The president of the Institute for Liberty told Big League Politics he is thrilled the Senate’s version of President Donald J. Trump’s tax reform program closes a tax loophole in the federal tax code that encourages American life insurance companies to move their headquarters overseas.
“I’m all in favor of free markets. I’m all in favor of tax competition, but it is not tax competition when you have vastly different regulatory schemes that are underlying the conditions of trade,” said Andrew Langer, who in addition to his leadership of the Institue for Liberty, is a radio talk show host on Baltimore’s WBAL and of the “LangerCast” podcast.
The situation Langer is describing is practice by life insurance companies of taking in life insurance premiums, which are normally considered income, but then taking those premiums and purchasing a re-insurance policy against the original policy–re-insurance is insurance on insurance and typically is a way for the company to mitigate its risk.
In this case, if the insurance company is based overseas, the purchase of the reinsurance policy that was income becomes an expense, thus, washing away the tax vulnerability.
Langer said this practice is part of a larger specialty called “base erosion,” which tailors a companies business practices to exploit different regulatory and tax rules in different countries.
In a bizarre twist, this practice of doing business in the United States tax-free forces American-domiciled companies to either compete at a tax disadvantage or move overseas themselves, he said.
The most famous example of “base erosion” was the decision to make part of the 1965 movie “Help!” starring The Beatles in Bermuda, so that the film’s profits were taxed under Bermuda’s more generous tax code, instead of the heavier taxes that would have to have been paid if the movie was taxed under the United Kingdom’s tax regime.
It might have been a great tax strategy, but it was a horrible film.
Langer was the lead author of a coalition letter that called on senators to support the elimination of the loophole in the final bill.
“The Senate tax bill includes strong anti-base erosion measures that will go a long way in stopping foreign companies from gaming the U.S. tax code. It is imperative that Congress resist any desperate attempts by foreign insurers to weaken the language thereby preserving their loophole,” he wrote.
This tax dodge has been in play for 30 years and it has led to U.S. life insurance companies moving their headquarters to either Bermuda or Switzerland, where the regulatory climate is as pleasant as the tax climate, he wrote. “The Senate bill would merely require foreign companies to pay U.S. taxes on their U.S. generated insurance business instead of allowing them to use offshore affiliates to strip earnings.”
Joining Langer on the letter were: Judson Phillips, Tea Party Nation; Ed Martin, Phyllis Schlafly Eagles; John Fredericks, The John Fredericks Show; Rick Manning, Americans for Limited Government and Jerry Rogers, Capitol Allies.
Read the coalition letter here:
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BACK TO WORK: Ford Motors Announces They Intend to Begin Reopening Plants on Apr. 6
Ford does not want to suspend production for months because of coronavirus.
Ford Motor Co. announced on Thursday that they intend to begin reopening some of their plants on Apr. 6, as the iconic automaker hopes that the coronavirus pandemic will not sideline their business for long.
Ford said last week that they would be suspending all production at their facilities indefinitely. They made the decision along with General Motors and Fiat Chrysler Automobiles with union workers spooked because of potential exposure to the coronavirus.
While Ford wants to resume their operations as quickly as possible, their plans are not written in stone. They could re-evaluate their time frame if the coronavirus pandemic worsens over the next ten days.
“We will continue to assess public health conditions as well as supplier readiness and will adjust plans if necessary,” Kumar Galhotra, Ford’s president of North America, said in a statement.
GM and Chrysler have not issued any possible schedule for resuming operations at the present time. If all goes according to plan, Ford will re-open the Hermosillo Assembly Plant on Apr. 6 for one shift. It would then open many more facilities across the country on Apr. 14.
The other corporate titans of Motor City may be skittish about reopening because of Michigan Gov. Gretchen Whitmer’s draconian restrictions on industry. Whitmer has issued an edict forcing all supposedly non-essential businesses to shutter until Apr. 13.
“The current trajectory we’re on seems a lot like Italy,” Whitmer said earlier this week. “We’ve got to do everything in our power to keep that from happening in Michigan.”
“This is an unprecedented crisis that requires all of us working together to protect our families and our communities,” she added. “The most effective way we can slow down the virus is to stay home. I know this will be hard, but it will be temporary. If we all come together, get serious, and do our part by staying home, we can stay safe and save lives.”
While public officials like Whitmer may have the best of intentions, their forced shut-down of the economy may cause more lasting damage to the country than the coronavirus ever could.
“The situation is fluid and can change week to week,” said Jim Cain, a spokesman for GM. “We don’t have firm return-to-work dates at this time.”
Americans are desperate to go back to work as the social safety net is strained like never before during these trying times. A dubious record was set for jobless claims filed in March, with three million Americans filing for unemployment benefits. President Trump hopes to have the country back on track by the Easter holiday.
“I think there are certain people that would like it not to open so quickly,” Trump said on Wednesday. “I think there are certain people that would like [the economy] to do financially poorly, because they think that would be very good as far as defeating me at the polls.”
He added: “I’m not going to do anything rash or hastily — I don’t do that. But the country wants to get back to work.”
It will not be easy for President Trump to pull the nation out of the grip of media-driven mass hysteria that has resulted from the coronavirus pandemic.
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