Month: August 2014

by Dish Staff

Burger King wants to become Canadian:

Under the deal, America’s least-favorite burger makers would form a new company with Tim Hortons based in Canada. The two could reach a deal soon as this week.  Like a lot of American corporations, Burger King is considering casting off its U.S. citizenship because it’s really easy. Under current U.S. law, a company just has to buy 20 percent of a foreign corporation to transfer its base, through a process called a corporate inversion. Once the headquarters have moved, U.S. profits are subject to the 35 percent U.S. tax, but profits abroad are only subject to the lower rate. Canada lowered its corporate tax rate to 15 percent in 2012. And though that rate climbs to about 26 percent when you factor in provincial corporate taxes, that’s still lower than America’s 35 percent tax.

Vinik adds, “If it sounds ridiculous that an American company can purchase a foreign firm and suddenly avoid the U.S. corporate tax system, that’s because it is”:

It doesn’t matter that the vast majority of the shareholders are still American. Or that the management and control of the company remains in the U.S. Or that in making the deal, nothing about the company actually changes. You would still be able to grab a Whopper for lunch. Its thousands of American workers will all still have their jobs. But Burger King will have opted out of the U.S. corporate tax system.

But Matt Levine argues that “this merger, if it happens, is a real merger with real business and capital markets purposes”:

The merger is not mainly about taxes; in fact, Tim Hortons and Burger King’s effective tax rates are basically the same.

Tim Hortons, I am given to understand, sells a lot of coffee and donuts, most of them in Canada. (Out of 4,485 stores at the end of 2013, 3,588 were in Canada.) I don’t know, you could probably sell the coffee in the burger stores, or the burgers in the coffee stores, or good lord you could put a burger on a donut, that will probably win you cool points with millennials; millennials love things that are part donut and part thing that is not a donut. So there are business reasons for the deal. But if Burger King acquired Tim Hortons, the tax rate on all those Tim Hortons stores would go up: Instead of the regular 15 percent Canadian rate that they’re currently paying, they’d have to pay 35 percent combined to U.S. and Canadian authorities. From a Canadian company’s perspective, that hardly seems fair. Thus the inversion.

One more thing: This inversion is not all that inverted. Tim Hortons is actually bigger than Burger King, on revenue and net income though not on stock market capitalization. This is not just an aesthetic point.

But Daniel Gross suspects taxes are part of the rationale:

Sure, there may be valid business reasons for a combination. Tim Horton’s has a huge breakfast business, which Burger King lacks. But it’s easy to suspect that tax avoidance is a driving factor. (Burger King isn’t pursuing a U.S. doughnut chain like Dunkin’ Donuts.) That hedge fund sharpie William Ackman, who is backing Canada-based Valeant’s effort to acquire Allergan—another potential giant inversion—is one of Burger King’s biggest shareholders doesn’t help matters.

Yevgeniy Feyman uses the news to argue for tax reform:

Long-term tax reform should focus as much as possible on not just lowering, but replacing the corporate income tax (and perhaps the individual income tax as well) – with a progressive consumption tax. Short-run “fixes” that predicated on economic nationalism are likely to do more harm than good, and ultimately fail to actually address the problems with our tax system.

Mankiw made a similar argument over the weekend:

Let’s repeal the corporate income tax entirely, and scale back the personal income tax as well. We can replace them with a broad-based tax on consumption. The consumption tax could take the form of a value-added tax, which in other countries has proved to be a remarkably efficient way to raise government revenue.

But Jared Bernstein highlights the downside of eliminating the corporate income tax:

Those who would get rid of the corporate tax basically argue that the smart move is to go with this flow: As long as so many more businesses are setting themselves up to avoid the corporate tax, don’t fight ′em, join ′em. The problem is that to do so risks turning the corporate structure itself into a big tax shelter: If income generated and retained by incorporated businesses should become tax-free, then guess what type of income everybody will suddenly start making? Taxes delayed are taxes saved, and with no corporate tax, anyone who could do so would structure their earnings and investments to be “corporate earnings,” untaxed until they’re distributed.

