Dems' tax-inversion demagoguery a whopper flopper

The “war on women” whopper isn’t the only flop for Democrats in the midterms. The class-warfare chefs on the Left hoped to get voters fried about American corporations looking overseas for better tax rates through the process of inversion — making acquisitions in order to repatriate to countries with rational tax systems. When Burger King announced the purchase of Canadian firm Tim Hortons to relocate in Canada, Democrats tried to char-broil the company as part of its faux-populist charade. As Politico notes, though, the whole strategy turned into a nothingburger:


President Barack Obama and his Democratic allies hoped to capitalize on the recent wave of companies ditching the U.S. to slice their tax bill as a populist issue to fire up the progressive base and bash Republicans as slaves to corporate interests.

So far, rather than becoming the political whopper that Democrats dreamed of, the issue has turned out to be pretty much a massive dud.

The one recent high-profile corporate name to consider the move, fast-food chain Burger King, did so with the stamp of approval from top White House ally Warren Buffett. Almost no one is talking about the issue on the campaign trail. And there is little chance legislation will advance or even come to a vote on Capitol Hill before the midterm elections. Meanwhile, some influential tax policy analysts suggest any of the administration’s possible unilateral actions could make the problem worse, be deemed illegal, or wouldn’t have much impact at all.

At the same time, Republicans seem increasingly comfortable arguing that companies looking to “invert” by moving their official address out of the U.S. highlights the disaster of the American Tax Code and the need for a complete overhaul, not another one-off fix sure to be shredded by corporate accounting wizards.

The inclusion of Buffett in this mix has made it difficult for the White House to seize on the deal, even though Politico notes that the brand’s familiarity would make it a great platform for its usual demagoguery on taxes. Unfortunately, the Obama administration has relied on Buffett to help make the case for much of that demagoguery, including the 2011 argument that Buffett’s secretary pays a higher rate than he does.  That soundbite failed to mention the difference between taxing salary income and taxing capital gains, which is a rational basis for the difference.


After painting Buffett as their ally in class-warfare policy, it’d be a little difficult to cast him as the enemy. They might have been able to do so had Buffett’s company not been involved in the Burger King transaction, Senator Orrin Hatch speculated, because Buffett called him before that to press him on inversions:

Hatch said during a speech at the U.S. Chamber of Commerce on Thursday that, before that fuss erupted, Buffett had wanted to know what lawmakers might propose on inversions.

“He called me to say, ‘You’ve got to do something about tax inversions,” the Utah senator said. “I believe that was before he entered into the Burger King situation.”

Now Buffett is having it his way, although he now denies that the Burger King inversion has anything to do with taxes. Hatch blasted Democrats for their demagoguery on this issue and corporate taxes in general:

Mr. Hatch, the top Republican on the Finance Committee and a leading GOP voice on tax policy, said in a speech to the U.S. Chamber of Commerce, that Democrats – particularly Obama administration officials – have engaged in “heavy-handed political rhetoric” by questioning the patriotism of companies that seek to do inversion deals.

“They are apparently more than happy to stoke the public fires against American businesses if it will help them in an election year,” Mr. Hatch said. Administration officials also hope to paint Republicans who oppose a legislative crackdown on inversions as “un-American boogeymen,” he said.


So far, it seems, the American public agrees. Perhaps they are just tired of Barack Obama’s divisiveness, or perhaps they grasp that tax environments are competitive globally as well as domestically. Rick Perry has managed to create a robust economy in Texas by cutting taxes and regulation and convincing companies like Toyota to relocate to the Lone Star State at the expense of tax-nightmare state environments like California. Rather than look for ways to penalize those who seek better tax environments, why not make the American tax environment more competitive by reforming the tax code here?

That kind of approach would take longer and more work, but like an elegant dinner with good and healthy food, the preparation pays off in the end. Demagoguery and class warfare are the fast food of politics — insubstantial, unhealthy, and counterproductive in the long run, but cheap and effortless in the short run. From the “war on women” to “unpatriotic corporations,” it’s clear what kind of diet Democrats want to feed Americans.

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