News that Pfizer, the world’s largest pharmaceutical company, plans to buy Britain’s AstraZeneca for $106 billion, renounce its U.S. citizenship, and declare itself a British company, has jolted Congress.
Pfizer is being denounced as disloyal to the land of its birth, and politicians are devising ways to stop Pfizer from departing.
Yet Pfizer is not alone. Hedge fund managers are urging giant corporations like Walgreens to go nation-shopping for new residences abroad to evade the 35 percent U.S. corporate income tax. Britain’s corporate income tax is 20 percent, and Pfizer stands to save more than $1 billion a year by moving there.
In what are called “inversions,” dozens of U.S. companies have bought up foreign rivals, and then moved abroad to countries with lower tax rates, cutting revenue to the U.S. Treasury. The real question, however, is not why companies are fleeing the USA, but why our politicians continue to drive them out of the country.
Many governors understand that if you want something in your state, you do not drive it out with high taxes. You strengthen the magnet of low taxes. Florida wants residents of other states to move there and retire there, so it has no income, estate or inheritance tax.
For years, Rep. Jack Kemp urged the creation of enterprise zones in poor communities like Benton Harbor, Mich., and Harlan County, Ky. Businesses that relocated there would be exempt from corporate income taxes. Why not make the United States the largest enterprise zone on earth — by abolishing the corporate income tax?
What a message this repeal of the U.S. corporate income tax would send to corporate headquarters worldwide: Relocate your company or next factory to the USA, keep every dollar of profit you earn, and either reinvest it here or take it home. Your call.
Consider the other benefits of abolishing the corporate tax. Corporate lobbyists, who spend their days walking Capitol Hill corridors seeking tax breaks, and their evenings at fundraisers handing $1,000 checks to congressmen who can create tax loopholes, could be put out to pasture.
Armies of tax lawyers, accountants and IRS agents could be shifted to more productive work. Companies could focus full time on creating new wealth, not finding ways to keep what they have earned.Many politicians seem to think the corporate tax punishes the rich and powerful and is an indispensable weapon in reducing inequality and redistributing wealth. This is neosocialist myth. As Ronald Reagan used to say, corporations don’t pay taxes, people do. The billions in corporate income taxes paid by Walmart and McDonald’s come out of the dollars spent by consumers. Where else does Ford Motor get the money to pay its corporate income tax, if not from dollars spent by Middle Americans on Ford cars and trucks? Middle America pays the corporate income tax.How could we make up for the lost revenue to government? Simple. The corporate income tax last year produced $273 billion, less than a tenth of federal revenue. Imports, which kill U.S. jobs and subtract from GDP, totaled $2.7 trillion last year. Put a 10 percent tariff on imports, and the abolition of the U.S. corporate income tax becomes a revenue-neutral proposal.
Looking back, consider what our political class has done to our once self-sufficient American Republic. We impose on businesses, our principal job creators, the most punitive corporate tax rate in the West. Through “free trade,” we tell U.S. companies that if they wish to avoid our taxes and get around our minimum wage, health, safety and environmental laws, they can move to China, produce there, and bring their products back free of charge — and kill their competitors too patriotic to leave America.
“The Decline and Fall of the United States of America” is going to be a piece of cake for future historians to write.
Patrick J. Buchanan is the author of “Suicide of a Superpower: Will America Survive to 2025?”