Finally, Roberto A. Ferdman, who posts the above chart, points out that corporate inversion is something of a trend:

Burger King would hardly be the first large American corporation to move its headquarters—more than 70 U.S. companies have reincorporated overseas since the early 1980s. The practice has been especially popular lately—more than half of those inversions have come since 2003, or almost double the amount that did in the twenty years prior, according to data from Congressional Research Service (CRS).

by Dish Staff

Tim Fernholz highlights new Pew data on libertarianism in America, which shows that only 11 percent self-describe as libertarian and understand what the term means:

The survey showed a fairly even split among Americans considering whether the regulation of businesses does more harm than good, or if aid for the poor helps or hinders, though a majority does think that corporations make too much profit. Libertarians, meanwhile, leaned strongly against any interference in business or help to the poor, though not as strongly as you might think: 41% of libertarians saw government regulation of business as necessary, and 38% supported aid to the poor.

Indeed, perhaps the most interesting finding is that self-described libertarians favor US involvement in world affairs more than the average citizen, despite their reputation for an isolationist lean. And, even more weirdly, 16% of libertarians said US citizens need to be willing to give up some privacy in exchange for greater security.

Kilgore thinks that “Pew has at the very least cast some massive doubt on all that ‘libertarian moment’ polling from Reason“:

These findings of the non-particularity of “libertarian” views, mind you, is after Pew has melted the category down from 17% of the public to 11%, since a lot of “libertarians” could not accurately distinguish “libertarian” from “communist” or—get this—“Unitarian.”

Allahpundit’s analysis:

What you’re seeing in the poll results, I think, is a bunch of doctrinaire libertarians having their brand diluted by a bunch of conservatives/Republicans who are disgusted with those labels right now, for whatever reason, and are thus hoping to claim “libertarianism” for themselves. Do you support aggressive policing, a muscular foreign policy, and a social safety net but are disgusted with how big and intrusive the federal government’s gotten and how complacent the GOP has gotten about it? Congrats, you might be a “libertarian.” In fact, this reminds me of what David Frum said recently about the “libertarian moment”: It’s not so much that conservatives are turning into doctrinaire libertarians, he argued, as that they’re attracted in the age of Hopenchange to the broad libertarian critique that government is malignant, not merely inefficient and stupid. That’s how you get the sort of “libertarians” captured in the poll. They’re deeply distrustful of government writ large, but ask them about particular manifestations of government power — the welfare state, the police, etc — and they’re more simpatico.

by Bill McKibben

Well, sort of. News overnight that Australia’s prestigious Sydney University has announced its endowment will stop making any new investments in coal, and start reviewing its existing holdings. It comes after an intensive campaign from Greenpeace Australia, and my friends at 350.org, and is only one of many victories for the divestment campaign in recent weeks: the Unitarian Universalist Association, the World Council of Churches, Pitzer College, and the University of Dayton (a big Catholic research university in that green stronghold of Ohio) have joined Anglican dioceses, Stanford University, the United Church of Christ, and a great many others in what an Oxford paper described as the fastest growing movement of its kind ever.

The divestment camp has made two basic arguments. One, we’ve said, it’s simply wrong to invest in companies whose business plans involve finding, digging up, and burning far more carbon than the world’s scientists say is safe: if that’s your plan, than you’re not a normal company, you’re a rogue. You may not be breaking the laws of the state, but you are committed to violating the laws of physics.

Two, even if you don’t care about the future of the, you know, earth, it’s also an unwise gamble to keep doubling down on fossil fuel, because your investment only makes sense if the world takes no action to rein in carbon emissions. If the planet’s leaders ever get their act together, then many of the reserves that undergird company valuations will be “stranded,” much like the condo developments abandoned in the Nevada desert during the last housing crash. That argument has been more persuasive than I would have guessed when we launched this drive.

Not everyone is convinced, of course:

NSW Minerals Council chief executive Stephen Galilee said it was “a shame that Sydney University has caved in to the bullying of environmental activists masquerading as financial advisers”.

“The divestment campaign is environmental activism dressed up as investment advice and anyone choosing to take investment advice from environmental activists do so at their own financial risk,” Mr Galilee said, adding a recent report commissioned by the council had found the fossil fuel divestment case was based “on false premises and unsubstantiated claims, and may breach Australian law”.

