Tax revenues vanish as firms move from US to Bermuda
Use of tax shelters is rising, prompting moves in Congress to keep companies home.
Paying as little as possible in taxes has been a hallmark of America's cash-flow culture since the days of the Boston Tea Party. But when the maker of Stanley Tools decides to hammer its nameplate to a door in Bermuda, albeit for fiscally prudent reasons, it strikes some as downright un-American.
In the quest for lower corporate taxes, a growing number of US corporations have laid plans to shift their nominal headquarters to Bermuda. As a result, figures from the US Treasury secretary to shop-floor employees at Stanley Works have joined a debate about just what this says about the US tax code and American business.
To some, it's a sign that firms are being driven out by overtaxation. Others talk overtly about a spreading corporate character flaw.
"These expatriations aren't illegal, but they're sure immoral," declared Sen. Charles Grassley (R) of Iowa recently. "During a war on terrorism, coming out of a recession, everyone ought to be pulling together. If companies don't have their hearts in America, they ought to get out."
With millions of dollars at stake, many are getting out, following their wallets if not their hearts. It's part of a dramatic rise in the use of tax shelters by corporate America.
In 1998, $155 billion in corporate income literally disappeared without Uncle Sam's tax collectors laying a finger on it, according to research by Harvard Business School Prof. Mihir Desai. That amount is the gap between what corporations reported to shareholders and what appeared on the tax returns they filed with the Internal Revenue Service.
Some say it's a "Bermuda tax triangle."