Jeff Opdyke - editor of Sovereign Investor

By Jeff D. Opdyke, Editor of Sovereign Investor and Profit Seeker at The Sovereign Society

Every day, I wake up to find a new frustration with my America.

These days that frustration is aimed at Burger King … and drug maker AbbVie … and Chiquita Brands. All three companies, and several others, are seeking to relocate overseas, in part to reduce their tax obligations here at home. It’s a process I’m sure you’ve heard about in recent weeks called a tax inversion.

I’m all for the inversion. It is absolutely the right thing to do for shareholders to battle a corporate tax regime so usurious and onerous that it now ranks among the three worst on the list of three dozen developed nations.

I’m frustrated that the actions of Burger King, AbbVie and Chiquita have yet again made me so angry at my government. Once again, American politicians and bureaucrats are attacking the symptoms rather than disease. And I fully understand why: Our country’s finances are so fundamentally broken — and so irreparable at this point — that lawmakers and bureaucrats have no choice but to siphon money from every single spigot they can find, regardless of the morality of doing so.

There’s a message in this … and it is not good for you, your wealth or shareholders of Western companies.

Earlier this month, Treasury Secretary Jack Lew told Congress that reducing the number of tax inversions was “imperative” for America. He — and a media industry that do not quite grasp the difference between that which is legal and that which is immoral — keep referring to inversions as a “tax dodge” and insist that companies are relocating simply to avoid paying income taxes here at home.

To which I reply, “No” to the tax dodge … and “So what?” to the claim that companies are looking to avoid U.S. taxes.

No one and no company is obligated to pay taxes beyond what they owe. And everyone and every company has the right to reduce taxes owed through every legal mean provided for in the law. Tax inversions are one of the many legal means at the corporate level.

The fact the Treasury and Congress are running around desperately trying to alter the law, and are implying in their media sound bites that reducing tax obligations is immoral tells you just how troubled America’s finances are. They’re trying to immorally sway public opinion against a legal tax maneuver by insinuating that Burger King is essentially anti-American for wanting to — smartly — relocate to Canada through the purchase of donut-and-coffee chain, Tim Hortons.

We find the real immorality in the rules that cause Burger King and Chiquita to seek the benefits of a tax inversion in the first place.

Uncle Sam’s Global Tax Regime

Most countries in the world enforce a territorial tax system, taxing their residents and local companies on the income they generate in the domestic market. They do not reach across global borders and try to claim that money earned elsewhere is subject to taxes at home.

Uncle Sam, however, is one of the very few countries to impose on all of us a global tax regime. Wherever you earn a nickel in this world, our debt-drunk uncle demands his cut. In terms of taxation’s purpose, it is a wholly immoral system.

Governments raise taxes to provide domestic services — and domestic services only. It’s not like the U.S. is paying for interstates or border protection or welfare assistance in Canada or the U.K. or Japan. Why, then, should a U.S. company pay taxes to America on sales collected overseas? The company already pays taxes in the local jurisdiction.

So what if Hong Kong or Singapore or Ireland levy corporate tax rates that are lower than America’s? That’s a competitive advantage they foster to lure business to their respective countries and to grow their economies. If America loses business to those or other jurisdictions, it should serve as a marquee signboard telling American lawmakers that their tax policies are antiquated, overreaching or excessive. Smart lawmakers would see that as a challenge and an opportunity to overhaul their country’s tax code to become more competitive to lure back the businesses they lost, to keep those that are threatening to leave and to steal others from countries with excessively high rates.

Idiots, like Michigan Democrat Sen. Carl Levin, run around upbraiding companies for being unpatriotic.

It’s one of the reasons America now ranks 32nd among 34 countries in the latest International Tax Competitiveness Index. We do nothing in this country to encourage local businesses to stay or foreign businesses to relocate here. Instead, our government looks upon companies as corporate ATM cards. Politicians want to take as much out of the machine as they can.

Indeed, KPMG compiled a table that lists corporate rates around the world, and guess which country sits at the very bottom of the list with a usurious corporate tax rate of 40%? Do I even have to tell you?

True; U.S. companies rarely pay full freight because of various write-offs, credits and what not. But the very fact that our stated rate is the highest in the world tells you just how flawed our system is.

And my fear is that because of our heft globally, and because of the size of our debts, the entire global tax system is soon to change in ways that benefit the U.S. government but hurt the rest of the world.

Harmonized Taxes = Higher Taxes for Everyone

The Organization for Co-Operation and Development (OECD), a primary ringleader in the Evil Empire that’s attacking self-rule and pushing for a one-world financial system, is calling on governments around the world to essentially harmonize their tax systems in order to “fight corporate tax planning.” Think about that: The OECD wants to take what is perfectly legal and make it illegal. Talk about immorality!

Here’s the question to consider. What’s more likely: that the U.S. lowers its rates closer to global developed-country averages … or that the U.S. forces other countries to raise their rates to match the U.S.?

The answer is 100% clear. The U.S. hasn’t the financial capacity to lower its rates. Uncle Drunkard needs to swipe as many dollars as he can because of the gargantuan debt-load he has to service. And he has a nasty habit of imposing his will on the world — i.e. programs like FATCA or Homeland Security mandates that make travelers (in Panama, for instance) submit to multiple, invasive security screenings before boarding an aircraft bound for the States.

Ultimately, Jack Lew’s “imperative” means that, soon enough, America’s financial needs will trump governmental morality. Tax inversions will go away. And tax rates in developed markets globally will rise as harmonization spreads. That will not be good for Western companies.

Of course, the upside is that the future will be great for certain nations that don’t march in lockstep with OECD’s immoral logic. It’s not hard to envision a world in which Singapore, Hong Kong, Gibraltar and few others become favored locations for starting a business and destinations for overly taxed businesses to relocate.

Overreach always has unintended consequences, as Jack Lew and Carl Levin are soon to discover.