Obama, who thinks ATMs and airport ticket kiosks cost America jobs, gave a speech last year regretting that Maytag workers in Illinois lost their jobs when the plant moved to Mexico, but rejoicing that more Honda cars “are made in America than anyplace else” and that Airbus was “building new planes in Alabama.” Maytag moved partly because in Illinois, which is not a right-to-work state, the price of unionized workers made Mexico a sensible choice. And Airbus is in right-to-work Alabama because capital, being mobile, goes where it is wanted and stays where it is treated well.
Alabama, and the Honda manufacturing states (Alabama, Georgia, North Carolina, South Carolina, Indiana and Ohio; all but Ohio are right-to-work), attracted these jobs by practicing “entrepreneurial federalism ” — tailoring tax and regulatory policies to gain competitive advantages against other states. Progressives deplore this as a “race to the bottom.” Conservatives call it a rationality competition.
Which brings us to “inversions,” whereby in the past decade approximately 50 U.S. companies have merged with foreign firms and located their headquarters overseas, becoming subject to that country’s lower corporate taxation. The U.S. system, unlike those of most major nations, taxes the profits that domestic corporations earn overseas, even though these profits are also taxed overseas. This double taxation is one reason that approximately $2 trillion in U.S. corporate earnings is being kept abroad rather than brought home for domestic investment.
Progressives say corporations using inversions are unpatriotic, which is amusing. When the Supreme Court’s Citizens United decision stipulated that Americans do not forfeit their First Amendment right to political advocacy when they act together through corporations (including, and especially, incorporated nonprofit advocacy groups), progressives ridiculed the idea that corporations should be treated as people. Now, progressives charge that corporations resorting to inversion are not behaving like patriotic people.
But Democrats believe in recycling even the rhetoric of John Kerry. Campaigning for president in 2004, Kerry denounced as “Benedict Arnolds” those American business executives who moved some operations overseas for competitive advantages. He did this among South Carolinians who work at Fujifilm, Michelin and BMW plants located there by executives who Kerry presumably thought should be despised as traitors by the Japanese, French and German publics.
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The column concludes:
This illustrates the grandstanding frivolity of the political class. It legislates into existence incentives for what it considers perverse behavior, and then waxes indignant when businesses respond sensibly to the incentives.
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