits which they are putting in their own pockets and tax shelters. This is welfare at its worst. In the meantime too many people in this country suffer from lower wages and poverty.
—Grant Osman

Robert Reich (former Secretary of Labor under President Bill Clinton) wrote a compelling argument for eliminating corporate income taxes in his 2009 book. He argues that the current system incents the wrong actions by corporations and that—with no tax—they would pay more dividends to shareholders subject to a progressive tax (wealthier pay a higher rate than middle class shareholders). His proposal is unlikely to get a second look in Washington. Meanwhile, corporate inversions would eliminate taxation on capital returned to the U.S. economy and invested here. It would be great for economic growth but, of course, economic growth is anathema to Obama, Sanders, et al.
—John Calia, Fairport

A public corporation’s board of directors’ responsibility is to the financial well-being of their shareholders. Corporate inversions should be a wakeup call to Congress to reform taxes and spend less.
—Charlie Waldman

If small businesses need to pay the taxes, large corporations should too. We all know New York State tax rates are high. I have kept my jewelry business, Panda Wear, here because I love Rochester. As owner and designer, I support “shop local,” which helps the economy in this great city. If we all choose to purchase one thing each week—buying local from a mom-and-pop business—it will change the economy for the better.
—Kim Pandina, Panda Wear Jewelry Designer and owner

Hello, both parties … Are you out there? Not having a fiscal or a tax policy is the reason why there are corporate inversions. Don’t you get it? Corporate inversions are a symptom and a response to government irresponsibility. Government, are you listening? Do you get the message yet? Blame large corporations, and the wicked 1 percent all you want, government. Blame everyone but the real culprit: Government.
—Jay Birnbaum

So, let me get this straight. The very same folks who turn a blind eye to illegal immigration want to crack down on legal out-migration. Right?
—Tom Shea, Thomas P. Shea Agency Inc.

There is a novel approach to this issue. Why not try to understand the reason (ultra-high taxes) for corporations moving offshore and then do something intelligent to resolve the issue? Instead, the “Big G” tries to create Byzantine roadblocks and regulations to enable a continuation of confiscatory taxes. All that will accomplish is to make the brainiacs at the corporations work harder and convince other corporations to avoid becoming entrapped in the U.S. tax abyss in the first place.
—Jim Cronin

The government should encourage business to stay and prosper in the U.S.A. Reducing the corporate tax burden is important; so is ensuring that other companies pay a fair rate. (So is) having fair trade agreements with other countries that actually protect U.S. companies. We need to protect our own. And the companies should not need or be able to use inversion to avoid fair taxation.
—Mark Williams

American corporations are only doing what their founding documents say they must do: “Maximize profits.” If they make a lower rate of income by having their funds in the United States, then they are obligated to move their funds overseas. The United States needs to reform its corporate tax laws and make them more in line with the other major economic powers. Corporate profits passed on to Americans are taxed again, so the government loses even less than you might think by lowering corporate taxes.
—Clifford Jacobson M.D., Vanguard Psychiatric Services PC

Large international firms have an advantage over smaller domestic firms in their ability to consider an inversion and thus have an unfair competitive advantage over other U.S. firms. All businesses and individuals should pay their fair share of taxes to support government’s responsibilities to provide essential services like highways bridges, waste and sewage services, etc.
—Bob Volpe, Rochester


4/15/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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