Burger King Deal Gets a Proverbial Shrug in Washington

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Christopher Millette/Erie Times-News via AP
By Ben White | @morningmoneyben

You would think Burger King's decision to buy Tim Hortons (THI) for $11 billion and move its headquarters to Canada would spark national outrage and move the debate over tax inversion deals to the proverbial front burner.

But you would be wrong. So far the deal has been met with a proverbial shrug.

The White House, which has promised robust action to stop inversion deals, has so far had very little to say about the transaction. White House Press Secretary Joshua Earnest wouldn't comment on the Burger King (BKW) deal. Instead he offered the standard boilerplate that Treasury is "considering a range of administrative options that are available to the administration to make those kinds of financial transactions less appealing."

Nothing stirs the hearts of voters like "a range of administrative options."

Burger King Says Tim Hortons Merger Not About Taxes

Earnest also once again called for comprehensive tax reform and, barring that, a one-off legislative fix to somehow bar inversion deals.

There has also been little evident outcry from members of Congress over the Burger King deal. Granted, Congress is out of session (one wonders if this is why the deal was announced now), so there is limited opportunity for members to step to microphones and rip Burger King as a corporate "deserter."

But there could still be a chorus of presidential hopefuls weighing in or press releases flowing out of congressional district offices demanding that the home of the Whopper remain the United States. None of that seems to be happening.

And the deal, which is about more than just lowering Burger King's effective tax rate, also has the blessing of Warren Buffett's Berkshire Hathaway (BRK-A) (BRK-B), which is providing $3 billion in preferred equity financing.

Close Obama Ally

Buffett is generally a close ally of the Obama White House. He has pushed hard for setting a minimum tax rate for millionaires, so much so that the proposal is now known as the "Buffett rule" and is regular feature of Obama's rhetoric on fairness in economic policy.

People close to the administration say the refusal to comment directly on the Burger King deal should not be taken as any indication of backtracking on making inversions a big piece of the fall economic agenda. They say to expect some kind of executive action proposals by October, in time for the November elections, where Democrats view economic patriotism as a winning issue.

An administration official said in a statement Tuesday: "As we have said, we are not privy to the details of individual companies' plans and are not in a position to comment on reported, potential business transactions. But let's be very clear: the president believes that as a general matter, it is not right that some large corporations are able to exploit a loophole in the tax code despite having the bulk of their operations based in the United States."

And that is really the big question on inversions: Is it really a policy issue the White House and Democrats expect to address in the near term or is it just convenient rhetoric they think can isolate Republicans as defenders of corporate tax dodging?

Buffett appears to think it is the latter, though one assumes Berkshire is protected if Congress somehow passes retroactive legislation barring inversion deals or the White House manages to foil them through its wide latitude to make administrative changes through the tax code.

On the question of congressional action before the midterms, expert opinion is generally in lockstep: No chance. There are very few legislative days left before Congress adjourns to campaign full time. And they will be packed with efforts to keep the government funded for the rest of the year and deal with other must-pass legislation.

And while many Republicans support some kind of effort to deal with inversions there is no bipartisan agreement on the way forward. The GOP can line up behind Sen. Orrin Hatch's efforts (which wouldn't be retroactive) and say they want to do something about inversions but Democrats won't listen to reason.

So for now, inversion transactions seem safe from congressional action. That doesn't mean they are safe from Treasury, which could take many moves to try and mitigate or eliminate the tax benefits of inversion deals. But will they?

Keeping Tight-Lipped

The administration is very tight-lipped about where these proposals stand and critics say the heated rhetoric is mainly aimed at discouraging more of these transactions from taking place. If that's the intent, the Burger King deal suggests it's not working.

And any of the fixes the White House comes up with will likely both enrage Republicans and drive up rhetoric that Obama is abusing the powers of his office, helping lift GOP turnout in midterms in which the Democrats' Senate majority is at serious risk. There will likely also be court challenges.

Of course, unilateral action on inversions could also boost listless Democrats eager to see more confrontational action from the president.

