The new Big Chart is here:
Oooh, ahhh – look how high those levels have gotten. We discussed the whys for these adjustments in our weekend post and how is, of course, The Fed – along with the other Central Banksters who have been pumping up the economy by giving so much money to the top 0.001% that they have nowhere left to put it but equities and, so, we rally!
What the World's wealthiest businesses and individuals DO spend their money on is teams of accountants and lawyers who help them to shuffle their money around through various overseas shell corporations in order to avoid paying taxes. Here's how Google knocks their tax rate down to just 2.4% in 4 easy steps:
Now we have companies flat-out leaving the US to avoid taxes but it's not US taxes they are avoiding – it's ALL taxes. Medtronic (MDT), for example is acquiring Covidien (COV) for $43Bn and the combined group will be domiciled in low-tax Ireland, the official home of its merger partner, COV.
All this juggling will save MDT about $750M a year in taxes, which every single US taxpayer will then pay $5 each to make up for. Over the next 50 years, the merger will pay for itself in tax savings while extracting $2,500 from your wallet as well.
Of course it's not just $2,500, this is the 15th "invesion deal" of the last two years and just yesterday Shire (SHPG) turned down a $46Bn offer by AbbVie (ABBV) to do a similar deal and Pfizer (PFE) is trying to buy AstraZeneca (AZN) for a whopping $128Bn – what the hell it's only money (and your money at that!).
This does not, of course, affect PFE, GOOG or MDT – after all, they "live" in Ireland now! Good thing, too, because that National Debt Clock shows that your family is already on the hook for $757,351 (public and private) as of this morning. While another $100,000 won't make much difference to you, Corporations have teams of accounts who make sure money like that NEVER slips through the cracks.
As you can see from the chart on the left, Corporations are only paying 10% of the US tax burden now, which is funny because they earned $3Tn last year yet paid less than $250Bn in taxes (8.3% net), which is LOWER than Ireland's 12.5% rate. If we lower our rate to 12.5%, then Corporations will fire accountants who can't get it below 5% – this is not a war we're going to win, folks.
Is this, then, the new normal? I do have a concern here that we have reached "peak avoidance" and that there won't be much room left to cut after this. Companies are racing into Ireland mergers to take advantage of this scam before the loophole closes on them and, even if we assume earnings are improving – they are improving based on closing stores, cutting staff, shaving taxes, shrinking portions etc. and, from our last quarter's productivity report – we may have finally cut all the way to the bone.
IN PROGRESS
This entry was posted on Tuesday, June 24th, 2014 at 8:24 am and is filed under Immediately available to public. You can leave a response, or trackback from your own site.
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