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Rep. Paul Ryan: America is not as competitive as it needs to be

Nicole Goodkind
Nicole Goodkind

It seems as though we can't go a week without another report of an American company merging with a foreign business in order to relocate their headquarters and avoid the nominal U.S. tax rate of 40%. The latest is Burger King’s merger with Canadian brand Tim Hortons in an $11 million deal that will move Burger King's business operations to Canada, where the corporate tax rate is only 26%.

Congressman Paul Ryan (R-Wis.), 2012 Vice Presidential candidate and author of “The Way Forward: Renewing The American Idea” joined Yahoo Global Correspondent Bianna Golodryga to weigh in. Congressman Ryan has long called for a comprehensive tax reform bill, but with midterm elections coming up, any serious reform seems at least six-months off. With this in mind, many politicians have called for a temporary solution or ban on inversions all together.

“The problem with those so-called solutions is that all they would do is make it more likely that American companies would be ripe for takeover by foreign corporations,” says Ryan. “There’s really no shortcut to the real answer which is tax reform.”

Trying to place punitive measures on corporations on top of a punitively high tax rate, says Ryan, will only accelerate U.S. company takeovers by foreign companies.

“The fact of the matter is,” says Ryan, “America is not as competitive as it needs to be, and when you tax American corporations at much higher tax rates than our foreign competitors tax theirs, they win, we lose — it’s just that simple.” The U.S. corporate tax rate is currently higher than all 34 OECD (Organisation for Economic Co-Operation and Development) member countries.

While it’s clear that corporate tax reform is necessary, it remains unclear whether Congress will be able break partisan gridlock and come to an agreement. “House republicans have led on this issue; we have proposed comprehensive tax reform that plugged loopholes, reduce crony capitalism and lower tax rates across the board for businesses and families alike.”

Warren Buffett, long an advocate for higher taxes on the wealthiest Americans, is backing the Burger King-Tim Hortons merger. His company, Berkshire Hathaway, reportedly funded 25% of the deal.

The merger between Burger King and Tim Hortons is just the latest in a slew of so-called inversions where American companies merge with foreign concerns, which allows the American firms to pay lower foreign tax rates. Other recent deals include: AbbVie with Shire and Chiquita Brands International with Fyffes (pending).

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