Whopper of US tax policy wakeup call

Posted Online: Aug. 29, 2014, 11:00 pm
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Orange County Register
Burger King, one of America's most recognizable fast-food restaurants, has entered into discussions to buy out the Canada-based coffee-and-doughnut chain Tim Horton's Inc., seeking an opportunity to merge and create a new company.

The merger of Burger King, with a $9.6 billion market capitalization, and Tim Horton's, valued at about $8.4 billion, would create a massive shift in the industry.

Furthermore, should the talks prove successful, the new company's headquarters would be located north of the border.

A merger would mark the most high-profile instance of tax-inversion, a process by which an American company reincorporates abroad, after a merger with a foreign company, to take advantage of lower foreign tax rates. Treasury Secretary Jack Lew and President Barack Obama called attention to this practice last month, with the latter calling it a violation of "economic patriotism."

"Rather than double-down on the top-down economics that let a fortunate few play by their own rules," the president said in a recorded weekly address, "let's embrace an economic patriotism that says we rise or fall together, as one nation, and as one people. Let's reward the hard work of ordinary Americans who play by the rules."

While a fine sentiment, his appeal loses a fair amount of power when Americans are being asked to play by bad rules. This is certainly the case for U.S. corporations, which pay the highest base corporate tax rate in the developed world – the federal rate alone is 35 percent. And while that number is mitigated by a selection of loopholes and deductions – Burger King's effective tax rate last year was 27.5 percent – it can hardly compare with Canada's federal rate of 15 percent, considerably lower than the 28 percent rate in place when conservative Prime Minister Stephen Harper took office in 2006.

Canada, in fact, has been quickly climbing the ranks as a desirable place to do business. Bloomberg Rankings placed it second, ahead of the U.S. and behind only Singapore, as the best country in the world for business.

This bodes poorly for the U.S. Losing large companies, like Burger King, with a yearly tax bill of almost $90 million, is clearly not in America's interest.

Scolding companies for not being "patriotic" is not a solution; making the U.S. a better place to do business is.


Local events heading

  Today is Friday, Sept. 19, the 262nd day of 2014. There are 103 days left in the year.
1864 -- 150 years ago: Charles M. Osborn of this city, a lawyer of prominence, who voted for Lincoln in 1860 is now out strong for McClellan and will take the stump for him.
1889 -- 125 years ago: The George Fleming company had begun its dried fruit packing in a branch plant on 16th Street, Rock Island, employing nearly a hundred workers.
1914 -- 100 years ago: The cornerstone of the new Eagles home was laid. Building committee members were John Kobeman, Fred Ehmke and Frank Wich.
1939 -- 75 years ago: Former Kaiser Wilhelm, in exile, is sad as the Nazis march with communists.
1964 -- 50 years ago: Ninety-two members of the acappella choir at Davenport's West High School today accepted an invitation to perform at the New York World's Fair on June 13, 1965.
1989 -- 25 years ago: A Rock Island woman is one of 50 winners of $10,000 in cash in the Illinois State Lottery's "Celebration "89" instant ticket game. Dawn Loeffler was the third winner to be chosen through daily drawings that began Aug. 28 and will run 50 consecutive days.

(More History)