This week, the Koch-sponsored Mercatus Center Program Coordinator Adam Michael defended corporations that take their headquarters overseas while retaining its material operations in its higher-tax country of origin to avoid paying taxes, commonly known as corporate inversion:
“There’s nothing illegal about a corporate inversion,” Michel said. “It is the process by which a corporation merges with a partner, another corporation, and moves their headquarters to the partner’s country.
Koch group, Americans for Prosperity (AFP), has also backed corporate inversion, going as far as to suggest that companies that move to other countries are avoiding the “disease” that is the American tax system.
This might be one of the first instances where we can’t call the Kochs hypocritical. Because the Koch brothers don’t just defend corporate inversion, they practice it.
Koch Industries has averted paying millions in what they should to the U.S. in taxes by using a set of foreign subsidiaries in Luxembourg. According to the Center for Public Integrity, the Kochs had years where the “Luxembourg subsidiaries enjoyed tax rates of less than 1 percent.” They’ve even lied about headquartering their subsidiaries outside of the country:
Koch says Invista is headquartered in the United States. However, U.S. and other operations are owned by a holding company incorporated in the Netherlands, a low-tax country, where it reports financial results.
Corporate inversion doesn’t just deny the federal government taxes. It hurts the economy, particularly small businesses and consumers. According to U.S. News and World Report:
When big companies find ways to dodge the tax bill, the bill doesn’t disappear. Someone must pick up the tab. There are only two possibilities: small businesses and consumers. There is no sound reason for America’s main street businesses to pick up the tax bill that is left unpaid when big corporations dine and dash. All businesses large and small should compete on their own merits. Success or failure should be decided in the marketplace and not based on who can bring on the investment bankers, accountants and lawyers to play the inversion game.
There’s no doubt about it: the Kochs don’t want to play fair. Hurting small businesses may hurt the economy, but it also reduces competition and boosts their bottom line.