Dear Senator Brown,
In response to Burger King’s just-announced plan to acquire Tim Hortons — the iconic Canadian donut chain — and move its own international headquarters to Ontario, you have called for a Burger King boycott.
You want us to spend our lunch money at Wendy’s or White Castle in protest. You’ve asked fellow fast-food enthusiasts to send a message and to take their business elsewhere. Of course, taking their business elsewhere is exactly what companies like AON, Medtronic, and now Burger King have done. And it is why more companies like Apple, Google, and Facebook are looking to Ireland as a home for subsidiaries and assets. Their message is simple: Corporate taxes are too high in the U.S. You seem to at least acknowledge that our current corporate tax rate is a problem. Your press release calling for the Burger King boycott goes on to call for a “lower statutory corporate tax rate” to compete “with the average of countries that are part of the Organization for Economic Co-operation and Development (OECD).” In 2013, the OECD simple average corporate income tax rate was 25 percent. The nominal corporate income tax rate in the United States is now over 35 percent at the federal level; it’s close to 40 percent when combined with state corporate taxes, making it the highest rate of any OECD member country. In contrast, Ontario, Canada’s rate (federal and provincial rates combined) is a smidge over 26 percent — or just a bit higher than that OECD simple average you cite.
Having the highest corporate tax rate is only one facet of the problem. As you know, the United States is alone among the most developed nations in subjecting all income to our tax rates no matter where in the world it is earned. Thus, an American company’s earnings in France, Australia, India, or Greenland are subject to the world’s highest corporate tax rate. Other advanced countries, such as Canada, have long since abandoned these tactics in favor of taxing only the income earned within their own borders. Accordingly, Burger King’s move allows it to pay the 35 percent U.S. rate only on earnings made from within the United States, rather than on all of its earnings worldwide.
But at least you concede that our punitive corporate tax rate poses a problem. Finding a solution is always easier once you have admitted as much.
Unfortunately, your proposal to lower the corporate tax rate and create a global minimum tax rate in order to “narrow the difference between us and our competitors” is only half right. Yes, lowering the corporate tax burden here in the U.S. will promote growth and prosperity, and keep or attract companies and their investors. But requiring companies to pay new or higher taxes “in each country in which they do business,” as you’ve proposed, misses the mark. Indeed, such a plan reveals your true colors.
Under your plan, no corporate dollar earned should ever be safe from government’s reach. This Washington-centric thinking concludes that countries promoting investment within their borders by offering lower tax burdens to potential investors and job-providers should be sanctioned, not applauded. You would “level the playing field” by forcing even developing nations to tax their investors, job-providers, and wealth-creators at an arbitrarily-dictated rate so that high-tax countries like the U.S. can be “competitive.” It is exactly this kind of government-before-enterprise instinct that gave rise to our flight-inducing corporate tax rate in the first place. The compulsion to eliminate healthy competition among nations is the problem, not the solution.
The boycott has already begun, Senator. Businesses have stopped buying what you and your colleagues are selling.
— Robert Alt is a contributor to National Review Online and president and CEO of the Buckeye Institute for Public Policy Solutions.