People are saying they will flee to Canada if Donald Trump is elected. Canada has already endured waves of disgruntled Americans fleeing George W. Bush, and then President Obama. The Trump case is funny, though, because of The Donald’s position on immigration. One Twitter wag suggested that Canada should build a wall.
To gain permanent residency in Canada, you must have a sponsor, a trade, references, a background check, and speak either English or French. The process takes at least two years. If you sneak in and overstay your visa, you will not be able to get a driver’s license, a health card, a job, or rent an apartment. The RCMP will hunt you down and send you back.
So, people who are offended by Trump’s remarks about immigration plan to protest by burdening the immigration system of our northern neighbor. Funny, eh? The only thing funnier would be if they tried moving to Mexico.
See also: Arizona has rights, too
We did a double take when we read about Burger King’s tax inversion to Canada. Canada? Burger King is majority owned by Brazilian private equity, so they’re not exactly “corporate deserters,” to use the president’s phrase. They will also enjoy revenue synergy with Tim Horton. Plenty of financial analysis is on FT, as here. So, when did Canada become a tax haven?
Jeremiah is always coaching you to find the truth behind the news, and this is a great example. America has the world’s highest corporate tax rate, at 35%. If you know this, you also know the headline figure is contested. Many pundits say that, once you back out various credits and deductions, the rate is closer to 23%. If this were true, companies would not be leaving the country. See chart from Bloomberg, below.
The Brazilian capitalists will have done their own tax planning. KPMG reckons that the total tax rate in America is 40%, versus 26% in Canada. To be fair, the tax apologists may be right about certain companies which are able to enjoy the gamut of preferential tax breaks. GE famously paid no tax at all in 2010.
Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines.
The point is that if you “follow the money,” you can determine which pundits are liars, and which corporations have Washington skills.
Filed under Finance, Media
Jeremiah was so pleased with the Chile post, he has us ransacking tax policy around the globe. This nugget is from Canada:
Interest on a loan secured by your home is NOT tax deductible, UNLESS you use the money for a profit making investment.
This is one reason Canada didn’t experience the housing crash – although pundits say it could still happen. Canadians pay tax on government bonds, but not their savings accounts. To an American investor like Jeremiah, Canada is “through the looking glass.” Run, don’t walk, to put your money in a Canadian bank. They’re offering 1.1% APR.
You may have noticed that our national economy staggers from one bubble to the next. Jeremiah is not the first to make this observation, but he is the first to coin a general rule:
If government policy favors some good or service, then the price of that good or service will become a bubble.
This simple rule explains the housing bubble, the dot com crash, the student loan crisis, municipal bankruptcy, and even the high cost of medical care.