There is an old saying, “If you don’t like it, leave.” Apparently, corporations have been recently leaving in droves. Why? Taxes.
In order to avoid paying U.S. corporate taxes, U.S. companies are simply moving their headquarters overseas. Reuters reported in April that foreign profits are being held overseas by U.S. Corporations to avoid paying taxes on them here in America. Between 2008 and 2013 the amount doubled to $2.1 trillion. Companies want access to their foreign profits but are not willing to pay the corporate tax rate here in the U.S. Rather than do that, they move overseas.
Citizens can leave too. In February, it was reported by Forbes magazine that Americans renouncing their citizenship is up 221 percent in 2013. Granted, that percentage seems like a lot but it is still only 2,999 people out of 317 million. The numbers are relatively few but they have seen a seven-fold increase since 2008 according to Time Magazine.
The reasons are usually financial. American citizens living abroad are often subjected to double taxation, paying not only Uncle Sam but the countries that they are living and working in as well. Many simply give up their U.S. citizenship.
What happens when you give up citizenship? It used to be free but since 2010, people had to pay $450 for the privilege. The U.S. is one of the few that allows renunciation of citizenship to a stateless status. Renunciators give up the protection of the American government domestically and abroad. They give up all the rights and protection of the Constitution and the Bill of Rights afforded to U.S. citizens.
They are shamed too. Since 1996, their names have been required to be published in a quarterly list of citizens renouncing their citizenship. This “Name & Shame Law” also includes what is known as the Reed Amendment. It states that if the reason to give up citizenship was for the purpose of avoiding taxation, then the person will not be allowed to ever return to the United States or its territories. But there’s more.
Since 2008, due to the Heroes Earnings Assistance and Relief Act, people renouncing citizenship also have to pay an exit tax. This “exit tax” is on all property of the expatriate. All their property is deemed sold for fair market value on the day of his or her renunciation, and they are taxed on that value.
The Supreme Court decision in the 2010 Citizen United vs. Federal Election Commission case basically said that corporations have the same rights as individuals. In effect, corporations are people. Let us assume, for the sake of this argument, that they are.
In the last decade, about 50 U.S. publicly held companies have moved abroad to avoid paying taxes and more are planning it. The latest announcement, Walgreens, has inspired congress to at least talk about doing something about the rush of companies moving overseas. We’re talking about Walgreens, a company founded in 1913 on the south side of Chicago, not some foreign entrepreneur trying to look American. It has been an American company for 101 years, and, if corporations are people, why aren’t they subject to the same renunciation of citizenship that regular Americans are?
I suggest that if a corporation wants to move overseas to avoid paying taxes in the United States, then the Reed Amendment should apply. That company, including its board of directors and upper level management will not be allowed back in the United States nor any of their products produced overseas. Furthermore, according to the Heroes Earning Assistance and Relief Act, those companies land holdings in the U.S. should be determined on the legal day they renounce U.S. citizenship and pay the exit tax on that value. I think you could even take it one step further. If those companies had received in the last 10 years any special subsidies, tax breaks, grants or taxpayer money to help them get established, then they should have to pay that back too.
If that were to happen, I don’t think you would see too many U.S. companies looking for a cheaper tax alternative in foreign countries anymore.