Why So Many American Companies Are Abandoning America
9th February 2016
Yet another major U.S. company is “renouncing its corporate citizenship,” said Andrew Ross Sorkin at The New York Times. Auto parts supplier Johnson Controls announced last month it is merging with Ireland-based Tyco International to take advantage of Dublin’s lower corporate tax rate. The fact that Johnson Controls is joining a “tidal wave of corporate migrants” is all the more galling because the company has been on the receiving end of plenty of U.S. largesse, including at least $149 million in tax breaks between 1992 and 2009 from Michigan alone — and, indirectly, the $80 billion auto bailout. Given that history, it’s tempting “to cue the national anthem and argue about the need for corporate patriotism,” but shaming companies into staying isn’t going to be effective. At least a dozen other so-called inversion deals are currently in the works. It’s high time we figured out how to make it “more attractive for American companies to be American companies.”
“The solution isn’t complicated,” said Ike Brannon in Real Clear? Markets. Our corporate tax rate is among the highest in the world — nearly 40 percent when state and local taxes are included. And unlike most other countries, the U.S. taxes every dollar earned, whether the profits are made at home or overseas. So, if a firm earns money in, say, Germany, it has to pay German taxes, and then U.S. taxes when it brings that cash home, a double penalty that makes U.S. businesses less competitive. To avoid this double whammy, American companies are sitting on $2 trillion in profits earned overseas — money that could be invested in the U.S.