There is also the very serious matter of unintended side effects if Treasury tries to punish companies that ship U.S. earnings abroad and load up their domestic units with debt. Would this move impact debt held by companies that haven't inverted? The mechanics of dealing with inversions through executive actions are fraught with potential landmines, making it even harder for Treasury to meet politically expedient deadlines for providing the president with options.

And if Burger King going to Canada doesn't get people more fired up about the issue it's hard to see what will.

Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money. Follow him on Twitter @morningmoneyben.




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74 Comments

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Jawmore

If it wern't for the"rainbow" queen burger I would go there more often. Since Dims love a 40% corperate tax rate highest in the world? versus Canadas 26% corperate tax rate prooves to me that dims hate businesses and private sector jobs. Perhaps I will buy me a Whoppper and eat it with pleasure knowing that the dims get pissed off. this might be just a beginning of an exodus thanks to dims thanks to Obama who love taxes.

August 27 2014 at 10:19 PM Report abuse +1 rate up rate down Reply
1 reply to Jawmore's comment
jrb359

I'll be eating there too! The Democrats are ALL about lies, deceit, taxing, and wastefully spending American tax payers hard earned monet! Maybe if they took away some of the restrictions, regulation, fees, licenses, and repealed obamacare, the economy would come back to life once more. Unfortunately, this administration wants nothing to do with helping Americans. It's NOT part of the Progressive agenda!

August 28 2014 at 6:01 AM Report abuse rate up rate down Reply
Hello, Verle!

boycot burger queen

August 27 2014 at 10:10 PM Report abuse -1 rate up rate down Reply
Betse

There's one very simple way that the good ol' American people can win on this one............ just stop eating at Burger King. Yes a great big, old fashioned, we will not buy your hamburgers,boycott! Goodness knows there are LOTS of places to buy a burger! Bet that would get their attention!

August 27 2014 at 9:36 PM Report abuse rate up rate down Reply
1 reply to Betse's comment
truu.liberal

Instead, make sure YOU get to PAY more of the taxes that are COLLECTED by BK competitors.

I mean, why wouldn't you instead seek to PAY less of the taxes that are COLLECTED from ALL the dumb ones too stupid to know that it is THEY who are PAYING these taxes.

August 27 2014 at 9:43 PM Report abuse +2 rate up rate down Reply
truu.liberal

The GREEDY are the mouth-breathing government goons that attack American citizens by exploiting the dumbest amongst us who are incapable of recognizing that ALL taxes COLLECTED by corporations are taxes that are PAID by citizens. .

The STUPID are dumbest 1%ers who are preyed upon by GREEDY goons who recognize the existence of dunces too dumb to recognize it is THEY who PAY the taxes COLLECTED by corporations.

If only there was some way to vote the dumb ones off the island.

August 27 2014 at 8:30 PM Report abuse +1 rate up rate down Reply
lylenpat

P.S. When you vote this November, get rid of the dead wood and plant as many new seedlings as possible. How to tell who to vote out of office, IF HE OR SHE HAS BEEN IN WASHINGTON LONGER THAT 8 YEARS, "CHOP CHOP CHOP". Who knows, maybe some day we can limit lobbying, Multibillion dollar elections, soft money, elections without lies and finger pointing. Maybe even get term limits, lobbying limits, donor contributions going to a General revenue fund to be equally divided among political candidates without having to pay back the chronisim generated by contributions to an individual. VOTE VOTE VOTE CHOP CHOP CHOP. There is a lot to choose from, like in the neighbor hood of 300 to 500 entrenched career politicians who do what they want, don't listen to the public and just enjoy the seniority and perks, all paid for through tax payer monies, of which, THE CITIZENS OF THIS UNITED STATES NEVER AUTHORIZED, NEVER GOT TO VOTE ON AND HAVE NO CAPABILITY TO STOP EXCEPT BY VOTING THE OVER PRIVILEDGED, OVER PAID, UNDER WORKED POLITICIANS WHO ARE SUPPOSE TO WORK FOR US.

