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Political Diary
August 3, 2008

This Bud's for Belgium

Politicians and Wall Streeters are starting to ask why the Belgian beer
company InBev purchased Anheuser-Busch and not the other way around.
Anheuser-Busch is an iconic American firm and some find it almost
unpatriotic that Anheuser CEO August Busch IV allowed the "King of Beers"
to relocate across the Atlantic -- though shareholders were the big
winners here with a $50 billion-plus takeaway.

But here's the real question: Was the takeover basically financed by the
savings Anheuser expected from escaping America's increasingly
uncompetitive corporate tax system? According to the Tax Foundation,
Belgium's corporate tax rate is 33%%, but the effective tax rate can be
half the nominal rate thanks to adjustments for something the OECD calls
a "notional allowance for corporate equity." Bottom line: InBev was
paying around 20%% of its profits in corporate taxes, compared to Anheuser-
Busch's rate of 38.4%%.

Things have gotten pretty bad when U.S. companies relocate to Europe to
cut their tax payments. But a research analysis by Morgan Stanley finds
the combined company's corporate tax bill will be lower than in the U.S.
and that the tax differential indeed figured into the economics of the
sale.

So while John McCain may have benefited from his wife's ownership of
Anheuser stock (estimated at between 40,000 and 80,000 shares), the
country will continue to see its competitive edge wither away without a
corporate tax rate cut. Mr. McCain to his credit wants to cut the
corporate tax rate to 25%%, close to the global average. Senator Obama is
more interested in raising tax rates than cutting them.

Wall Street dealmakers tell us to expect more sales of U.S. companies to
European rivals thanks to the combination of America's higher corporate
taxes and the weak dollar. They're right. New data from the OECD for 2008
indicate that the international average for corporate tax rates fell by
another percentage point last year, meaning the U.S. is pricing itself
out of the market as a corporate headquarters. "America's 35%% corporate
tax rate is not just bad economics, it's downright unpatriotic," says tax
expert Kevin Hassett of the American Enterprise Institute.

-- Stephen Moore and Tyler Grimm

--
I have noticed also myself, gentlemen, that when men seek for nothing in
warfare but only life at all costs, they are generally the ones to die,
and that with disgrace and ignominy; but when they recognize that all
men must die, for this is their common lot, and strive only to die with
honor, these I generally see growing to old age, and while they live,
much happier.

Learn this lesson yourselves, for now is the time we need it: be men
yourselves, and encourage others to do the same.

- Xenophon, "Anabasis"