Corporate Inversions

Wow, I hope I can still write. Not that I am that good of a writer, but it has been a while since I have written and posted a message. It has been a good summer, but it is winding down. August 1st is Friday, our trip to Ashland is next week, and when that happens we know that summer is ending and school is beginning. I do think our school is going to see more change this year, some will be exciting and many with be challenging.

However, what I want to write about is change and the corporate tax rate in this country. A dear friend of mine wrote on Facebook yesterday about how horrible corporations are for leaving the United States and merging with companies in other countries. The term used to describe this process is Inversion. The reason these corporations are doing this has nothing to do with Partriotism, per se, but it is an economic one.

Our President, instead of dealing with an antiquated tax system, has chosen to attempt to create law that would inhibit company head quarters from moving to greener pastures. I used the phrase antiquated tax system. Senate Finance Committee Chairman, Ron Wyden, a Democrat from Oregon, “recently called the American tax code a rotting mess of a carcass.” So instead of condemning corporations for acting according to their nature, maybe we need to look at governmental drivers that are pushing these companies to leave our shores

Don’t get me wrong, I am not going to defend all corporate actions. If you have been reading this blog for any length of time you know how I feel about some of the actions taken by corporate management, Jim McNurney has just made another mistake mentioning how employees are cowering. However, in this situation, I think our leaders need to look at what is happening from a systems thinking perspective. What are the system drivers that are producing the current results and are there needed changes that could improve performance of the system?

As the WSJ reported this morning, the United States has the highest corporate tax rate in the world. Even France has a rate lower than our country. “While U.S. corporations face a combined federal statutory tax rate of 39.1%, our competitors in the Organization for Economic Cooperation and Development (OECD) face an average rate of 25%.” The need to deal with our tax system is not just a Republican perspective. Remember Ron Wyden is a Democrat. Laura Tyson, former chairwoman of President Clinton’s Council of Economic Advisors, has stated that “America’s relatively high rate encourages U.S. companies to locate their investment, production, and employment in foreign countries, and discourages foreign companies from locating in the U.S., which means slower, growth, fewer jobs, smaller productivity gains, and lower rewal wages.” Can you say high unemployment rate and lower workforce participation rate.

I do agree with Walter Glavin’s final point in his article, Why Corporate Inversions Are All the Rage, “It’s time for Congress to reform a tax system that mainly benefits other countries. Other countries have learned this lesson already – both Japan and the U.K. have adopted a modern hybrid international system and lowered their corporate tax rates in recent years. The U.S. needs to learn from their examples, and fix the broken tax system now.”

On top of that we have a personal tax system that is not providing the necessary resources to provide needed safety nets for our citizens. Those that are super rich find loop holes to not pay taxes, and those who are poor don’t make enough money to pay taxes, so those of us in the middle pay the lion’s share. Whether that is a completely accurate statement could be debated, but those in the Middle Class feel this reality.

Thus, we have a tax system that is horrible all around, and an inept Congress that will leave for its August break providing just enough governance to keep our country open, that’s it. The tax system needs work, immigration needs a workable solution, Veterans Affairs need some work done, and on and on it goes. We need some leadership here people. Come on this is getting ridiculous.

And that is my thought for the day!

And that is my thought for the day!And that is


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