Obama Threatens to Punish Companies over Legal Tax Avoidance

Again following in the footsteps of FDR, Barack Obama is threatening to take political action against U.S. companies that justifiably seek to legally reduce their onerous U.S. tax burdens. Reuters reports, “Obama could bypass congressional gridlock and restrict foreign tax-domiciled U.S companies from using inter-company loans and interest deductions to cut their U.S. tax bills.” At issue are so-called “inversions.” What are those, you ask? Investopedia states, “Re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. Corporate inversion as a strategy is used by companies that receive a significant portion of their income from foreign sources, since that income is taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country that has lower tax rates and less stringent corporate governance requirements.” Alternately, the U.S. government could stop chasing companies oversees with insanely burdensome corporate taxation.