August 27 2014 at 7:21 PM Report abuse rate up rate down Reply
lylenpat

Maybe if Americans would start paying attention to this crap of major corporations moving from the U.S. to avoid paying taxes or paying none at all, and quit being apethetic because "It doesn't affect me directly" and do something about it. As Jay Leno did on his program years ago, going to the streets and asking historical or everyday questions like "Do you know what the Gettysburg Address is" daaaaa, not really without the street number and the city name. Stupid is as stupid if you do not join the human race and make yourself aware of the world around you. MAYBE IT IS TIME TO WAKE UP AMERICA AND BOYCOTT THESE COMPANIES AND CONGRESS PEOPLE to make them aware of some NON-GREEDY CARRING about the American Way of Life. 50, a 100, 300 million dollar CEO's of companies who treat their workers and customers like trash and take their money to other countries so they can "Supposedly satisfy their GREEDY investors" need an attitude adjustment. Companies, at least some, are slowly becoming aware that foreign investments, foreign workers, foreign factories, taking American jobs and company profits over seas, IS NOT WORKING OUT TO WELL. Sure it's cheap labor in the beginning, sure it's low taxes in the beginning, but sooner rather than later, business's and governments, outside the U.S. wake up to that cunning little monster called "GREED". They soon too, want the extra revenue, the bigger salaries, better living conditions, better health care and so on. Be aware my friends that GREED and the desire for it is much like a loose starving tiger. Sooner or later it will return to it's origin and jump in through the window and eat it's creator. Look at China, it is beginning to pay the price of incoming revenue, it's uplifting affluent society and it's government while creating a false economy, building boom and export business, is slowly crumbling. Enjoy this economic monster, but remember, even GODZILLA had his day and was left alone to hibernate.

August 27 2014 at 7:12 PM Report abuse -1 rate up rate down Reply
1 reply to lylenpat's comment
truu.liberal

The GREEDY are the government goons who viciously assault American businesses.

The STUPID are dumbest 1%ers like you who are exploited by the GREEDY because of your incapacity to identify them.

August 27 2014 at 7:50 PM Report abuse rate up rate down Reply
jamp713

check where some of your senators and congressmen and rich politicians investments and money is at

August 27 2014 at 4:35 PM Report abuse rate up rate down Reply
shmtnmusic

Seems to me that even with tax breaks for American companies, they're still paying a higher rate than other more business friendly nations. Correct that and you'll have a return of overseas monies. Of course, democrats and liberals can't fathom that.

August 27 2014 at 4:21 PM Report abuse rate up rate down Reply
theycallmeroy3

Good thing the US Open is going on, because an administration strategist is going to need a lot of top spin, to spin this one.

BK is no Walgreen's.

BK corporate tax in in the US, after tax credits is 27%. Surly the administrations knows that, but maybe not.
Horton's in Canada's tax rate is just shy of 27%. Call it 26% something. Not much difference in %. That's how BK can say it's not about taxes.

And Horton's are not planning to sell Whoppers. I don't know how the Democrat's are going to
spin this, and come out on top.
Inversions been around a while. Its not like Obama's never heard or known of them.
but...
Understanding tax inversions is a whole different ballgame. At least how to properly spin it to the general public.

And how's the deal is structured, BH could take a hose if BK went under. It's not without risk.

Someones banking on the public not caring. Ah, the addiction of fast food.

Whooper versus Walgreen's. Whopper's win- 6.0 6.0 6.0.

August 27 2014 at 3:59 PM Report abuse -1 rate up rate down Reply
hecd.ag

Another day, and my conservative pets are still whining. But seriously, is ANYONE surprised?

August 27 2014 at 3:42 PM Report abuse -2 rate up rate down Reply
2 replies to hecd.ag's comment
truu.liberal

Everybody is just laughing at you again, dunce.

Perhaps this would be a good place for you share share a few more elementary school playground illustrations of your juvenile intellect

August 27 2014 at 4:07 PM Report abuse -1 rate up rate down Reply
gee.effwye

You hit comment board this morning whining, Namcy...WTF are you talking about?

August 27 2014 at 8:19 PM Report abuse rate up rate down Reply