But in fact, coal stocks have been a drug on the market. New York State’s pension fund alone has managed to lose $100 million over the last few years investing in black rocks. In this case, one might be better off taking investment advice–or advice period–from Desmond Tutu, who helped lead the last great divestment drive (from apartheid South Africa) and now is a key voice for fossil fuel divestment:

The taste of “success” in our world gone mad is measured in dollars and francs and rupees and yen. Our desire to consume any and everything of perceivable value – to extract every precious stone, every ounce of metal, every drop of oil, every tuna in the ocean, every rhinoceros in the bush – knows no bounds. We live in a world dominated by greed. We have allowed the interests of capital to outweigh the interests of human beings and our Earth.

by Sue Halpern

Sometime before my toddlerhood I became a failure to thrive baby. Food was going right through me; I wasn’t gaining weight. And so my parents took me to the doctor, and tests were done, and I was diagnosed with celiac disease. Certain foods were eliminated from my diet. Others were offered up almost non-stop. If there was ever a good case for sibling jealousy, it was watching my older brother eat apple pie while I got mashed bananas. Again.

Celiac doesn’t go away, but there came a time when I stopped abiding by the rules. What’s a little (or a lot of ) stomach distress when a buttered, toasted bagel is in the offing. Or blueberry pie. Or waffles. It was the celiac’s equivalent of Amish youth’s Rumspringa, and it was great! But having gotten sick once too often, I went back to my old ways, and when I did, I found that the sense memories of what I’d eaten stayed intact. Even now, years later, I can conjure up the taste of that bagel, or pie, or waffles. And because I have been able to do that, I’ve hardly felt deprived.

For the longest time, being wheat-free or gluten-free was an anomaly. But in the past five years or so, as you no doubt know–how could you not?–it has become a thing. Everyone is doing it! Celebrities. Athletes. Regular folk. The word on the street has been that eliminating wheat, or gluten, gives you more energy. That it makes you lose weight. That humans didn’t evolve to eat this stuff, so we can’t fully digest it. And the more it has become a thing, the more products are showing up on the supermarket shelf with the “gluten-free” label, even foods like Cheddar cheese and popcorn and, probably, steak. Which is to say nothing about the specialty products– the gluten-free oatmeals and almond flours and beers.

While none of these appeal to me–I’d rather have my sense-memory of  Toll House cookies not be distorted by some weak imitation–I completely understand why it might seem like a godsend to others, especially parents with celiac children. But to be honest, I’ve felt a little silly recently saying that I can’t eat that pasta or pizza, like I’m part of a cult I never meant to join.

But now begins the backlash. And not from people who are ready to go back to sourdough and cupcakes, but from science. As Luisa Dillner reports in The Guardian, for the past two years, gastroenterologists have been diagnosing people with something called non-celiac gluten sensitivity (NCGS), whose symptoms include “bloatedness and diarrhoea but also fatigue, ‘foggy brain’ and pain and numbness in the arms and legs.” But, she writes,

The research on NCGS is inconclusive and the most recent studies show that carbohydrates called Fodmaps, rather than gluten, may be the cause of symptoms. Fodmaps are fermentable oligo-, di- and mono-saccharides, and polyols – and one of them, fructan, is increasingly implicated in irritating the gut, causing flatulence, diarrhoea and bloatedness. Wheat has Fodmaps but so do other foods such as garlic, artichokes, yoghurt and fruit.

And an editorial in the academic journal Gastroenterology suggests that NCGS may not even exist.

Potentially phantom illnesses aside (and let’s hear it for the placebo effect in any case!), a warning issued by a Kansas State University food safety specialist brings a more serious worry: a popular gluten substitute, lupin “has the same protein that causes allergic reactions to peanuts and soybeans.” Because, until now, lupin has not been used much here in the States, the fear is that people with nut allergies will be unsuspecting consumers, with disastrous results.

But do not expect the recently gluten-free to break out the Mint Milanos any time soon. According to an article in The New York Times:

The portion of households reporting purchases of gluten-free food products to Nielsen hit 11 percent last year, rising from 5 percent in 2010. In dollars and cents, sales of gluten-free products were expected to total $10.5 billion last year, according to Mintel, a market research company, which estimates the category will produce more than $15 billion in annual sales in 2016.