A traitor is everyone who does not agree with me.
-George III
Right now, for tax purposes, a few big corporations are shifting their residences out of the country to get out of paying taxes – even though they are keeping most of their business, inside the United States. These transactions are known under the technical term of “inversions.” But what these companies are really doing is taking advantage of a loophole to avoid paying taxes here at home, leaving middle class families to foot the bill, since they have to pay more in taxes to make up for what these corporations stash offshore.
White House Statement
President Obama will pull out the only page in his presidential playbook today, when he demonizes companies that make business decisions that lower their taxes. By saying companies that use “inversion,” a technique of buying a foreign firm to escape the highest corporate tax rates in the world are renouncing their citizenship, the White House hopes to have something for Democrats to campaign on during the midterm elections.
Yes, it’s not unlike President Obama to host non-stop fund raising efforts through a series of global disasters which ratcheted anxiety around the world: his focus is staying in office.
The White House statement also reveals something that, in my mind, is significantly more important than a business seeking a fairer tax system: the notion that the government must get paid because of its insatiable addiction to spending. If corporations don’t pay the highest tax rates in the world, then Main Street will have to pay. Really, Mr. President? Considering all the freebies given out during the last six years, you’re going to hit the middle class or, once again, those dastardly rich people for not paying their fair share?
The government must cut spending, must stop paying people not to work, stop encouraging people not to work and stop punishing job-creators. I guess saying as much makes me a traitor; then so be it.
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Voting With their Money
If moving your corporate headquarters means you’ve renounced your citizenship, does selling mutual funds focused on America to buy funds focused on the rest of the world mean the same thing? That’s what millions of Americans have done this year, as they’ve dumped domestic funds to the tune of $6.3 billion while buying $60 billion in world funds.
There is a seriously negative narrative about this trend and lack of confidence in the economy and our leaders.
I think those concerns are valid, but America has survived the war against success and efforts to undermine Capitalism and the economy will gain traction. It’s not going to be as great as it can be, but the embedded greatness will make the difference. I think everyone should have exposure to domestic stocks. That being said, people put their hard earned money where they think it will perform best.
This administration considers all money generated in this nation to be theirs and bristle when efforts are made by those that actually earn those funds try to keep more of it. In the meantime, the amount of Americans that missed this rally is heartbreaking and I suspect some will begin to ease back into investing, but a bunch will do it with one stock at a time while trying to hit homeruns.
People must take the same measured approach to investing.
Speaking of America, it’s doing better as initial jobless claims are at the lowest level since February 2006. Of course it stands to reason that at some point, we will run out of people that can lose their jobs and take first-time unemployment benefits.
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