September 7, 2014

Thoughts on Burger Flipping

So we're a dozen or so days post the announcement that Miami-based Burger King is buying Canada's Tim Hortons, for about $11 billion, and the merged company's headquarters will be in Canada.  How many times have you heard "you want fries with that, eh?"

When the deal was leaked, and then finally confirmed, there was a lot of traditional media chest-thumping about how this was another in a string of corporate mergers for 'inversion', a process where American firms become foreign firms in order to reduce their US tax burden, er, I mean to foster growth and expand their global footprint and improve shareholder value.

On Facebook, Burger King had this message of inversion denial front and center on August 26th, the date the deal was announced; by that time, there was a groundswell of complaints on social media, which began after the news leaked that a deal was in the works:


In some respects, we probably should have been mad at Burger King for a long time. According to this report, Reuters did some digging around in corporate filings and found out that BK's tax rate is "among the lowest in the industry," some five percent less than McDonald's, Starbucks or Dunkin' Donuts. But there's also this:
Burger King generated almost 60 percent of its revenues in the United States between 2011 and 2014, regulatory filings show, but the chain reported just 20 percent of its profits in the country over the period. 
Hmm. And:
Turns out Burger King has created tax structures that allow it to operate nearly tax-free in German and British markets... (and) has also channeled income through Switzerland, which has enabled it to pay an effective tax rate of fifteen percent on foreign income over the past three years. 
Almost comically - I kid you not - as I'm typing this, there's an ad on the radio from a firm specializing in tax law noting that Albert Einstein once said "the hardest thing in the world to understand is the income tax" and yet, it seems like Burger King and lots of other companies have managed to get a grip on this difficult topic, doesn't it?

Now, I confess when this news broke, like lots of people my initial reaction was to say that I would no longer spend any money at Burger King, which would save me all of about $20, since we almost never go to fast food places of coffee chains. I freely admit I get frustrated when companies don't pay taxes, or use loopholes they purchased from entrenched politicians (from both major parties) to avoid what we currently define as their fare share.

So we're threatening not to patronize them, and what is Burger King doing? They're back to posting photo-shopped food and people on their websites, as if to say "move along, nothing to see here." The negative comments continue, and probably will for some time, because people have seen and felt the power of social media campaigns in affecting change. 

Some of the comments have called for total boycotts, some for passing legislation to get Burger King off US military bases, and even a few calling for sanity.

Why sanity?  Well, there are actually a number of reasons. 

A significant number of Burger King restaurants are not corporate-owned, they're franchisee-owned, maybe by people you know, employing people you know, supporting and paying taxes in your community. For example, Syracuse is the headquarters of the Carroll's Corporation, which operates 570 Burger King outlets and employs over 17,000 people in thirteen states. I wouldn't really want to boycott them - they do a lot of good in our community, and they have all of those employees... Perhaps, instead of blindly boycotting all Burger Kings, we should ask if they're a corporate outlet or franchisee-owned before we take a stand?

Boycotting, too, if it's successful, would hurt the corporate bottom line, which of course is the intended outcome.  The unintended outcome, however, is that they'll pay even less taxes under those circumstances,  making the situation even worse. 

On removing the restaurants from US military bases, the thinking is that if you're not interested in paying taxes here in America, we're not interested in having you feed our soldiers on our property; those soldiers are the ones who, by their very (tax-supported) existence, protect you and your right to pack up and move your headquarters out of dodge.  Seems reasonable, I guess - however, doing that may in fact take jobs away from military spouses and children, income they may desperately need to stay above water.

Others have pointed out that damaging the company's bottom line only hurts us in the end, because our pensions and 401(k) plans probably have stock in these places, and we wouldn't want to shoot ourselves in the foot, would we? 

So what are we to do, beyond social media bashing and boycotting corporate restaurants? 

An inversion, by definition, is a change in the position, order, or relationship of things so that they are the opposite of what they had been.  We need an inversion of our own, starting at the ballot box.  We need to elect people who will, among other things:
  • support and abide by term limits
  • support and work for real campaign finance reform and election reform, starting with refusing to accept corporate, union, lobbyist and PAC money and contributions from outside the district they represent
  • support and work towards real tax reform for people and corporations, allowing people to keep more of what they earn and making it less necessary and/or attractive for corporations to make moves like this
  • support (and work towards) the elimination of the countless redundant and overlapping services (and agencies) that exist within all levels of government, and to adequately support and fund efforts to combat the fraud that occurs within government programs, including Medicare
  • refuse to vote for or submit a bill that has an unrelated rider, amendment, or language not directly tied to the purpose of the bill; for example, if you're trying to fund the military, leave the SNAP program for another piece of legislation

These are the kind of things that will restore reason, bring fairness across the entire playing field, and might actually make a difference. The rest of it? Our knee-jerk reactions make us feel good, and there's nothing like blasting off a Facebook post or a tweet, but in the end, if we don't change the players, we can't change the rules. And we can't change the rules if we don't vote.

If we don't vote, well, we might as well be flipping burgers.