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The Obama administration stunned the business world yesterday with new, draconian rules designed to prevent so-called tax inversions. Inversions allow American corporations to escape most U.S. income taxation. The animus against such inversions is emotional and financial. On the one hand, companies wanting to leave are accused of being ungrateful, unpatriotic<\/a>, insidious<\/a>, or worse. In other words, the rationale against inversions is an appeal to emotion. But the real driver of that antipathy is that their escape from U.S. taxation creates a bigger tax burden for the rest of us. I believe that if the money weren\u2019t the issue, the emotion wouldn\u2019t be there.<\/p>\n Not too long ago, America was the destination of choice for individuals and companies. I don\u2019t recall any of this emotion in reverse. America has accepted foreign investment, including wealthy foreign individuals and foreign companies wanting to domicile here, with open arms. In fact, these types of immigrants were considered America\u2019s due for being the freest, most business-friendly nation on earth. We would have regarded the idea that they were “economic deserters” with respect to\u00a0their home countries as bizarre or unhinged. America has generally accepted foreign individuals much more grudgingly and with suspicion, but we never thought of immigrants as wronging their country of origin just for leaving. Neither did their former compatriots, with one exception.<\/p>\n That exception, of course, is communist countries. They demonized their emigres with the same epithets that our political leaders apply to inverting corporations. Their accusations should sound familiar. \u201cAfter all we gave you\u2014food, education, jobs\u2014you want to leave us?\u201d But in the west, we saw the twisted logic of such appeals for what they were, i.e., a presumption that just because you provide things to someone, you own them. We properly viewed these self-serving claims the way we viewed abusive husbands saying, \u201cafter giving you a roof over your head, good food, nice dresses\u2026\u201d And when communist appeals to patriotism and threats failed to dissuade, they required their emigres to leave behind virtually everything they had acquired or built on the theory that \u201cyou didn\u2019t build that.\u201d Communist countries literally built walls to keep their people in. We used to ridicule their tactics and reasoning. When America was the place people wanted to be, we believed that keeping your citizens captive was wrong, and voting with your feet and wallet were basic freedoms.<\/p>\n We often hear that\u00a0greed is driving corporate inversions. That’s true, I suppose, to the extent that\u00a0corporations want to be in the most favorable business environment possible for making money for their owners. But it is far more true with regards to politicians trying to extract\u00a0every dollar they can from their citizens, including corporate citizens. In the case of the U.S., that includes profits for products made in India to sold in Austria, if the company is headquartered in Chicago. That is what our tax system lays claim to.<\/p>\n We are unique among advanced nations in claiming taxes on global earnings. It is an arrogance held over from the postwar period when America could dictate the terms of trade, and when our tax rates were competitive with those of most other nations.<\/p>\n
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