When The King Goes To Canada

Burger King has announced that it is buying Tim Horton’s, a Canadian doughnut and coffee chain, and moving its headquarters to Canada as part of the move.  From the frenzied reaction to the decision, you’d think the head guys at Burger King had set fire to the American flag and then used the remains to mop the floor by the deep frying machine.

Ohio’s Democratic Senator, Sherrod Brown, seems to be the one who has gone the deepest off the deep end; he’s urging a boycott of Burger King in favor of American burger outlets like Wendy’s and White Castle.  In an email he sent out yesterday, Brown calls what Burger King is doing “abandoning your country” and says it is part of a “growing trend in which companies get rich in the United States, then move to a foreign tax haven with the stroke of a pen.”  Bernie Sanders, the Independent Senator from Vermont, says the move shows “contempt” for the “average American.”  Dick Durbin, the Democratic Senator from Illinois, also has ripped Burger King for being un-American.

It’s not entirely clear that Burger King’s motive in pursuing the Tim Horton’s deal is to avoid taxes.  The company says they are making the move not to dodge taxes, but because they want to buy Tim Horton’s and think the move will be more palatable to Canadian regulators if the combined company’s headquarters is in Canada.  It seems undeniable, however, that the move to Canada will change how the new company pays taxes — companies that are headquartered in the U.S., under U.S. tax laws, pay the steep 35 percent corporate income tax on all income earned anywhere in the world (even in countries that have no corporate income tax), whereas companies headquartered in Canada (and many other countries) pay the different corporate tax rates in the countries in which the income is earned.

The overreaction to the Burger King move seems like pretty obvious, and silly, political posturing.  So Canada, our friendly neighbor to the north with whom we share a peaceful common border that is thousands of miles long, is now a despicable “tax haven” like, say, the Cayman Islands?  So corporations that see a better deal and pursue it are now unpatriotic if that deal reduces the taxes they pay in the U.S.?

As a reminder to our Senators, corporations don’t exist to funnel as much money as possible to the U.S. government.  Instead, corporations are principally answerable to their stockholders and, in most instances, have the primary goal of making money, not shelling it out unnecessarily.  Burger King isn’t breaking any laws by buying Tim Horton’s and moving its headquarters, and if doing so will help it save on unnecessary tax payments and realize better shareholder value, what’s wrong with that?  If American tax policy is out of step with that of Canada and other countries, maybe America needs to revisit its policy rather than blaming companies for making entirely rational economic decisions.

One other point on this:  there’s a Burger King near my house.  I’m not sure how many people it employs, all told — 50, perhaps? — but how do you think those people would be affected if Sherrod Brown’s call for a boycott were successful?  If Burger King moves to Canada its restaurants will continue to employ thousands of Americans, and it will continue to pay taxes on the money it earns here.  That seems fair to me.

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Bounty (And Headline) Hunting

I’m sure Members of Congress are scratching their heads about why their approval ratings in opinion polls are flirting with the single digits.  “We are public servants who work hard,” they no doubt rationalize.  “Why can’t the American people see that and appreciate what we do for them?”

Here’s a partial answer to that question. Illinois Senator Dick Durbin, a Democrat and the assistant majority leader in the Senate, has announced he’s going to hold hearings on the “bounty” issue in the NFL in order to decide whether bribery laws should be expanded to include professional sports bounties.  For those of you whose attention was distracted from that topic of crucial national importance by minor issues like skyrocketing gas prices, crushing federal debt, and the continued crappy economy, the NFL recently disciplined members of the New Orleans Saints for running a “bounty” pool in which players were paid if they put a hit on key players for the opposing team and knocked them out of the game.

Such bounties are cheap and dirty stuff, of course, and aren’t consistent with time-honored concepts of sportsmanship, but it’s silly to think they should command even one instant of Congress’ time.  This isn’t a federal issue, it’s an effort by another of our political leaders to grab some headlines and on-camera time with grandstanding about an issue that isn’t of any material significance.  No doubt some staffer in Senator Durbin’s office, whose salary is paid by tax dollars, decided that hearings about NFL bounties would be a way to get the Senator some face time with big stars and boost his recognition ratings — and I’m sure other Senators will be perfectly happy to join in.

As a country, we’ve got a lot of problems that our politicians should be addressing.  Sports bounties aren’t one of them.  Instead, they’re just a distraction that politicians invent to keep people from focusing on the fact that they aren’t doing their jobs.  The problem for Congress is that people aren’t distracted — they’re paying attention, and they are sick and tired of these stupid political games that continue to be played while the frightening, fundamental problems go unaddressed.

Those Greedy, Evil Bankers

I see that President Obama has joined Senator Dick Durbin of Illinois and others in slamming bankers.  Some of the outcry is the result of frustration, because banks have reacted to the Dodd-Frank legislation passed recently by imposing fees on people who use their debit cards to make purchases, some is due to the fact that banks were part of the 2008 financial meltdown, and some is caused by the belief that banks are not lending as much as they should.

We should all be on guard, however, when politicians try to blame one industry for our woes.  It’s like the sleight of hand used by magicians who want to distract our attention so we don’t see how the trick works.  Politicians want us to blame banks so we don’t blame politicians or hold them accountable for the dreadful job they’ve done.  And banks are a convenient, time-honored scapegoat.  In fact, America has a long history of bank-hating, from the battle between Andrew Jackson and the Bank of the United States to the campaigns against J.P. Morgan and Wall Street “gamblers” during the 20th century.

Should we really castigate banks for charging for their services?  Debit cards clearly involve costs for administration, data security, accounting for charges, and sending out bills, and someone has to pay them.  When Congress enacted legislation that made it tough for banks to have retailers pay the costs, the banks inevitably turned to another source — the consumer who uses the card to by something in the first place.  In a capitalist society, are banks simply supposed to eat the costs and thereby become less solvent?  Is it really so unfair to make those who use the debit card service to pay for it?

No one has figured out how to practice capitalism without banks and without allowing businesses to charge what the market will bear for their products and services.  Ask President Obama — according to the Amazon website, his two books, Dreams from My Father and The Audacity of Hope, carry retail price tags of $25.95 and $25.00, respectively.  The President isn’t giving away his work product for free and banks shouldn’t have to, either.