To The Daily Sun,
The administration has imposed new regulations on business. That is not news in any way shape or form, but it is important. This latest round of regulatory taxation is aimed at corporate tax inversions.
Businesses have increasingly been utilizing completely legal inversions to minimize the impact of the U.S.'s internationally noncompetitive 35 percent corporate tax rate. In the latest regulatory move the U.S. Treasury Department has created new rules making it more difficult for companies to move their tax addresses outside of the U.S. It is unwise to attempt to capture and restrain business by regulatory fiat.
Companies like doing business in America because of the access to intellectual capital, well developed capital markets and the large population — all in one open market. These are advantages to doing business here. But increasingly companies are balking at our high corporate tax rates. For the other advantages to matter, companies must be able to financially overcome the tax and regulatory hurdles. Many multinationals mitigate the tax disadvantage by shifting profits to low-tax companies abroad using the tactic known as earnings stripping.
One thing that is troubling about the Treasury's new regulatory move is that the administration and Congress actually agree that the U.S. should lower its corporate-tax rate. Lowering the corporate tax rate is a way to create an incentive for corporations to keep and invest more profits here. With that said, the political party has been unwilling to move tax reform forward. It is an election year after all. Why would the political party think that doing something helpful to either the economy or the American people would be a good thing? Absurd, right?
Many CEOs are up in arms about the new Treasury rules. Pfizer and Allergan made news by terminating their planned $150 billion merger. Both CEOs had critical remarks for the U.S. government which were true. The Treasury changes ignore the reason many companies pursue inversions in the first place, which is that U.S. corporate tax structure puts American companies at a competitive disadvantage to foreign companies with lower rates. We know what the issue is, but refuse to act on it.
Underlying the tax issue is the deeper and more systemic issue of regulatory overreach which is exemplified by the Department of Treasury's action in this case. The Treasury is an executive branch agency. It is by regulation imposing taxation and regulatory burden on business in contravention of the best interest of business and the citizens of the county. If there is to be change made to taxation, that is the responsibility of the legislative branch. But we, the electorate, the candidates, media and government are not even talking about the propriety of Treasury's action. It is time for accountability.
- Category: Letters
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