Skip to comments.Stanley's Steaming [IBD Editorial on Stanley Tools leaving the USA]
Posted on 05/14/2002 4:11:07 PM PDT by snopercod
Revenue: Weary of high taxes, a famous old-line company wants to leave the U.S. Public officials reaction reveals an all-too-common mind-set in the halls of power.
Stanley Works, the New Britain, Conn., toolmaker, announced in February that it had plans to reincorporate offshore. The move would save the company $30 million a year in taxes. Last week, shareholders approved a paperwork relocation to business-friendly Bermuda.
The possibility has energized the political class. They see a cash cow about to jump the fence.
"Stanley Works has no right to abandon their obligations as a corporate citizen of this country," mumbled Rep. James Maloney, D-Conn. Abandon their obligations? What, to be taxed at punitive rates so that Maloney and his colleagues can hand out costly favors to their voters?
Particularly irksome is the scolding by Rep. Richard Neal, D-Mass, who blustered that "during this time of war" Stanley has "chosen profit over patriotism and turned their back on the United States."
Elected officials are, sadly, the blindest among us. Are the companies that seek greater economic freedom turning their backs on the U.S.? Or is the lawmakers, who demand hefty tribute for the right to do business in an ostensibly free country? There is something grossly unpatriotic about holding a private company hostage to the insatiable appetite of the state.
Conneticut Attorney General Richard Blumenthal revealed that he holds a similarly distorted notion of patriotism when he declared that Congress "should close the federal tax loophole that is motivating Stanley Works to abandon America and Connecticut."
Particularly galling is that to these politicians the company is to blame, not the high taxes imposed by those selfsame politicians.
Note that Blumenthal talks of abandonment, as did Maloney. The dangerous assumption is that Stanley owes society. Yet last time we checked, the consent of the governed was still required here.
While Congress considers legislation that would stop companies from moving overseas, Blumenthal is using his office to do something about it. He filed suit last week against Stanley, alleging that the information given to shareholders concerning the vote intentionally confused them.
We believe in informed shareholders (and Stanleys will vote again), but Blumenthals statement reveals his true aims. The suit is a warning to Stanley and all other Connecticut companies: Pay up, or well make life miserable for you.
This fuss is an ugly reminder of the war on business constantly waged by government. Today, its Microsoft getting steamrollered because it held a hefty piece of the market. Or its Big Oil, which faces price controls in Hawaii - which has the highest state gasoline taxes in the nation.
Tomorrow its Stanley, which will be denied the basic right to leave unless its willing to finish a drawn-out-fight. Whats surprising is that more people havent fled Connecticuts tax burden, Indeed, the Tax Foundation points out that May 14 is Tax Freedom Day for NutmegStaters - the latest in the nation. Those "lucky" citizens now can start working for themselves, not government.
Its their politicians whove abandoned them - and freedom.
This could be the start of something BIG...
You get to pay US income taxes no matter where you live and work on the planet?
As some what from Washington (the state), I think Boeing is a great example of business telling government to shape up or they will walk. I also think that Government in general and democrats in particular have not a clue as to how easy it would be for many of us to incorporate overseas and continue to do buisiness via the internet in the highly taxed US. Government needs to understand at some point that it must adopt "best practices" and become cost competitive or else all the good people and all the good businesses will leave for a better place.
I am finally reminded of the UK many years ago during the brain drain when anyone with any skills and any money left the UK to avoid their confiscatory taxes. The Brits were repeatedly outraged when their brightest scientists and engineers left and their stars of stage, screen and records left for other countries. They just couldn't understand why folks didn't tough it out. Every year when I do my taxes and wonder if I will be tagged this year with the alternate minimum tax, I wonder what I would do if and when it triggers.
The reasons have more to do with what you don't get than what you lose. Companies accounting and taxes become much more complex. But the real reason most companies don't move offshore is that they would still have to pay tax on US based income. If most of a companys income is US based, then there is not much savings.
Brother, don't I know it...
Gain? Paperwork increase.
Unless you some substantial business in foreign countries. If so, it saves you from paying income tax to the USA on income earned overseas. If all of your income derives from domestic sales, it saves you nothing although moving your state of incorporation can mean a lot in both taxes and management protection.
If they are resident, they get taxed on every dime they make inside and outside. If they are nonresident, then they taxed only on US sources of income.
I'm just waiting for the IRS to announce in Zero Wing style to the world "All Your Money Are Belong To Us Now!"