If a corporate deserter doesn’t want to pay US taxes, don’t let it buy US elections

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Credit: American Friends Service Committee

As far as lucrative business practices go, one clever gimmick is an increasingly popular one: the “corporate inversion,” in which a U.S.-based company merges with an overseas company and changes its legal address, thereby lowering its corporate income taxes due to Uncle Sam.

The proposed deal between Pfizer and the Irish company Allergan would’ve been a prime example, if not for the new Obama Administration tax rules designed to curb that particular tax loophole. As the U.S. Department of Treasury noted, “Typically, the primary purpose of an inversion is not to grow the underlying business, maximize synergies, or pursue other commercial benefits. Rather, the primary purpose of the transaction is to reduce taxes, often substantially.”

On a broader level, corporate inversions raise serious concerns about the flow of vast amounts of money between corporate lobbyists, elected leaders who can legislate new tax rules, and powerful entities looking to protect their narrow financial interests no matter the harm to the common good.

Those political power players in the corporate sector include companies that renounce U.S. citizenship in order to dodge taxes but still seek to spend enormous money to meddle in U.S. politics. By contrast, actual human beings aren’t allowed to spend in American elections if they’re not Americans.

Why should multinationals that stiff Uncle Sam get a special exemption that they can abuse to keep politicking away and swaying U.S. elections? They shouldn’t. Prof. Ciara Torres-Spelliscy, a fellow at the Brennan Center for Justice, explains why in this post:

The court reasoned that just as Bluman is not allowed to vote in an American election as a Canadian citizen, it is similarly appropriate to ban his money. The Supreme Court summarily affirmed the ruling but gave no reasoning that might guide the lower courts.

The FEC, Congress and the Courts really need to think about whether the logic of Bluman should apply to foreign-owned companies like Budweiser.

More companies than you might suspect have foreign ownership through tax-dodging international mergers. As I explore in my new book Corporate Citizen?, election regulators need to grapple with the multinational nature of corporations that do business in the U.S. once and for all.

Citing another company that turned to corporate inversions to lower its tax bill to America, she proposes a common sense solution (emphasis added):

Burger King could re-name the Whopper “The George Washington,” or start serving “freedom fries,” the fact remains that the company is now headquartered in Ontario.

So should Burger King be able to spend in U.S. elections under Bluman? Arguably not. The same logic of Bluman that we don’t want foreigners influencing American elections should still apply. After all, if Burger King doesn’t want to pay American taxes, perhaps they should not be able to spend in American elections. The FEC could help by clarifying exactly who is in or out of the ban on foreigners so that foreign-owned companies don’t try to change the outcome of American elections at the bidding of a foreign interest.

For the original article, see “Why ‘Made in America’ May Not Mean What You Think,” Brennan Center For Justice (2016).