There has been a lot of back-and-forth amongst lawmakers and political pundits in the media lately regarding U.S. companies switching their addresses to foreign locations in order to avoid corporate taxes. One side claims that there is nothing wrong with such deals, while many democratic lawmakers, including President Obama, contend that it is un-American and that it should be stopped.
However, if you take a closer look at the issue, then you’ll find that the underlying problem isn’t really whether or not companies do these kinds of inversion deals. The real problem can be found in America’s overbearing corporate tax laws. Instead of trying to prevent U.S. companies from moving overseas, perhaps the government should focus on fixing the corporate tax code.
Depending on whom you ask, there are plenty of problems with the corporate tax code, but here are some basic facts that you should be aware of.
• Tax breaks for U.S. corporations equaled about $150 billion in 2013. However, by comparison, tax breaks for individuals reached $1 trillion.
• Revenue from corporate taxes was responsible for 10 percent of all federal tax revenue in 2013.
• Among all developed countries, the United States has the highest corporate tax rate, coming at 35 percent.
• Corporate tax laws are not equal. Different investments and activities are taxed in different ways.
• More U.S. companies than ever before are looking to leave the country. In the 20 years prior to 2004 only 29 companies opted for inversion. However, since the beginning of 2004 through 2013, 47 have occurred.
The debate will rage on, but by focusing more on fixing the cause of the issue (companies leaving the country to save on taxes), the government may find they could fix issue itself if the corporate tax code received a much-needed overhaul.