Speaking as someone who has eaten there,
Burger King is one of the saddest places on earth. Abandon
digestion and pimple-free skin, all ye who enter there. To me,
Burger King isn’t just a lousy place to eat but a sort of
existential black site that drains the life out of you (well, me)
on every level: All the products are just lousier versions than
what’s offered at better fast-food joints. The ads, even those old
fake-hip ones with the weird Burger King, are awful to the nth
degree (anyone else remember the
“Where’s Herb?” campaign?).
Yet I find the attacks on Burger King’s purchase of Tim Horton’s
“Cafe & Bake Shop” even more saddening. By picking up
the Canadian-owned maker of the terribly-named “Timbits”
(donut holes named after the hockey player and drunk-driving
cautionary tale who co-founded the chain), Burger King can
escape U.S. corporate taxes that are much higher than those in most
other countries. This is the so-called
tax inversion process, by which a U.S. company picks up a
foreign one and then moves its corporate headquarters there to take
advantage of lower taxes.
“Voila, higher profits!” clucks The Daily Beast‘s
Daniel Gross. The Department of Treasury estimates that
over the next decade such inversions could mean a loss of $20
billion in corporate taxes. To put even that self-evidently puny
amount in even clearer context, the Congressional Budget Office
(CBO) figures the corporate income taxe will raise $4.5 trillion
over the same period. “In other words,”
notes Kyle Pomereau of the Tax Foundation, “corporate
inversions are predicted to cost 0.5 percent of the corporate tax
base over ten years.”
The White House and a number of Democrats are
trying to stymie tax inversions through legislation and
the bully pulpit.
Just earlier this month, President Obama floated the idea of an
administrative action that could spike such deals and he’s blasted
tax inversions as “unpatriotic.”
But this is all b.s. until the U.S. gets its corporate tax
rate into line with what other countries are charging. According to
KPMG, which has a comprehensive chart of corporate tax rates
(including average state and regional rates), the U.S. total comes
to 40 percent. Canada’s comes to just 26.5 percent:
The corporate income tax rate is 26.5%. It comprises a
15.0% federal tax component and an 11.5% provincial tax component.
Depending on the province, the combined general corporate income
tax rate ranges from 25% to 31%. Lower corporate income tax rates
are available to Canadian-controlled private corporations (CCPCs)
on their first CAD$500,000 (CAN$350,000 to CAD$425,000 for certain
provinces) of taxable active business income. A 2014 representative
tax rate for a CCPC on its first CAD$500,000 of active business
income is 15.5% (an 11% federal tax component and a 4.5% provincial
tax component). Depending on the province, the 2014 combined active
business income tax rate ranges from 11% to 19%.
Read more, including a breakdown of the U.S. figure, here.
There’s no shame or infamy in moving to where conditions are
better, whether for your family, your job, or your business. Such
freedom of mobility is, in fact, typically celebrated as one of the
things that makes America exceptional. And it goes without saying
that since tax inversions are perfectly legal, there’s not even a
hint of impropriety here.
As Gross points out in The Daily Beast, Burger
King won’t save its corporate skin simply by shuffling off to
Canada. It’s a poorly run company and it’s really kind of a miracle
it’s lasted as long as it has (did I mention how sad-inducing BK
is?). But for god’s sake, are Democrats and other economic
nativists really so dumb as to think they can gain ground in a
global economy by making it harder for all businesses to do
business in America (whether through higher taxes or ownership
rules or other regulations)? That way madness lies—and continued
economic lassitude.
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