It’s no mystery why American companies have stockpiled over $2 trillion of overseas earnings in foreign bank accounts. If they bring it to the United States, the IRS would grab 35% of it. That’s the US corporate tax rate—the highest in the developed world, double the average in EU nations.
Medtronic found a creative way to repatriate its cash, allowing it to bring money to the USA subject to just a 12.5% tax. The company acquiredCovidien, another, smaller medical device firm in Ireland and will establish its formal headquarters in Dublin, thereby slashing its tax rate by two-thirds, and leaving it with far more cash for plants and equipment, innovation, hiring and keeping workers, and tapping new markets.
Pharmaceutical, biotechnology, healthcare and other companies have concluded or are pursuing similar “tax inversion” strategies. The actions have outraged the White House, “progressive” activists and many Democrats in Congress—except when President Obama’s BFF Warren Buffett engineered Burger King’s acquisition of Canada’s Tim Horton cafe and bakery chain.