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Friday, March 25, 2011

Another Company Fed Up With High Income Taxes -- CAT -- Nothing To Do With The Bakken

Updates

March 30, 2011: Fascinating discussion on CNBC this a.m. The discussion featured a "60 Minutes" piece on Transocean (RIG) moving headquarters to Switzerland some years ago for tax reasons. It turns out that RIG is not the only company doing that. Without getting into specifics, CNBC "Morning Joe" noted that CNBC's parent company GE was also moving subsidiaries overseas for tax reasons. A graphic behind the panel showed the corporate tax rate for the US at 35%; Ireland at 12- 13%; and, Switzerland at 15% (or thereabouts). I knew there was a discrepancy in corporate rates, but I did not know it was so great. One can see the list here.

An additional tax that was not raised in this discussion was the payroll tax that is "matched" by the corporation and thus a cost to the employer. The payroll tax is as high as 15 percent in the United States. There is no payroll tax in Switzerland, and it is 10 percent in Ireland. 

Original Post

A few weeks ago I posted a couple of articles about Fidelity Investments moving some of their operations out of Massachusetts to New Hampshire and/or Rhode Island due to high income tax rate in Massachusetts.

For the same reason Minnesota icon Marvin Windows is moving its manufacturing plants out of Minnesota to neighboring North Dakota.

Now, another similar story, but one that is even bigger. Caterpillar is considering moving its headquarters out of Illinois.
In a letter sent March 21 to Gov. Pat Quinn, Caterpillar chief executive officer Doug Oberhelman said officials in at least four other states have approached the company about relocating since Illinois raised its income tax in January.

"I have been called, 'cornered' in meetings and 'wined and dined' -- the heat is on," Oberhelman wrote. "Before, I never really considered living anywhere else and certainly never considered the possibility of Caterpillar relocating. But I have to admit, the policymakers in Springfield seem to make it harder by the day."
Minnesota, Illinois, and Massachusetts. Hmmm.

A reader reminded me that Boeing moved from Washington state to Chicago for tax reasons. (I mistakenly thought it was to be closer to United in Chicago but that apparently had nothing to do with decision to move. It was all about taxes.)
Illinois agreed to provide Boeing with up to $41 million in tax breaks and various state grants over 20 years, while the city of Chicago offered an additional $19 million in property tax relief over a similar period and a $2 million grant. 
ATT moved its headquarters out of Texas several years ago (but not for tax reasons, as far as I know). The point is this: corporations can and do relocate. 

CAT is a global company. There is no reason it has to remain in the United States. Transocean (RIG) moved to Switzerland a couple of years ago due to US federal income tax and regulatory climate.

2 comments:

  1. Dont forget Boeing as it moved from birthplace in Seattle to Chicago, all for tax reasons. Only thing left that would devastate WA St economy would be if Microsoft left for anywhere else. Just sayin'

    ReplyDelete
  2. You are correct. Since a lot of folks may not read the comments I will add this to the post above, with supporting documentation.

    Thank you very much for sending this my way.

    ReplyDelete

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