Follow us:

Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

August 28, 2014 at 10:14 AM

Burger King to America: Drop dead

A Burger King restaurant in Decatur, Ga. (Photo by Erik S. Lesser, EPA)

A Burger King restaurant in Decatur, Ga. (Photo by Erik S. Lesser, EPA)

As you know, Burger King will move its headquarters to Canada with its purchase of Tim Hortons, thus evading America’s supposedly onerous corporate tax rates. The talking point here is that the effective federal, state and local tax rate in the United States is 40 percent, highest in the OECD, vs. Canada’s 26 percent.

A few points:

1. Like the tax-evading Internet companies (you know who you are), Burger King has benefited mightily from the commons. Its low-paid employees’ health care and other social services costs are off-loaded to the American taxpayers. Freeways, roads and infrastructure, paid by taxes, have been essential to the chain’s growth, especially in the sprawly suburbs.

2. Burger King is not only stiffing American companies that do pay their taxes. It is also sticking it to its franchisees, who own the vast majority of its stores and will continue to pay state and local taxes. The tax savings will go to executive compensation and shareholders, furthering income inequality.

3. One doesn’t have to flee the country to achieve perfectly legal tax avoidance. Sure, smaller companies pay full boat. Larger ones have elaborate methods to pay much less. According to the Government Accountability Office, large corporations paid an effective federal tax rate of 12.6 percent in 2010, not the nominal 35 percent, while 10 percent paid no federal taxes.

Thus, the chart below from the Tax Policy Center shows how corporate taxes as a share of GDP have fallen. This is one reason why we have deficits and “can’t afford” everything from modern infrastructure and “entitlements” (earned benefits) to replacing our aging Navy submarines:

corporate_gdp

4. But hasn’t the tax burden hurt corporate profits? You decide:

CORPPROFITSfredgraph

5. But don’t lower corporate taxes encourage hiring? According to tax expert Linda Beale, the answer is a “resounding no.” Another new study shows that the corporate tax code isn’t hurting competition, either — the opposite may be the case.

So when you think about “takers” and “deadbeats,” think about this whopper of a kick in the face to America.


 

Thursday Reading: One big reason it feels as if the recession never ended | Washington Post


 

Today’s Econ Haiku:

Dimon’s on Twitter

Hackers hit JPMorgan

Just hit any key


I invite you to follow me on Twitter (@jontalton), no hacking


 

 

Comments | More in Tax policy | Topics: Burger King, Tax avoidance

COMMENTS

No personal attacks or insults, no hate speech, no profanity. Please keep the conversation civil and help us moderate this thread by reporting any abuse. See our Commenting FAQ.



The opinions expressed in reader comments are those of the author only, and do not reflect the opinions of The Seattle Times.


Advertising
The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►