You remember President Obama’s billionaire little buddy Warren Buffet?
Mr. Buffet was very publicly beside himself that his secretary reportedly was taxed at a higher rate than he was. (Forget that the aspect of the tax system that President Obama and Buffet were deploring in unison will probably benefit the secretary—who was trotted out at a State of the Union address—later when she retires and is living on her investments.)
But that was then. Now, the president’s favorite billionaire finds it to his advantage to go against the president on the matter of companies that, stymied by the U.S. tax code, move their headquarters to friendlier countries. The Wall Street Journal reports:
President Obama and Senate Democrats are going to need a new business front man. This week they've been officially abandoned by their erstwhile tax-policy patron saint Warren Buffett, who has joined up with what the President likes to call the "corporate deserters" who locate their legal headquarters somewhere other than the United States.
On Tuesday Burger King Worldwide BKW -4.32% confirmed that the Miami-based burger chain is buying Tim Hortons Inc., THI.T +8.14% the Canadian purveyor of coffee and doughnuts, for roughly $11 billion. As part of the deal Burger King will move its legal headquarters north of the border.
Mr. Buffett, who has been the President's longtime partner in a campaign to raise taxes, will help finance the transaction. Mr. Buffett's Berkshire Hathaway BRKB +0.01% will invest $3 billion in preferred shares that will pay a handsome 9% coupon.
For the record, Burger King protests that this isn’t about corporate taxes but about taking advantage of Canadian hunger for coffee and donuts. The Wall Street Journal remarks:
No doubt that's true but it overlooks that Canada has become a far more business-friendly tax jurisdiction than the U.S. And so are most serious countries, given that the combined state and federal corporate tax rate of nearly 40% in the U.S. is the highest in the developed world.
The real tax gain for Burger King is that by choosing a legal address in Canada it can avoid Washington's obsession with taxing overseas profits at American tax rates. To the extent that either chain is able to grow internationally, this deal means that their world-wide earnings, once taxed overseas, generally won't have to be taxed again for the privilege of being invested in the U.S.
In expanding into a more tax-friendly country, Burger King is doing right by its shareholders, many of whom look to their investments to help them through their retirement years.
But the President thinks it is “unpatriotic” for a company to opt to put money into the pockets of investors, millions of whom are ordinary, working Americans, rather than in the pocket of the IRS.
Ohio Senator Sherrod Brown, a Democrat, is trying to blackmail Burger King by calling for a boycott.
The real villain is the U.S. tax code that makes it more appealing for corporations to do business elsewhere.
But at least Mr. Buffett’s secretary will have the night off for the next SOTU. Indeed, as much as our president loves hanging with rich people and celebrities, Mr. Buffett may not be getting as many White House invites in future.