Michael Barone

All this is, or should be, in the news this week because of the proposed acquisition of U.S.-based Burger King by the Canada-based Tim Hortons donut chain. The new company would pay U.S. rates on profits made here, but less on profits made elsewhere.

This is what the administration calls an "inversion" and which its cheerleaders denounce as "unpatriotic." Several U.S.-based pharmaceutical and medical device firms have made similar transactions with a view to reducing total tax liability.

But, as Judge Learned Hand wrote long ago, "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes."

Those who consider their taxes too low may donate money to the Treasury. Some people actually do so.

Some liberals lament that many countries have been lowering their corporate rate to attract more businesses. Ireland's low 12.5 percent corporate tax, plus its high-literacy work force and rule-of-law courts, have spurred much investment there.

These liberals want to resist this "race to the bottom." But as economists of just about all stripes agree, the corporate tax is not really paid by Scrooge McDuck-like figures wallowing in their money bins. The costs are passed along to consumers and employees.

So there's a strong argument for eliminating the corporate income tax altogether. Absent that, there's an overwhelmingly strong argument for cutting the rates and reducing its extra-territorial reach.

At the beginning of his presidency, when he was hailed as a politician uniquely amenable to compromise and reconciliation, Obama recognized the strength of this case.

But it turns out that he lacks either the inclination or the skills to negotiate, or both. So we get denunciations of "unpatriotic" corporations rather than a policy that solves a readily solvable problem.


Michael Barone

Michael Barone, senior political analyst for The Washington Examiner (www.washingtonexaminer.com), is a resident fellow at the American Enterprise Institute, a Fox News Channel contributor and a co-author of The Almanac of American Politics. To find out more about Michael Barone, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com. COPYRIGHT 2011 THE WASHINGTON EXAMINER. DISTRIBUTED BY CREATORS.COM