William K. Black
February 16, 2016 Bloomington, MN
I have been planning to respond to a January 26, 2016 article in the Wall Street Journal entitled “Washington’s Corporate Purge” that begins with the claim that “Bernie and Hillary compete to drive more U.S. companies overseas.” My title was going to be: “WSJ Shills for Tax Cheats and Cheers Race to the Bottom.” The context was a typical WSJ claim that it was “moral” to do a tax inversion deal with Ireland to cut a U.S. company’s corporate tax rate dramatically. Murdoch’s minions’ explanation of this “moral” concept is as follows: “A CEO obliged to act in the best interests of shareholders cannot ignore this competitive reality.” The idea that CEOs “act in the best interests of shareholders” as opposed to the best interests of the CEO is contrary to economic logic and reality, but let’s focus on the claim that as soon as any competitor engages in the race to the bottom on taxes all U.S. CEOs have a “moral” duty to race to the bottom by avoiding paying U.S. taxes. If that is true, then it is essential to either impose a new form of taxation that corporations cannot evade through such inversion scams ( a point that Donald Trump, of all people, made in the most recent debate) or for governments to cooperate to prohibit such a race to the bottom.
If a CEO owes a “duty” to evade taxation, surely all couples and parents owe a duty to their spouse/partner and their children to evade taxation. We can destroy almost any civilization under this “logic” in which tax cheats are the new “normal” and “new moral” exemplars.
But as I was preparing to write that article I read with shock (OK, I admit that I was naïve to be shocked at this late date) that the Obama administration is siding with the massive corporate tax cheats. Instead of cooperating with other governments to end the suicidal race to the bottom or imposing other taxes and penalties on the tax evaders, the administration is demanding that the EU cease cracking down on tax evasion scams by U.S. corporations. The same Wall Street Journal reported on February 11, 2016 that “U.S. Treasury’s Lew Challenges EU on Corporate Tax Investigations.” And yes, I understand money, but I also understand that engaging in a race to the bottom distorts commerce and produces a Gresham’s dynamic in which the most unethical CEOs will drive the most ethical CEOs from the C-suites and produce serious job losses.
Watching the Obama administration join Murdoch in shilling for U.S. corporate tax evaders and demanding that the EU not attempt to stop the race to the bottom on corporate taxation rather than supporting that EU effort is painful, but no longer surprising. Hillary Clinton says that we must not point these facts out because doing so is “disloyal” to Obama. Obama is being disloyal to the American people and the stated principles of his Party when he shills for wealthy corporate tax evaders. We do any official our greatest service as citizens when we hold them accountable, not when we self-censor. The President is an elected official, not a saint, and he or she needs us to always speak truth to power.