Today, the Senate Committee on Finance will vote on a bill introduced by Sen, Charles Grassley of Iowa that would make it illegal for a US firms to re-incorporate overseas to avoid the tax bias against corporate overseas income. CMDC considers this and similar legislation in the House to be a wealth killer. Rather than address the manifest defects with the current US federal tax system, such legislation seeks to punish businessmen who seek to compete globally on a fair field and act to protect the wealth they create.
Accordingly, we submitted the following letter to the members of the committee:
Dear Senator:
On behalf of the Center for the Moral Defense of Capitalism (CMDC), a non-profit corporation organized to promote the social welfare of the nation by presenting a moral foundation for individualism and economic freedom, I am writing to express our opposition to S. 2119, the “Reversing the Expatriation of Profits Offshore Act”, which was introduced by Sen. Grassley of Iowa.
A present threat to the American pursuit of prosperity is our fundamentally flawed system for paying for the cost of government. One example is that in the face of intense tax competition among the nations of the world, the current US tax system unfairly taxes wealth earned overseas. Except for the United States, no major country taxes corporate revenue earned abroad. The result is that American companies operating overseas are forced to compete on an unfair playing ground against foreign companies that do not pay the same taxes. This policy threatens American jobs and American ownership of businesses.
In the face of this injustice, Congress has evaded its responsibility to fix the flawed laws which cripple American companies and threaten American jobs. As it is the people that ultimately pay taxes, every dollar of unfair “corporate tax” must come either from decreased shareholder returns on investment, decreased employee wages, or increased customer prices.
As a defense against unjust corporate taxes, some American companies have created paper headquarters in tax havens, choosing to legally incorporate there, while their day-to-day operations remain in the US. As a result, jobs and profits stay in America, but the companies escape the unfair US tax treatment that their foreign competitors do not suffer.
Yet American companies such as Fruit of the Loom, Ingersoll-Rand, Nabors Industries, PricewaterhouseCoopers Consulting, Seagate Technologies, Stanley Works, Tyco International, and Weatherford International, just to name a few, are all being pilloried for reincorporating in overseas tax havens. Unlike the unfair corporate taxes US businesses are forced to pay, these reincorporations do not threaten a single American job or close any American plants. Instead, these companies are now able to compete on the same footing as companies from every other major country in the world.
Yet rather than correct the conditions that compel US firms to seek protection from unjust and destructive taxation, some members of Congress propose to outlaw these reincorporations and legally force business owners to keep their firms in the US, even if it means the loss of American jobs and the destruction of American businesses.
The current state of affairs is unacceptable. You must not perpetuate a tax regime that makes it impossible for American companies to do business. Our lives and our prosperity depend on our ability to work free from unjust shackles. We demand Congress protect our rights.
Accordingly, CMDC calls upon you to vote against S. 2119 and work to immediately address the unfair and destructive tax bias against US corporations.
Sincerely.
Nicholas Provenzo Chairman
We expect that the Senate Finance committee will pass the bill, allowing it to move on to a floor vote, but as this is an election year, we expect that the issue will be fought both in the halls of congress and among the candidates.
