If lower taxes had nothing to do with it, Burger King’s (BKW) new headquarters would be in San Diego, not Canada.
But that is not going to happen and we all know why. American decision makers have taken high taxes and declared them an art form — one that was heartily endorsed during the last election by America’s favorite investor, Warren Buffett.We even named it after him: The Buffett Rule.Secretaries should not pay a greater share of their salaries in taxes than CEO’s.
But we had to wait until they passed it until we found out what was in it. The Buffett Rule does not apply to Buffett.
Buffett and his supporters scrambled to invent the Buffett Corollary after it was learned he helped Burger King Worldwide buy a chain of Canadian doughnut shops named Tim Hortons (THI). Buffett put up $3 billion and the Wall Street Journal announced as part of the deal, Burger King would move its headquarters to Canada.
There’s only one reason to do that: save taxes. Canada has lower marginal corporate tax rates. You remember those, before our national economic policy became “Blame Bush” that is how we created wealth and jobs in America.
This is what the President calls “economic patriotism.”When we raise taxes on the 53 percent still actually paying them, the only patriotic response is to sit back and enjoy it.
Now I know what Samuel Johnson meant when he said patriotism is the last refuge of a scoundrel.
Let’s put aside for a moment that Burger King’s largest investor lives in Brazil or that Burger King sells its delicious fare all around the globe. So moving to Canada may be less than it seems. But there is no doubt that the new company will be paying less in taxes.
Which is why shares of both companies rose 20 percent after the deal was announced — a rarity because most often, shares of at least one of the companies decline during an acquisition.
Burger King is not the first, just the latest, company to say it does not feel like waiting around for someone to figure out taxes are too high in America.
The pharmaceutical company Mallinckrodt (MNK) used to be a pillar of the St. Louis business community, but it is now headquartered in Ireland and investors like that just fine. They believe they are entitled to a bigger share of their company’s profits than the government.
It’s a long list: Medtronic (MDT), Pfizer (PFE), Chiquita (CQB), Omnicom (OMD), Eaton (ETN), Aon (AON), Ensco (ESV), Rowan (RDC), Liberty Global (LBTYA) are just a fraction of the companies who decided they cannot afford the higher taxes that staying in America necessitates.