Friday, July 18, 2014

Corporations are people too, only better

Scott Grannis wrote a post in defense of tax inversions. In it, he quotes a WSJ Op-Ed by Miles D. White about how the maneuver is legal and the absurdity of the US tax code that taxes corporations on their worldwide income:
The U.S. is among only a handful of countries, and the only one in the Group of Seven, that taxes companies on world-wide earnings rather than the earnings in their home domiciles. It's a double whammy: the highest rate, by far, and it's applied worldwide.
While I agree that this aspect of the tax code is an anomaly, I would point out that the United States taxes people (natural persons) on the basis of citizenship. In fact, if a US citizen were to live in an another country, he is liable for US taxes. On top of that, he has to declare his foreign holdings under FATCA under the pain of extensive penalties.

For example, if your Irish grandmother died and left you a modest inheritance in trust for you when you were 14 (recall that Ireland is a popular location for tax inversions). You forgot to tell the IRS about the trust for ten years (who thinks about those things when they are 14?), the back taxes and penalties could very well be higher than the value of the inheritance itself.

To return to the issue of tax inversions, why should corporations be taxed any differently than ordinary American citizens? Are they somehow better?

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