Skip to main content

Blame Burger King deal, not Warren Buffett

By Robert McIntyre
updated 9:19 AM EDT, Wed August 27, 2014
STORY HIGHLIGHTS
  • Robert McIntyre: Burger King's purchase of Tim Hortons means it can pay less taxes
  • Robert McIntyre: Americans are right to be angry at the merger
  • He says while Warren Buffett's company is partly financing the deal, he's not to blame
  • McIntyre: Unless Congress fixes the tax loopholes, nothing will change

Editor's note: Robert McIntyre is the director of Citizens for Tax Justice, a public interest research and advocacy organization focusing on federal, state and local tax policies and their impact. The opinions expressed in this commentary are solely those of the author.

(CNN) -- Americans are rightly angry that Burger King plans to use its merger with the Canadian doughnut and coffee chain Tim Hortons to claim Canadian citizenship, probably as a way to avoid paying U.S. taxes -- which the burger chain denies. But Burger King is the latest company to undergo an inversion, which happens when an American company uses a merger to reincorporate as a foreign one.

Some have suggested boycotting the fast food chain, while others have directed their anger toward the billionaire investor Warren Buffett, whose company Berkshire Hathaway is partly financing the deal.

Buffett is famous for arguing that our tax code should be fairer and that the rich and powerful should not get more breaks than middle-income Americans -- views that some say are incongruous with his involvement in this merger.

Robert McIntyre
Robert McIntyre

But anger toward Warren Buffett is misdirected. He cannot close loopholes that allow Burger King to claim Canadian citizenship any more than he can close the loophole that allows him and fund managers to pay a smaller percentage of their income in taxes than their secretaries.

The real culprits are members of Congress, who have failed to close these loopholes and have allowed Burger King to claim that it is becoming a foreign corporation for tax purposes even when common sense tells us it is as American as any company could be.

You see, Burger King will continue to serve U.S. customers. It will not undergo much change in ownership. And it will likely continue to have its managers based in the United States. But when it's time to pay taxes, it will claim to be a newly restructured company based in Canada, which has a lower corporate tax rate.

Will Congress close tax loopholes?
Fast food controversy

It's absurd that Congress is allowing Burger King to use paperwork to avoid supporting the very public investments — highways, agriculture supports, food inspections, courts — that make its profits possible.

And just be clear on this point: Burger King probably will use this deal to avoid taxes, no matter what the company says. Defenders of these arrangements argue that profits the company makes in the United States will still be subject to U.S. taxes, but that ignores the additional loopholes that a corporation can exploit after it inverts.

For example, Burger King can take on debt from the foreign company that officially owns it after inversion and then make interest payments that wipe out its U.S. income for tax purposes. This effectively shifts the profits made in the United States to a foreign country where the company will be taxed less.

Of course, this is all an accounting gimmick since merged corporations like Burger King and Tim Hortons are really just one great big company, so a "loan" from one to the other is really like one branch of a company wiring money to another branch. But our tax rules are so poorly written that they allow this utter nonsense.

It doesn't have to be this way. A proposal from President Obama would basically tell the IRS not to recognize a company like Burger King as "foreign" for tax purposes unless it really has become a foreign company in a real sense.

This proposal has been introduced as legislation in the House and Senate, but so far a majority has not acted in either chamber. Until Congress hears from all of us outraged Americans, nothing will change, no matter what Warren Buffett does.

Read CNNOpinion's new Flipboard magazine

Follow us on Twitter @CNNOpinion.

Join us on Facebook.com/CNNOpinion.

ADVERTISEMENT
Part of complete coverage on
updated 6:11 PM EST, Thu December 18, 2014
President Obama has been flexing his executive muscles lately despite Democrat's losses, writes Gloria Borger
updated 2:51 PM EST, Thu December 18, 2014
Jeff Yang says the film industry's surrender will have lasting implications.
updated 4:13 PM EST, Thu December 18, 2014
Newt Gingrich: No one should underestimate the historic importance of the collapse of American defenses in the Sony Pictures attack.
updated 7:55 AM EST, Wed December 10, 2014
Dean Obeidallah asks how the genuine Stephen Colbert will do, compared to "Stephen Colbert"
updated 12:34 PM EST, Thu December 18, 2014
Some GOP politicians want drug tests for welfare recipients; Eric Liu says bailed-out execs should get equal treatment
updated 8:42 AM EST, Thu December 18, 2014
Louis Perez: Obama introduced a long-absent element of lucidity into U.S. policy on Cuba.
updated 12:40 PM EST, Tue December 16, 2014
The slaughter of more than 130 children by the Pakistani Taliban may prove as pivotal to Pakistan's security policy as the 9/11 attacks were for the U.S., says Peter Bergen.
updated 11:00 AM EST, Wed December 17, 2014
The Internet is an online extension of our own neighborhoods. It's time for us to take their protection just as seriously, says Arun Vishwanath.
updated 4:54 PM EST, Tue December 16, 2014
Gayle Lemmon says we must speak out for the right of children to education -- and peace
updated 5:23 AM EST, Wed December 17, 2014
Russia's economic woes just seem to be getting worse. How will President Vladimir Putin respond? Frida Ghitis gives her take.
updated 1:39 AM EST, Wed December 17, 2014
Australia has generally seen itself as detached from the threat of terrorism. The hostage incident this week may change that, writes Max Barry.
updated 3:20 PM EST, Fri December 12, 2014
Thomas Maier says the trove of letters the Kennedy family has tried to guard from public view gives insight into the Kennedy legacy and the history of era.
updated 9:56 AM EST, Mon December 15, 2014
Will Congress reform the CIA? It's probably best not to expect much from Washington. This is not the 1970s, and the chances for substantive reform are not good.
updated 4:01 PM EST, Mon December 15, 2014
From superstorms to droughts, not a week goes by without a major disruption somewhere in the U.S. But with the right planning, natural disasters don't have to be devastating.
updated 9:53 AM EST, Mon December 15, 2014
Would you rather be sexy or smart? Carol Costello says she hates this dumb question.
updated 5:53 PM EST, Sun December 14, 2014
A story about Pope Francis allegedly saying animals can go to heaven went viral late last week. The problem is that it wasn't true. Heidi Schlumpf looks at the discussion.
updated 10:50 AM EST, Sun December 14, 2014
Democratic leaders should wake up to the reality that the party's path to electoral power runs through the streets, where part of the party's base has been marching for months, says Errol Louis
updated 4:23 PM EST, Sat December 13, 2014
David Gergen: John Brennan deserves a national salute for his efforts to put the report about the CIA in perspective
updated 9:26 AM EST, Fri December 12, 2014
Anwar Sanders says that in some ways, cops and protesters are on the same side
updated 9:39 AM EST, Thu December 11, 2014
A view by Samir Naji, a Yemeni who was accused of serving in Osama bin Laden's security detail and imprisoned for nearly 13 years without charge in Guantanamo Bay
updated 12:38 PM EST, Sun December 14, 2014
S.E. Cupp asks: How much reality do you really want in your escapist TV fare?
updated 1:28 PM EST, Thu December 11, 2014
Rip Rapson says the city's 'Grand Bargain' saved pensions and a world class art collection by pulling varied stakeholders together, setting civic priorities and thinking outside the box
updated 6:10 PM EST, Sat December 13, 2014
Glenn Schwartz says the airing of the company's embarrassing emails might wake us up to the usefulness of talking in-person instead of electronically
updated 5:33 PM EST, Fri December 12, 2014
The computer glitch that disrupted air traffic over the U.K. on Friday was a nuisance, but not dangerous, says Les Abend
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT