By Dan Calabrese ——Bio and Archives--August 8, 2014
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As part of the bailout of the auto industry in 2009, Obama's Treasury Department authorized spending $1.7 billion of government funds to get a bankrupt Michigan parts-maker back on its feet -- as a British company. While executives continue to run Delphi Automotive Plc (DLPH) from a Detroit suburb, the paper headquarters in England potentially reduces the company's U.S. tax bill by as much as $110 million a year.
The Obama administration's role in aiding Delphi's escape from the U.S. tax system may complicate the president's new campaign against corporate expatriation. After a wave of companies announced plans to shift addresses this year, Obama last month labeled the firms "corporate deserters." The Delphi case also highlights how little attention the administration paid to the tax avoidance technique until recently. Only this year did Obama include a measure in his annual budget proposal to prevent some tax-driven address changes, which are known as "inversions." Thanks to gaps in a Congressional ban on contracts with inverted companies, his administration continues to award more than $1 billion annually in government business to more than a dozen corporate expats. The Obama administration is now trying to rescind the tax benefits of the Delphi deal that it helped broker. In June, the Internal Revenue Service told Delphi that the 2009 address change should be disregarded for tax purposes, and that Delphi must pay taxes as a U.S. company. Delphi says in a securities filing that it will "vigorously contest" the IRS's demand.This is both delicious and maddening. Delicious because it so clearly shows what a complete fraud this whole narrative about corporate inversions is. The administration just recently started talking about inversions, but they've been happening for a long time, and the administration not only didn't think it was a big deal, they were actually willing to encourage it when it was in their own best interests or in the interests of a company - like Delphi - that they couldn't afford to see go under. Maddening, because today the Democrats need a new political narrative, so they're yelping about corporate inversions and trying to pass new legislation to essentially ban the practice. And since that doesn't square with their own recent history where Delphi is concerned, they have now sicced the IRS on Delphi and told them to surrender the tax advantages that the administration actually encouraged and helped them to obtain five years ago. Damn right Delphi should fight this. It's about as egregious a political screw job as you're ever going to see. By the way, if the Democrats really want to stop corporate inversions, all they need to do is change the corporate tax code so that corporations a) don't have to pay the ridiculous 35 percent rate; and b) corporations don't have to pay taxes on overseas earnings. All the countries where U.S. companies are establishing new headquarters have tax codes that function as I'm suggesting here, which is precisely why the inversions are taking place. Conservatives have long warned that it's idiotic to maintain a tax code that beats up corporations, because it will ultimately cost you more than you gain once they focus on strategies to avoid the taxes - strategies that pretty much always come at the expense of activity and productivity in the U.S. Liberals obviously know this is true, because the very thing they're getting so exorcised about right now is a prime example of it. But instead of admitting their mistake and fixing the tax code, they would rather beat up corporations for doing what it's only natural for corporations to do. But do note: The left has not cared about this issue for long. In fact, they don't even care about it now. They just find it to be a useful narrative at the moment, so please ignore what they did five years ago. That's what the IRS is trying to force Delphi to do.
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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
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