The New York Times recently reported on tax avoidance schemes undertaken by Apple, the world’s most profitable company. The left (including the President) hates profits and wants people and businesses to pay higher taxes. Of course, Apple didn’t get to be so profitable by unnecessarily paying taxes that its competitors are smart enough to avoid.
The fact is that businesses, unlike some individuals, have the money and wisdom to hire tax planners to reduce their tax bills. Is this a bad thing? No, tax competition insures that governments cannot get too out of control in terms of their tax and regulatory policies. Should the rest of us be concerned? Well, I for one would rather have resources stay in the private sector than in the coffers of inefficient governments. Sure, it may not be “fair” that businesses and the wealthy can legally avoid heavy tax burdens. Next time the government asks for more taxes, it is worth realizing that some of the very people targeted for higher taxes will simply flee or find a loophole to avoid the tax. That is why they are wealthy and successful in the first place.
The Times article was excellent. HOWEVER, it failed to point out that the United States may be the only OECD country that taxes income on a world wide basis as opposed to territorial income tax. Translation: After paying foreign income taxes, the foreign multinational can repatriate the net foreign profits to the home country tax free. Not so with US multinationals. They have to pay another layer of US taxes if the US rate is higher than the foreign rate (and the US corporate tax rate is now the highest in the world).
If the US had a territorial income tax like the other OECD nations, much of the tax gamesmanship played by US corporations would cease. Whenever politicians start pounding their collective chests about the unfairness of US corporations trying to cheat the tax man, be sure to ask the same politician why the US does not have a territorial income tax.
The Taxfoundation.org has lots of articles on the subject of territorial income tax.
The Fair Tax would eliminate all these loopholes, tax fraud and the real need for the IRS. Check it out: http://www.FairTax.com