Points to ponder as bean counters shift their tokens.
There's been so much talk about U.S. firms repositioning their corporate headquarters overseas to take advantage of lower tax rates that fear-mongers may be missing a few points.
To a large extent, this is a paper shuffle, and will not mean a wholesale move of corporate operations out of the country. After all, many U.S. firms are incorporated in Delaware, and conduct most of their business in other states. For some, their only presence in Delaware is a file in a lawyer's office.
In the past, U.S. firms that made money worldwide left the profits where they were gained, because if that cash were to be "repatriated" -- brought back to corporate HQ in America -- it would be taxed at U.S. rates. So the companies that use the "inversion" tool to shift their corporate parentage to another country will still do business in the U.S., but they become -- technically, at least -- a "foreign firm" and are taxed at home-country rates.
Does all this mean manufacturing, sales and marketing divisions will all be uprooted and taken out of America? Not likely, unless the company drops out of the U.S. marketplace. And that would mean abandoning a huge slice of their business.
Consider also these examples: Ford assembles cars in Mexico and Canada for sale in the U.S., and Toyota, a Japanese firm, assembles cars in Tennessee for sale in the American marketplace. And for many years, Japanese firms did not "repatriate" their profits, but instead reinvested them in the U.S.-based facilities.
One quick way to stop the so-called inversion trend would be to lower U.S. corporate tax rates, if in fact inversion is such a terrible danger to American business. In Logic 101, this fear is known as the "slippery slope fallacy," the idea that one thing inevitably leads to a series of other dangerous happenings.
Possible? Yes. Plausible and likely? Not for manufacturing firms, although some pharmaceutical firms already concoct some of their products elsewhere.
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