Long live the King! All hail America’s greatest patriotic company, Burger King.
You’ve probably heard that Burger King is looking to buy Canadian donut shop chain Tim Horton’s. The proposed purchase has created some controversy in circles because Burger King would in essence give up its American citizenship and become a Canadian headquartered corporation to avoid United States corporate income taxes. This is called “inversion,” and it has the panties of the left in a collective knot:
“The deal would be structured as a tax inversion, which could see a more favorable treatment for Burger King’s foreign profits and create the third-largest global quick-service restaurant player,” Scotiabank analyst Patricia Baker said in a note to clients.
“If Burger King can export itself to Canada, I understand the tax savings are in the order of 13 percent,” said David Baskin, president of Baskin Financial Services, which controls about 180,000 shares in Tim Hortons. “So that’s got to be a win for the Burger King shareholders.”
This proposed merger is yet another example of the United States’ unfriendly business climate. Not only does the United States have the highest corporate tax rate, but onerous regulations, including pundits and politicians pushing prohibitive minimum wage hikes, increase the costs of doing business in the United States.
This hurts the American consumer, of course. Corporations pass the costs of doing business to the consumer. They have to–corporations are in the business of making money for the company. If costs rise, corporations don’t simply absorb them. They either cut corners by reducing the amount of product given to the consumer, or they raise prices. In the end, the consumer simply pays more.
Instead of criticizing companies that are working in the best interest of the corporation (and its owners, the shareholders), America should focus on reforming its tax code to reduce the taxation of corporations (and individuals, of course). Cutting taxes to make business more attractive in America would bring about more economic activity, creating more jobs and *gasp* generating more tax revenue for the government via sales, wages, and other taxes.
Our friends on the left often forget that “any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes,” as the great Judge Learned Hand wrote in Helvering v. Gregory. Let he who pays more taxes than he is legally obligated to pay cast the first stone against corporate tax avoidance.
The opportunity for Republicans here is this: they need to show the general public why high taxes on corporations hurts both the general public, and the corporation. The general public as a consumer is hurt by higher taxes through higher costs and less economic activity/opportunity. Also, if more of the general public were investors in corporations, perhaps they’d understand how high taxes hurt them as owners of corporations.
As always, free markets are better markets.