With recent news about Burger King and medical device manufacturer Medtronic relocating their headquarters outside of the United States to avoid high corporate taxes, the subject of corporate inversions has been a big topic of discussion in the media. While President Obama and the Treasury Department condemn these moves and construct roadblocks to prevent inversions, they fail to see the reasons that drive these corporations overseas.
It’s no mystery why American companies have stockpiled over $2 trillion of overseas earnings in foreign bank accounts. If they bring it to the United States, the IRS would grab 35% of it. That’s the US corporate tax rate – the highest in the developed world, double the average in EU nations.
Political rhetoric in the United States, particularly on the right, has a strong tendency to focus on the incomparable economic freedom of Americans and American businesses. They portray the rest of the world as more socialistic and the American system as the closest thing to a free market economy operating in the world. Yet that is far from the truth. In fact, America is swiftly being supplanted as a preferred place of business by many other countries in the rich world.
Subway’s move came as a result from pressure from Vani Hari, a blogger who calls herself “The Food Babe.”