Another Corporate Giant Is Leaving The U.S. – What This Means For You

Try getting in shape for a marathon on an all-McDonald’s (MCD) diet…

You wouldn’t be surprised to come in dead last. After all, you didn’t put in much effort. Actually, you went out of your way to make yourself less competitive. So you would expect to lose.

It’s just common sense.

But this is exactly what U.S. politicians have been doing for years: passing tax laws that sabotage the country’s global economic competitiveness.

As you can see in the chart below, the U.S. has the highest effective corporate income tax rate in the developed world. This is a major reason why the U.S. is lagging behind in the global economic marathon.

These “worst in the developed world” tax laws are clearly hurting the global competitiveness of U.S. companies.

Oppressive U.S. corporate tax liabilities make doing business similar to trying to swim in a lead jacket. So it’s no surprise that an increasing number of productive people and companies are trying to rip off that lead jacket so they can stay afloat.

At this point, it’s more than just a trickle. It’s an increasing trend.

Putting the Beast on a Diet

Over the past couple of years, dozens of high-profile U.S. companies have moved abroad to lower their corporate income tax rate. No surprise, this makes them more globally competitive.

Medical manufacturer Medtronic moved to Ireland.

Telecommunications giant Liberty Global moved to the UK.

DE Master Blenders—the tea and coffee arm of Sara Lee—moved to the Netherlands.

Omnicom Group (OMC), the largest U.S. advertising firm, also moved to the Netherlands.

Burger King (BKW) moved to Canada.

And these are just a few of the most prominent companies breaking the shackles.

The strategy these companies use is called an inversion. It’s where a U.S. company merges with a foreign company in a country with lower corporate taxes and reincorporates there.

Meddling politicians and the mainstream media like to howl and shriek about inversions. They say the practice is “unpatriotic” or “un-American.” That’s nonsense. The fact is, inversions are perfectly legal. Nothing in the current incarnation of the U.S. Tax Code prohibits them.