Say you're on the editorial board of the Milwaukee Journal Sentinel and it's time to write something negative about Gov. Scott Walker's basically reckless and erroneous attack on Mary Burke's alleged tax dodging. But you have endorsed Walker in the past, along with many of his business views. And perhaps you don't want to look overly anti-Walker to a business community that buys ads in your newspaper. What to do, what to do?
Well, here's one crude solution: Proceed to ding Walker on his anti-Burke rhetoric, but ameliorate that a bit by writing an editorial using the time-honored "they all do it" principle, dinging a politician from the other major political party for what you portray as a similar transgression.
In today's editorial, the Journal Sentinel editors went ahead and dinged Walker, but then gave over half their editorial to criticizing President Obama for the manner in which he's been calling for an end to "inversion," a tax loophole that allows US-based firms to avoid federal taxes by making themselves, mostly just on paper, into foreign-based operations.
Obama's trespass? Calling the use of tax inversion anti-patriotic, while his budget director called on corporations to exhibit some "economic patriotism."
Now, Walker deliberately blenderized the facts in his campaign attacks on Burke, while Obama, who unlike Walker isn't running for re-election, has used stirring rhetoric to make a factual point about a defect in the US tax code. We are, by the Journal Sentinel's reckoning, to regard these as equivalent transgressions. Hey, both men are talking about taxes, so that's all the equivalency the JS needs, apparently.
Obama's rhetoric isn't out of line, in context. After all, his more complete statements on the matter have noted that companies are essentially renouncing their US citizenship to avoid paying their fair tax share here. And hasn't the US Supreme Court recently granted to corporations more and more rights equating to individual citizens? Indeed, if you or I renounced our citizenship the way corporations are doing for tax advantages, might there be observers out there who considered us unpatriotic?
Ironically, the Journal Sentinel as it notes in the editorial has supported Obama's call to end the inversion loophole. Their beef is entirely with his patriotism rhetoric, not his actual policy position. And on that narrow point the editorial conflates Obama's stand against inversion into the kind of underhanded slime that has been the Walker attack on Burke's tax history, with the paper suggesting that Obama spend less time talking, and more time acting, on overall tax reform.
Trouble is: Been there, done that. Obama has long since laid out his vision for broader tax reform. But in keeping with their "let Obama have no victories" strategy, Republicans have ignored that call. Meanwhile, business interests have criticized Obama's overall reform stance, because the current system benefits them handsomely.
Indeed, one flaw in our tax policies is how lawmakers like Walker can easily hand out tens and hundreds of millions of dollars worth of tax credits to firms that continue to shift jobs to other states or countries -- or for that matter even companies that do none of that but would just like a handout lest they decide to pack up and leave. You see, the fundamental flaw in today's US tax code is that it is too generous and permissive in its approach to the wealthy and businesses, but too demanding of rank-and-file taxpayers. From an online White House summary:
The tax code has become increasingly complicated and unfair. Under today’s tax laws, those who can afford expert advice can avoid paying their fair share and interests with the most connected lobbyists can get exemptions and special treatment written into our tax code. While many of the tax incentives serve important purposes, taken together the tax expenditures in the law are inefficient, unfair, duplicative, or even unnecessary. In fact, because our corporate tax system is so riddled with special interest loopholes, our system has one of the highest statutory tax rates among developed countries to generate about the same amount of corporate tax revenue as our developed country partners as a share of our economy; this, in turn, hurts our competitiveness in the world economy.
In this situation, the tax inversion loophole is an ideal example of what lawmakers should focus on fixing. But powerful, megaphone-equipped special interests who dislike the idea of losing a single tax break deploy their own rhetoric, usually boiling down the argument to: Democrats hate business.
So, if you were president, and the Republican Party and all the private special interests who can afford megaphones and TV advertising time were yelling for you and your party's hide because they dislike your vision for tax reform, what would you do? Like most past presidents, you'd probably take your case to the voters, and put it in plain language that would break through the media noise barrier.
The Journal Sentinel's complaint notwithstanding, corporations are only one part of Obama's intended audience. The other, more important target is Congress and the American voter, and Obama is hardly the first president to invoke patriotism as the reason to take action. After all, Obama does not enact laws, he only gets to sign them or veto them. It's up to Congress to reform the tax code, and right now Congress is doing next to nothing on nearly everything, because of the GOP scorched-earth policy.
It's normal for a president to use his bully pulpit to encourage voters to push for congressional action on many fronts, from taxes to making war. Yet suddenly, when Obama wields that tool, the Journal Sentinel is unhappy. Well, dear editors, what easily digestible sound bite do YOU think is going to get results out of Congress? A dry treatise written by a staff economist? Back rubs from Harry Reid?
Besides, giant drugstore chain Walgreens just blinked and backed off its plan to implement tax inversion. Did the Obama administration's rhetoric -- fortified by general public outcry -- not have any impact in that decision?
But the Journal Sentinel can't help dig a little more: "We're dying to know what other tax breaks Obama and [Budget Direct Jacob] Lew believe are unpatriotic. How about mortgage interest? 401 (k) accounts?" The editors, however, ignore a key difference: Whatever you think of the above two tax breaks, the dollars don't by and large disappear from the US economy into protected overseas accounts. Furthermore, those tax benefits actually serve to strengthen the US economy, rather than erode it.
Nevertheless the JS editorial defends businesses taking advantage of tax inversion, reasoning that if something is legal, it's okay to do it -- situational ethics and moral implications be damned.
The bottom line, which Obama has made clear, is that tax inversion while legal is a provision that is generally bad for the USA economically. It unfairly removes dollars from the US Treasury, allowing corporations to continue enjoying the many benefits of operating here yet leaving taxpayers holding a bigger bill. Which in turn means that tax provision costs average citizens more for whatever services government can afford to provide. Thus if you're anti-government, tax inversion is working for you even if you don't yourself take advantage of it.
Still, if tax inversion is not unpatriotic, why have numerous lawmakers and presidents along with consumer advocates over the years pushed citizens to "buy American"? And if tax inversion isn't about patriotism, you've got to wonder why big companies that invert their tax status simultaneously feel entitled to fly the American flag and employ patriotism as a visual component in their advertising.
