Transnational Corporations Have NO Allegiance To The U.S. Zippo, Niente, Zilch

Cutting the corporate tax would make other problems grow. "The abolitionists ask: Why not give up on the fiction that we can adequately and efficiently tax companies and instead tax their shareholders at higher income-tax rates? But as imperfect as the corporate tax may be, the end of it would create all kinds of problems and disadvantages....The corporate tax is an important balancing mechanism in an era of great inequality....Another reason abolishion is a bad idea: If you think we’ve got tax avoidance problems now — and if you don’t, you’re not paying attention — we’d have a much bigger problem with a zero tax rate on incorporated businesses." Jared Bernstein in The New York Times.

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Alan: Big Business has brought penury on the working class by sequestering ever more wealth for itself.

The next phase of self-aggrandizement is to re-incorporate overseas to avoid U.S. taxes.

Will the right-wing emerge from coma or continue to applaud its oppressors?

"Plutocracy Triumphant"

Cartoon Collection

http://paxonbothhouses.blogspot.com/2014/05/plutocracy-triumphant.html

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Burger King Plots Canadian Invasion to Save His Faltering Kingdom

Fast food doesn’t sell like it once did so the burger chain is contemplating the takeover of Tim Horton’s—not for their donuts but for their lighter tax burden.

Patriotism may be the last refuge of a scoundrel, as Samuel Johnson put it, but a lack of it may be the last refuge of corporate executives who have run out of ideas on how to improve their business.

In recent months, we’ve seen a rash of “inversions” where an American company buys a company based in another jurisdiction with a lower corporate tax rate and swaps its American passport for a foreign one for tax purposes. Voila, higher profits!

Now Burger King, the iconic fast-food chain long based in Miami, may be joining the rush. The company is in talks to purchase Tim Horton’s, Canada’s ubiquitous coffee-and-donuts chain. “If completed,” the New York Times reports, “the deal would mean Burger King’s corporate headquarters would move to Canada, raising the specter of yet another American company switching its national citizenship to lower its tax bill.” (The statutory tax rate in the U.S. is 35 percent compared to 15 percent for Canada.)

Burger King, the perpetual Mets to McDonald’s Yankees, has recovered some of its mojo in recent years. Led by 33-year-old CEO Daniel Schwartz and several wunderkind executives who were lionized in a recent Bloomberg Businessweekcover story , Burger King has sold off the corporate jet, adopted other efficiency measures, and pumped up lagging growth overseas. They sold off most of the restaurants the company owned to franchisees, thus freeing up capital and putting the financial onus for revamping tired outlets on others. Lastly, it invested heavily to re-engineer one of its core products, the less-fatteningSatisfries.

This re-engineering couldn’t change the business model Burger King is playing with: low wages and low-quality, low-priced food is getting beat by “fast casual” like Chipotle and Five Guys that offer noticeably better food at slightly higher prices. Efforts to offer more healthful fare have largely fallen flat. Earlier this month, most of Burger King’s North American outlets dropped Satisfries. Meanwhile, several states and cities have jacked up the minimum wage.

Stagnant sales have followed, declining 1 percent last year. Same-store sales growth was just 0.4 percent in North America this summer—positive but below the rate of inflation. During the same period, 22 Burger King stores closed.

When sales are stagnating, costs are rising (wages, beef, and dairy), and your physical footprint is shrinking, the only way to maintain profits is to reduce expenses. In general, MBAs are agnostic about how cost cutting can be achieved. If Burger King’s executives realize they can save a few cents on every dollar of profits by relocating the corporate headquarters so that it is in another tax jurisdiction, then they will go shopping for an inversion. Which is why Wall Street firms like Goldman Sachs, J.P. Morgan Chase, and Morgan Stanley have been pitching inversions as a strategy.

Low wages and low-quality, low-priced food is getting beat by “fast casual” like Chipotle and Five Guys that offer noticeably better food at slightly higher prices.

Sure, there may be valid business reasons for a combination. Tim Horton’s has a huge breakfast business, which Burger King lacks. But it’s easy to suspect that tax avoidance is a driving factor. (Burger King isn’t pursuing a U.S. donut chain like Dunkin’ Donuts.) The fact that hedge fund sharpie William Ackman, who is backing Canada-based Valeant’s effort to acquire Allergan—another potential giant inversion—is one of Burger King’s biggest shareholders doesn’t help matters. 

Burger King could easily ignore the outcry. Thus far, U.S. companies that have engaged in tax inversions have generally avoided any serious political or market consequences. Congress won’t do anything about it, although President Obama has instructed Treasury to examine its options. Investors seemed to agree. As this chart shows, Burger King’s stock jumped nearly 20 percent on the news.

Here’s the rub. It’s one thing for a fairly anonymous company that sells pumps or valves or industrial products to other businesses to renounce its citizenship for the sake of saving a few bucks on taxes. It’s quite another when you’re an iconic American consumer-facing company that relies on fickle American consumers for a large share of its business. 

No, throngs of American consumers won’t stop going to Burger King just because its formal corporate address moves from Miami to Oakville, Ontario. But a few might, and in a business of razor-thin margins, that makes a difference.

More significantly, companies like Burger King spend hundreds of millions of dollars—and lots of time—trying to encourage consumers to think about them in favorable ways, from quirky add campaigns (remember the subservient chicken) to trying to make fries more healthy. By the same token, any measure that can detract from or damage your public image can be very harmful—especially when you’re already losing market, stomach, and wallet share to competitors. It’s hard to think of any entity that has burnished its brand by moving to Canada.