Tax dodge

image credit: Vocal-NY

Allan Sloan, editor-at-large for Fortune magazine, is angry.

And with good reason: He is upset at a lot of U.S. corporate executives who are engaging in "inversion.” This is the process of moving the location of incorporation to a tax haven and skipping out on paying U.S. taxes. Even though the company is still headquartered in the U.S. and derives much of its revenue and profits here, the company becomes a foreign entity.

In a cover story this month titled "Positively un-American tax dodges," he writes: “All of this threatens to undermine our tax base, with projected losses in the billions. It also threatens to undermine the American public’s already shrinking respect for big corporations.”

He is angrier at corporate America than he has been any time since the financial crisis, and you should be too. “The spectacle of American corporations deserting our country to dodge taxes while expecting to get the same benefits that good corporate citizens get” is unacceptable.

Some estimates are that these tax maneuvers have cost the U.S. taxpayer almost $20 billion over the past 10 years. I suspect that number is off by an order of magnitude. Just two companies, Apple and Google, with their variations of the Double Irish With a Dutch Sandwich, could account for that much in forgone tax revenue. Everyone else’s taxes go up accordingly when these companies skip out on what they owe.

There are several benefits these freeriders get but don't pay their fair share to shoulder. They include:

  • Deep financial markets
  • Rule of law
  • Military protection
  • Physical infrastructure
  • National research programs
  • Terrific places for employees and their families to live

And of course, access to the wealthiest consumer market in the world.

There are a variety of solutions to this, none of which stand much of a chance with our do-nothing Congress. So a major problem continues and builds, even as our decrepit infrastructure decays further day by day.

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