Corporations, driven by intense competition, will not pursue uncompetitive products or markets. This is a reality of capitalism. The choice to invest overseas (see Ford) rather than domestically has more to do with taxation than the quality of American workers.
Headline: This is a war on tax inversions
Does the U.S. government want to help American business or not? Does the administration want to help middle income wage earners or not? Does team Obama want to grow the American economy at its historic 3.5 percent long-term trend or not? Apparently, President Obama's answer to all three questions is "no."
Those are the real issues behind the Treasury's latest militant attack on so-called tax inversions, where a U.S. company merges with a foreign firm in order to take advantage of the foreign firm's lower corporate tax rate. In this case, the attack was aimed at Pfizer proposed takeover of Allergan, which is based in Ireland and has a 12.5 percent corporate tax rate. Pfizer is based in New York. So, the new combined entity would have paid the Irish corporate rate, which is nearly three times less than the 35 percent U.S. federal corporate rate. However, the deal was called off early Wednesday, with executives citing the changes to U.S. tax regulations.
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