Top Senate Democrats warned Burger King that it was in for a whopper of a surprise if it thought moving to Canada for the tax benefits would come without a heavy cost.
It’s the latest episode in the long history of corporate moves as political hot potatoes, and, for many lawmakers, patriotic grist for the mill.
Senators were appalled by the American company's plan to merge with Canada’s iconic Tim Hortons coffee chain and relocate its operations to the north. Lawmakers predicted a coming public and congressional backlash.
Sen. Sherrod Brown immediately suggested that Americans turn to “Wendy’s Old Fashioned Hamburgers or White Castle sliders” in the wake of reports that Burger King had “abandoned their country.”
Both Wendy’s and White Castle are based in Ohio, the state that Brown represents in the Senate. On the other hand, Brazilian private equity firm 3G is the majority owner of Burger King, which is based in Florida.
“To help business grow in America, taxpayers have funded public infrastructure, workforce training, and incentives to encourage R&D and capital investment,” Brown thundered. “Runaway corporations benefited from those policies but want U.S. companies to pay their share of the tab.”
Sen. Carl Levin, who has long been a champion for closing corporate tax loopholes, warned the company that the blowback from the American consumer could swamp any tax benefits it receives from leaving the United States. He was speaking before the deal was confirmed on Tuesday.
“There could well be a strong public reaction against Burger King that could more than offset any tax benefit it receives from a tax avoidance move,” he said Monday, describing the deal as “another example of why Congress can’t afford to wait any longer to put a stop to tax dodging through this kind of merger.”
For Sen. Orrin Hatch, the top Republican on the Senate Finance Committee, the Burger King news emphasized the need for a tax overhaul that would make it more attractive for American companies to stay in the United States.
“Burger King’s pursuit of an inversion only further underscores the arcane, anti-competitive nature of the U.S. tax code. Short of a tax overhaul that will make it easier for American companies to invest and create more jobs at home, Senator Hatch has advocated for an interim proposal to address the disturbing recent uptick in inversions,” Julia Lawless, a Hatch spokeswoman, told The Daily Beast. “He’s continuing to work with colleagues on both sides of the aisle and hopes to find a viable policy-driven, apolitical proposal.”
While Canada does offer a more attractive tax rate—15 percent at the federal level, compared to America’s 35 percent—the tax burden is far from the only factor in Burger King’s potential move to Canada.
Tim Hortons is a coffee chain nearly synonymous with Canadian identity, and Canadian law provides for the nixing of mergers that isn’t in the national interest, a problem which could come up if the company was to move its operations to the United States rather than the other way around. Given many large American corporations are able to avoid much of their taxes through loopholes, taxes may be just one of the considerations in any potential deal.
Burger King’s possible move has the potential to become a potential political symbol of a broader economic malaise, as have other such moves in the past—real or perceived.
GOP presidential nominee Mitt Romney claimed that President Obama’s automotive sector policies had driven Jeep to consider a move to China (this claim was later singled out as PolitiFact’s “Lie of the Year”). And when John Kerry was running for president, he repeatedly condemned corporate “Benedict Arnolds” who move jobs and operations overseas to reduce tax obligations.
Burger King itself has been a part of the congressional conversion, both as a punchline and as part of the debate on the minimum wage in America. For example, Rep. Ted Poe made a speech on the House floor in January to denounce what he viewed as President Obama’s “imperial” executive orders.
“Madam Speaker, this is America; it is not Burger King,” Poe said. “The President cannot always have it his way.”
Burger King has also become a sort of synonym for ‘minimum wage job,’ with numerous mentions in speeches and interviews as shorthand for the topic. Sen. Tom Harkin invoked the case of a 50-year-old Burger King worker in December to make a point about the minimum wage and unemployment benefits.
And Florida GOP Sen. Marco Rubio, whose constituents include Burger King corporate staff, caused a stir in the progressive blogosphere when he said that Republicans were the party of economic growth, while Democrats were resigned to minimum wage jobs.
“I want people to look at the Republican Party as the party that shows them the way to a new American century versus a Democratic Party that shows us how this is the new normal and we just have to get used to it, that the cashier at Burger King will always be a cashier, and all he or she can hope for is an increase in the minimum wage,” Rubio told the New Hampshire Union Leader.
So could Levin and Brown be onto something? Burger King’s Facebook wall has been inundated with threats from customers over a possible boycott should their corporate operations move to Canada. An advertisement for their Mushroom and Swiss burger became a key venting ground for Americans frustrated about the potential deal.
“If you attempt to buy Tim Horton’s for the purposes of evading US Taxes, I will NEVER step foot in another Burger King again…Don’t do it,” read the most ‘liked’ comment on the post. Others called them “tax cheats,” “freeloaders,” “tax dodgers”—and many others threatened boycotts. The same fate befell the company’s Facebook advertisement for cookies.
Warren Buffett was reportedly among the investors who are all too happy to ignore these threats. Buffett's Berkshire Hathaway is expected to provide about 25 percent of the deal's financing.