The friendship between President Obama and Warren Buffett is not news. Warren Buffett supported President Obama’s tax increase proposals saying that his secretary paid higher taxes than he did. The failure of the Obama Administration to permit the Keystone Pipeline to be built allows the Burlington Northern Santa Fe railroad, owned by Berkshire Hathaway, owned by Warren Buffett, to transport the oil (see rightwinggranny.com) from the oil fields to other areas of the United States.
Well, President Obama has often stated that companies that move their headquarters overseas are unpatriotic. He has stated that it is patriotic to stay in America and pay higher taxes. I guess Warren Buffett does not let President Obama’s opinion interfere with his business decisions.
Today’s Washington Post is reporting that Burger King is buying Canadian chain Tim Hortons Inc.. CNBC is reporting today that Berkshire Hathaway (Warren Buffett) is helping to fund the deal by committing $3 billion of preferred equity financing. Berkshire Hathaway will not play a role in the management, it is only providing the financing.
So why is this ironic? This acquisition will allow Burger King to move its headquarters to Canada where the corporate tax rate is 26.3 percent as opposed to America where the corporate tax rate is 39.1 percent.
It is not unpatriotic to want to save money. Burger King is accountable to its stockholders for its finances. It is not illegal for the company to move its headquarters to Canada to avoid an unreasonable tax burden. The solution to the exodus of corporations from America would be for Congress to lower the corporate tax rate. The Laffer Curve illustrates that this would create income for the government–not reduce income.