When Delphi emerged from a long, drawn-out bankruptcy in 2009, the Federal Government’s Pension Benefit Guaranty Corp assumed a six billion dollar liability in underfunded pension plans. As a consequence, many Delphi salaried employees have lost the majority of their pensions. But when Delphi Automotive incorporated after the bankruptcy, that incorporation took place in the United Kingdom.
Now the IRS is actively pursuing claims against Delphi for tax liabilities — but “new Delphi” would rather pay taxes to our former colonial masters.
According to the WSJ,
In 2011, as the new Delphi prepared to go public, it disclosed that the IRS was “currently reviewing” whether the anti-inversion rules applied to it. The company said that if the IRS didn’t carve out an exception in its impending rules, there would be a “significant risk” that Delphi’s inversion eventually would be set aside and the firm would be treated as a domestic corporation for U.S. tax purposes. When the regulations came out in February of 2014, no exception was carved out, lawyers say.
It is difficult to envision how anybody’s version of a “free market” involves a company shedding six billion dollars of liability to the United States Government before running off to the UK to incorporate for the purpose of saving tax money — even though Delphi’s primary operations continue to be in Michigan. Given the continuing and considerable legal activity by former Delphi salaried employees who strenuously object to taking seventy-percent haircuts on their pensions, perhaps the best thing to do would be to permit Delphi to continue to pay the UK taxes on its earnings, but to hand over that six-billion dollar liability to “new Delphi”.
Alternately, the IRS might determine, and the courts might agree, that the “inversion” is not permitted by law, forcing Delphi to remit several years’ worth of back taxes to the United States. No matter how it happens, however, something’s rotten in Denmark — or London, depending how you look at it.
I’m pleased to see the Eat’n / Sh*tt’n meme make a comeback.
COTD
The sad part is, Delphi may get away with murder.
This whole sordid mess is just but one tiny (relatively speaking) example of a potential 80 million others as to how/why the U.S. is screwed six ways to Sunday*.
*No hyperbole.
Delphi hourly workers got their pensions topped up full.
Delphi white collar employees get a 70% haircut.
Ya-that sounds about right. Your government looking out for the “favored” class.
As a taxpayer, I am outraged. As a conservative I am not shocked. We could eliminate 80,000 pages of the tax code and still have one of the most complex in the world.
Our tax code should make the US a desirable destination for companies. Instead, we lamely attempt to punish the successful while keeping the corporate welfare flowing-provided your company is not involved with any nasty industry like coal or oil, or fracking. Those industries are targeted for extinction.
It’s not the government looking out for the “favored” class. It’s that union members actually have somebody looking out for them (or that’s the theory, anyway). When you are an employee at will you are on your own.
Had the union been the one taking the 70% haircut, I doubt your response would have been “I guess they just needed better representation”. But since it was “your team” who ended up stealing from the pension fund, that makes it okay, right?
It certainly puts your support of single payer into perspective — you must assume you’ll be sufficiently favored to get better-than-average care.
Whoa, whoa, whoa, before you start throwing around terms like “your team” (referring to Unions) and “stealing from pensions,” why don’t you go read the book The Retirement Heist, and see what the real thieves did to pensions in this country.
It’s guaranteed to royally piss you off, you’ll like it.
I guess those white collar employees should have negotiated better. If they don’t like the compensation terms, they can always find a different job.
Free market FTW!
They negotiated compensation terms which were overruled in the bankruptcy. It was the political power of the unions, not the free market, that determined this outcome.
This just reminded me of how GM f*cked my grandmother’s retirement healthcare (surviving spouse) and how that f*cking did her in.
F*ck GM, f*ck their apologists and f*ck anyone who buys their garbage.
Do you realize how few americans have retiree healthcare (other than Medicare)? It was obvious from looking at GM’s financial statements well before the bankruptcy that when healthcare obligations were considered, GM was insolvent. GM initially supported the Clinton health plan, then withdrew its support. Ironically, that plan might have saved prevented GM’s bankruptcy.
I realize this – I’m not an idiot. When you retire, you usually save money or budget healthcare into it. When it was guaranteed and you retire in the late 1970’s, you don’t plan on your company going belly up. I wish you could go back in time and be your smart 4ss self and properly prepare my grandfather to plan on his company f*cking him over. Maybe I would have experienced a good 5 more years with my grandmother?
@ Tresmonos: A little civility please. I’m for a single-payor national health insurance system which would have taken care of your grandparents along with everyone else. I think I’m in the minority here though. The majority would probably say that’s life under capitalism and cast them to the wolves.
The main problem was that many of those people relied on those benefits and planned their lives accordingly. I mean, someone working at GM during the latter half of the last century never would have foreseen them going bankrupt.
That’s the problem with an “every man for himself” system. It assumes you’re omniscient and can somehow plan for every contingency.
Apparently the conservative answer to someone getting “f-ed over” by a company is, “Well, you should have negotiated with them better. Get better at professional legal negotiations.”
Again, this problem would be simply solved with a single-payer healthcare system.
As someone from a country with a single payer system, it’s not the solution. People just die in line. You’re covered, eventually.
We all die eventually. In the USA, the elderly consume massive amounts of healthcare to hang on for the last 6-12 months…
Whereas the liberal answer seems to be “well, that’s what you get for not joining an organization that’s a wing of the Democratic Party”.
The only difference is, one is a self-satisfying fiction, and the other has two people (or at least one person with two sock puppets) blatantly arguing for it.
