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Now the Democrats Want a Fence. Not to Keep Illegals Out, But to Keep Corporations In!


The tax code is forcing corporations offshore and Democrats want to punish them. Wouldn't it be better to reform the tax code and become the corporate headquarters destination for all the world's companies?

The president is finally preparing to put up a fence. The wall is not intended to keep illegals from entering, but to keep corporations from leaving.

Corporate America is voting with their feet. They make decisions the same way you make decisions. They do what is in their best interests. Occasionally that includes making decisions for tax reasons.

International companies sell products worldwide. If they were domiciled in say, Ireland, they would pay Irish taxes on goods sold in Ireland. Under our current system they pay taxes in Ireland and then again in the U.S. when what is left of the profit is brought home.

Some American corporations have merged with foreign firms so that income earned on foreign sales is only taxed in that jurisdiction. The conditions under which it may be done are specified in Section 7874 of the U.S. tax code. Many more are considering it.

Liberals, though, are looking for a way to punish them. They begin, of course, by demonizing them.

President Barack Obama questions their patriotism. He calls them “corporate deserters.” Treasury Secretary Jack Lew demands “economic patriotism” and has written to Congressional leaders asking that legislation be drafted to punish them with penalties and restrictions.

One of the proposals is to pass a law retroactively that declares any company that does more than half of its business in the United States is a U.S. company. This is an open encouragement for American companies to be purchased by foreign entities that will likely be met by more demonization and punishment. Another proposal is to tax the shareholders.

I have a better idea. Let’s make our tax laws so appealing that international firms will want to relocate here.

First, we must confront the myth that corporations pay taxes. They don’t. Their tax costs, as well as all of the other costs of doing business, are built into their price. That is the only mechanism that exists for a business to pay a bill. You and I pay their overhead costs, including their taxes, when we buy their product.

In fact, the consumer is the only taxpayer in the world. When the product is consumed there is nothing left to pass on.

Under the current system, business decisions are often made for tax reasons rather than economic reasons. You’ve been there. You get up on Monday morning thinking about your employees, your customers and your shareholders. You show up for work and the man sitting at the head of the table is the tax man with 74,000 pages of complications written by people who have never had a customer or an employee. That tax code is the single biggest drain on our economy.

There are four huge problems our tax code creates that have a negative impact on our economy.

  1. We currently spend upwards of a trillion dollars a year just complying with the code to remit what we owe. That is like paying for a dead horse. We get nothing for it. One study concluded that a small business spends $724 just to comply, collect and remit $100.
  2. Our retail prices are inflated by 22 percent by the embedded costs of the Internal Revenue Service at every level of the manufacturing and distribution chain.
  3. The underground economy avoiding the tax system is estimated to be about 2 to 3 trillion dollars a year.
  4. There is today, in offshore financial centers, about $20 trillion. Those dollars should be in our economy. They are not because of the tax consequences of repatriating them.

Moving to a consumption tax fixes them all. Nibbling around the edges of the current income tax system fixes nothing.

The FairTax (HR 25), introduced in the U.S. House of Representatives by Rep. Rob Woodall (R-Ga.) with 75 co-sponsors, repeals all taxes on income and abolishes the IRS. Passing HR 25 would create the world’s largest magnet for corporations and jobs.

Currently, the average income earner pays 23 percent of what he earns (15 percent income tax and 8 percent payroll tax). Under the FairTax, you would pay 23 percent of what you spend. There is no tax on savings or investment.

Under the FairTax, essentials are not taxed. Rather than having the political battle of defining essentials, the FairTax uses the government definition of poverty level spending, which is the amount of spending necessary for a given sized household to buy their essentials.

Every household would receive a cash distribution at the beginning of every month to prebate the tax consequences of spending up to that level. For a family of four, the first $2,500 in spending each month would be spent untaxed.

Beyond that everyone pays the same. We all become voluntary taxpayers paying taxes when we choose, as much as we choose, by how we choose to spend.

Eliminating the tax code eliminates the compliance costs yielding a 10-year tax cut of 5 to 10 trillion dollars. It also increases the purchasing power of all Americans, through reductions in prices and increases in take-home pay.

We will become a global economic powerhouse by selling into a global economy without the tax component in our price system.

The FairTax abolishes the IRS! That is significant since we now know that the IRS has been using confidential information on individual Americans against them politically. No free society should tolerate an agency this intrusive, this coercive, this corrosive. The IRS has become a Racketeering Influenced Corrupt Organization that must be put down like you would a rabid dog.

By eliminating the IRS, the American people get the ultimate gift that freedom has to give – the gift of anonymity. Never should an agency of government know more about us than we are willing to tell our children.

John Linder served in Congress for 18 years from Georgia. He and his wife, Lynne, have retired to a farm in Northeast Mississippi. He can be reached at: linderje@yahoo.com

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