Tax Inversion: The Reason Companies Are Moving Out Of The U.S.

Businesses have been moving out of the U.S. at a rapid pace. Why? One of the many reasons besides cheaper labor and less regulation abroad are high corporate taxes. In fact, ours are the highest in the world at 35%. Thus companies, in order to escape,  do what's called a tax inversion move.

What is a tax inversion strategy?

A U.S. business will purchase a company overseas where taxes are lower. Claim it as their headquarters and thus pay that country's lower tax rate on profits. Can't blame them. They're doing whatever it takes to make the cost/price of their products cheaper and of course increase profit margins.

In some ways this is good for the American people. Who doesn't want to pay less for their purchases?However, on the flip side of the coin, it hurts us due to loss of jobs.

So what's the solution?

Easy. Lower corporate taxes and less regulation.

Makes sense, doesn't it? Lower corporate taxes and regulation and companies would move back or at least it might help to stop the bleeding of businesses moving out of the U.S.

However, Obama's Treasury Department has recently issued two new rules cloaked in noble language that handcuff companies even more.

The first is to eliminate tax inversion. The second is to eliminate private U.S. companies from loaning money from one department to another and thus avoid additional tax consequences by claiming debt.

Businesses do the above legally.

In response, Obama's Treasury Department wants to eliminate these loopholes in order to regain corporate revenue in the form of taxes in order to fill governmental coffers. Why not just lower corporate taxes and eliminate those regulations that hurt businesses so they can compete with the rest of the world? By doing so it would bring jobs back to America, more people would be working and tax revenue would increase exponentially.

However, that is not the ultimate goal of the current administration. Their true motivation is to increase the power and scope of government. So unless we vote in a presidential candidate who believes in free enterprise and has the guts and political skill to help implement these beliefs, we'll carry on as we have been and nothing will change.