Your essentially correct by using the phrase “someone working at GM… would never have forseen them going bankrupt.”
Of course, by the mid-90’s, there was a sizable minority of analysts OUTSIDE of GM who saw danger lurking. Especially if fuel prices spiked…
http://www.stltoday.com/business/local/obama-aides-let-delphi-avoid-taxes-with-tactic-president-now/article_e053f999-a7d2-5707-87ff-cc9575445924.html
#thanksobama
The lines in a single payer country are dependent upon the resources the country wants to put into the system. You can pay more to add capacity and shorten lines. Here in the United States, we could pay a lot more than what the Canadians are paying and still pay less overall what we are now for a system that leaves 15% uninsured and more underinsured.
@Conslaw – I read a recent study done where the intent was to compare the USA health care system to the Canadian one. The problem was deciding on which metrics to look at. The researchers chose to look at mortality rates since it is a simple statistic to pull from data. The Canadian system was 5% better based on mortality rates. Some areas the USA has a clear advantage and that was surgical wait times. That is a product of “for profit” healthcare as it is always more profitable to run more clients through the system. The USA system did poorly with chronic illnesses like renal failure. Chronic illnesses have poor profit margins in a profit based system.
The USA system was 79% more expensive than the Canadian one.
@319583076 – will you feel that smug when it is your time to “hang on” ?
I’m ready to go right now.
I’m not willing to gobble up healthcare for another 6 months of “life”, but as usual, that’s a minority opinion.
In a nation of so-called “faithful”, it’s puzzling how few people are willing to meet their God.
@319583076 – and are you ready to go suffering needlessly and/or ready to go because you can’t afford the health care?
There is a difference between meeting your end in an artificially shortened timeline due to a lack of basic care.
Just to be clear I am not talking about advanced aggressive care like intensive care cardiovascular and pulmonary support.
Proper palliative care is actually proven to extend ones life even though that is not the purpose of palliation.
Yes and yes, although in the first instance I’m willing to go by my own hand if I’m able.
I’m against the more aggressive care for the most part, not the palliative care so much. But, like I said, there’s no way out. We are all dead men walking.
“The lines in a single payer country are dependent upon the resources the country wants to put into the system. You can pay more to add capacity and shorten lines.”
Isn’t that the case with everything? There’s a limit to what can be spent, though.
Places with the best healthcare in the world aren’t purely single-payer, they’re a multi-tiered blend. Canada and the US are two extremes of how healthcare should not be delivered.
@danio3834 – Canada does have private for pay surgical centres and diagnostic centres. They tend to be busy with Workers Compensation claims and car crash insurance claims. Basically any private insurance will send patients to private clinics.
I do agree that the USA and Canada have very different systems. Ours is 79% cheaper per capita but has longer wait lists for procedures.
A capitalistic system of business tends to work poorly in health care because profits are the name of the game. They will focus on high turn over procedures that increase profits. Chronic conditions tend to drain the system so prices climb high to offset the cost or insurance premiums rise too high.
A consumer that cannot say no to a service doesn’t have much power to push down prices. One can chose to stay out of the health care system but that only increases suffering and death.
The other option is to follow @319583076 and kill yourself at a predetermined time.
That sort of approach or assisted suicide opens up a huge can of worms.
Wow,,,! having a bad day Tres…?
When the US is losing companies to the UK over corporate taxes, that is when it should be obvious to all that something is wrong with our tax structure.
The UK has been aggressively cutting its corporate tax rate over the past few years. Allied with its good geographical location, use of English, solid legal framework the UK is a good place to headquarter.
The US corporate tax system needs simplifying since the headline figure is 35% but the effective rate is a more reasonable 25%, but that is if you have lobbyists and exploit the loopholes.
See Fiat/Chrysler for another example of a company going to the UK for tax purposes.
It only make sense for Global companies to go where it is most advantageous to be. They are businesses, not charities. If we want to keep the business, we need to start doing what the UK is doing.
I agree. Corporate tax rates (on profits) are kind of a shell game anyway, since there are so many accounting tricks to move profits around. And taxing profits naturally means there’s lots of ways to spend money so you don’t have too much profit.
Even without ‘loopholes’, I fail to see the point of a high corporate tax rate.
I heard a lot of people claim that GM was more of a health care provider rather than a manufacturer of automobiles due to their health care costs of employees and retires. There is certainly something to that, my father worked for GM and retired from the company; after his death my mother continued to get her health insurance through GM. She was paying only $45 a month for a level of health coverage I could not begin to afford through my employer, and in the last years of her life she certainly used a lot of it. The cost of health care for GM employees and retirees may have been a good deal for them, but it certainly was a big expense for GM.
@johnny ringo – I do recall an expert say that the Big 3 were Retirement Trusts” masquerading as car companies. That was maybe 10 odd years ago I recall that comment being made.
This is a good read:
http://www.macleans.ca/economy/business/the-decline-of-the-north-american-car/
It’s well known that corporations are people. Now it’s time to let people be corporations.
When that happens, by all measures of sanity the US health care system deserves to experience a similar exodus to the UK as the tax system.
The usual reason any company headquarters in the UK is due to their bankruptcy provisions. Takes about 5 minutes, and your employees are s**t out if luck.
Particularly popular with “German” companies who otherwise have to hand over actual retirement packages (like GM when they closed the main Opel plant). A google search will find all sorts of “solicitors” expounding the benefits of relocating head offices to the UK, to save the owners from losing the money they made off their employees when times were good.