Capitalism doesn't check your passport
James Gimbi
Whining about tax inversions is hitting a new pitch this summer. The President criticized tech companies for “magically becoming Irish” in July. Just this week, Whopper lovers are swearing off Burger King’s acquisition of Tim Horton’s for fear of missing out on taxes to the Great White North. “Un-American,” they call it. How dare a company cut costs, driving prices down and wages up? Greedy, unpatriotic fat cats, exploiting the little guy, unlike the glory days of old.
Of course, we aren’t living in the protectionist twentieth century, and globalization is more complicated than opening a token McDonald’s in Beijing. Beyond goods and services, international markets trade ideas and policy. Americans are normally pretty pleased with these markets. We offer capitalism and democracy around the globe and enjoy foreign capital, diverse policy, and cheaper products as fruits of this exchange.
But we forget that participating in a market invites competition. The USA couldn’t manufacture goods as efficiently as the other players, and so we lost our manufacturing pole position. Likewise, we don’t offer competitive tax rates, and so we lose revenue.
Forum shopping is a legitimate tactic for American businesses. States compete with one another to encourage companies to open up shop within their borders, and that works out great for consumers. No one cries foul when a firm moves from Pennsylvania to New York for a warmer tax climate, but bring Ontario into the mix and we are suddenly dealing with an unethical business practice? Blind nationalism is the only explanation, which has no place in an efficient market.
Capitalism doesn’t check your passport. No market will. I skip Starbucks on my way to Tim Horton’s if I want decent coffee. I choose to live in the United States because it realizes values hard to find anywhere else. We are serious about free speech, individualism, the rule of law, and privacy (…sort of). But those are not values held by successful businesses. It may be cold and unromantic, but capitalists must value capital. If lower expenses are found across a paper border, not moving would be irresponsible. If we don’t like losing tax dollars to Canada and Ireland, we should stop whining at deaf ears and compete.