‘It’s not news, it’s CNN’ (my longtime pet name for CNN) just published an article naming 7 US companies that keep more than $50 billion offshore to avoid the US’s extremely high corporate tax rate. For the record, they still pay taxes at all levels for their operations in the US, they just don’t bring money earned in other countries back into the US so they don’t have to pay US taxes. Which should make perfect sense as a reasonable function of business. You didn’t make the money in the US, you shouldn’t have to pay US taxes on that money. If you feel otherwise, you are a dimwit, but I digress.
Here’s ‘It’s not news, it’s CNN’s’ list:
- Apple (AAPL, Tech30): $111.3 billion
- General Electric (GE): $110 billion
- Microsoft (MSFT, Tech30): $92.9 billion
- Pfizer (PFE): $69 billion
- Merck (MKGAF): $57.1 billion
- IBM (IBM, Tech30): $52.3 billion
- Johnson & Johnson (JNJ): $50.9 billion
And here’s who they tend to donate political money to:
- Apple – Donates majority to Democrats
- General Electric (GE) – Pretty close to even historically. Though they traditionally leaned Republican. 2008-2010 they were majority Democrat donors, but they’ve shifted to the GOP in recent years.
- Microsoft: Donates majority to Democrats
- Pfizer: Even money between Democrats and Republicans since 2008. Prior to 2008, Pfizer leaned Republican.
- Merck: Even money between Democrats and Republicans since 2008. Prior to 2008, Merck leaned Republican. Interesting that the two giant pharmaceutical companies shifted Democrat in 2008 when universal healthcare made the platform for the Democratic Party. Currently, Merck is still nearly even for the 2014 cycle, but donations to the GOP seem to be a higher percentage than since 2008.
- IBM: Donates majority to Democrats
- Johnson & Johnson: Traditionally evenly split between Democrats and Republicans, but slightly leans Democrat since 2008.
Since Burger King is in the news I figured I’d let you know they lean heavily to the Republican Party. Yes, even though Warren Buffet is involved. Of course, who could blame them. The Democrats hate everything about the fast food chain.
You can’t be angry with companies moving overseas, or using inversion to save millions of dollars (which ends up being reinvested in the company leading to more jobs). The US has the highest corporate tax rate in the developed world, and we are one of the only nations that taxes all global earnings at the US tax rate. If a company’s branch in Belgium sells a widget in Belgium, the US government thinks they are entitled to tax that widget simply because the corporate headquarters is located in the US. Almost no one else does this. Because … well … it’s stupid.
Since 1982, 43 US companies have left the US and reincorporated in low-tax countries. 13 have done it since 2012.
If you don’t want American companies to leave, you have to give them incentives to stay. All that is required is that we bring our tax code in line with our international competitors. Lower the corporate tax rate, and don’t tax overseas sales at the US rate. This is basic free market competition. If you want to buy a Widget A and two retailers sell Widget A, you will almost always buy from the company that sells Widget A for less. Same thing goes for corporations. If they have the same benefits, but a lower tax rate that saves them millions of dollars, they’d be foolish to not reincorporate overseas.