The truth about inversions.

Recently, CNBCs Rick Santelli interviewed the CEO of Abbot Labs about corporate inversions. His explanation of the issues is fascinating.


http://bizappshhs.blogspot.com/2014/11/making-impact-with-graphics.html

Federal Government vs International Business

This past September, Burger King purchased a Canadian restaurant chain, Tim Horton's, and proceeded to move their corporate headquarters to Canada. Why move? The simple answer is to escape high US taxes on corporate profits. Such merger deals, called inversions, have been a hotly debated issue in Washington. Here's a quick video explaining the issue.

 Some lawmakers say that taxes should be lowered on corporate profits to encourage companies to re-invest and stay in the United States. Others believe that the United States should increase restrictions on the ability of companies to move profits off shore.

You can read more about what inversions are at this Investopedia site.

This article from Bloomberg Business News outlines the Burger King deal and gives a pretty interesting overview of the struggle in Washington to deal with inversions.

Another issue closely related to inversions is the issue of "earnings stripping." This involves declaring dividends in a foreigns nation in order to reduce the taxable income of US corporations.

Think: Most countries tax businesses based on the earnings made within their own boarders whereas the United States taxes corporations based on the earnings from their entire worldwide operations. Should the United States change it's tax policy to emulate that of the rest of the international community?

The US has the highest tax rate of any industrialized nation (35%). Companies currently are holding over two trillion dollars in overseas accounts because they don't want to bring the money back and pay taxes on it. Should the US lower its tax rate to encourage investment here at home?

Are US companies being unpatriotic for wanting to avoid paying taxes or are they just acting in their own (and their shareholders) best interests?

Assignment: Write a one page Google Docs paper titled Tax Inversion. Format your paper in 12 point Times New Roman, double-spaced text. Answer the questions above. Share your paper by the end of class. Your paper will be graded based on the following:

• Grammar usage and punctuation 0-3 points
• Formatting 0-3 points
• Quality and completeness of your answer 0-4 points

Total available points 10

Cub Cadet

In May of 2009, MTD Products closed the Cub Cadet manufacturing facility in Brownsville. The closing of the plant resulted in the loss of 200 full-time jobs and 280 part-time jobs. It was a huge blow to the local economy.

The big question left behind was, why did this happen? First, it might be useful to understand a bit of the history of the Cub Cadet company. You can read a bit about the history of Cub Cadet here. Cub Cadet was eventually bought by Yanmar, a Japanese company. You can read a bit about the company here. Yanmar also has a Wikipedia page which provides some useful background information.

What happened to Cub Cadet and Brownsville is just a small part of a bigger picture. To understand whats happening with the local economy, you need to understand globalization.

Discuss the following questions in class:

1. What changes in American society encouraged International Harvester to get into the lawn tractor business?

2. What was the primary selling point for the Cub Cadet brand?

3. Why do you think Yanmar would be interested in getting into the lawn tractor business in the US? What additional information would you like to know?


Assignment: Write a paper in Google Docs titled "Cub Cadet." Answer the questions above in a paper formatted to 12 point double-spaced, Time New Roman. Put your name and page number in the header of the paper. Your paper will be graded using the following rubric:

Formatting: 1-3 points
Spelling and Grammar: 1-3 points
Completeness of answers: 1 point per question. (4 points total)

Maximum points: 10

NAFTA

Twenty years ago, President Clinton signed the North American Free Trade Agreement (NAFTA) into law. The law reduced tariffs on good imported and exported among Canada, Mexico and the United States. The hope was that by reducing tariffs, new markets would open up for American products to be exported. Looking back, the effects of NAFTA have been mixed. Read the following article on the growth of the automobile industry in Mexico. Also, read this article on the results of NAFTA. For a good overview of the pros and cons of NAFTA, read this article on Investopedia.

Discuss: After reviewing the materials, what do you think of NAFTA? Do you think it was a good idea or bad? What have been some of the good results and what are the bad? How has NAFTA changed the types of jobs that are available to American workers?

Assignment: Type a one page paper formatted with double-spaced, 12 point, Times New Roman. Name your paper NAFTA. Explain why you think NAFTA was a good idea or bad. Will NAFTA result in a net benefit for the United States? Use evidence from the materials you were provided.

Rubric:

Formatting: 0-3 points
Spelling and grammar 0-3 points
Content and quality of your answer 0-4 points

Total 10 points

The Fed

The Federal Reserve, otherwise referred to as "The Fed," is the arm of the government charged with maintaining the health of the economy. In order to operate a business, it is essential to have a basic understanding of how the Federal Reserve functions and how it influences the economy. Here are some resources you can use to learn more about The Fed.

You can find a quick tutorial at Investopedia.

The Federal Reserve Band of St Louis has a video you can watch here:

For a more humorous look at The Fed, check this out...

For a more technical explanation of open market operations, watch this:

Assignment:

After reviewing the materials above, write a paper answering the following questions:

1. What is the goal of monetary policy?

2. What are the three primary "tools' the Federal Reserve uses to control monetary policy?

3. Under what conditions would the Fed raise interest rates? What key indicators would the Fed look at when making this decision?

Title your paper "The Federal Reserve." Format you paper in 12 point Times New Roman, double spaced text. Submit your paper by the end of class. Answer the questions thoroughly using compete sentences. Your paper will be graded on the following scale:

Grammar, usage and punctuation 0-3 points
Formatting 0-3 points
Completeness of your answers 0-4 points

Total points 10

Math and Writing

Take your math and writing seriously. You'll need those skills when you go to college. Read this...

http://memphis.edu/admissions/math_writing.php

What is a Recession?

Think about the following questions: What are some things that can cause recession? What actions can governments take to help economies recover from recessions? What role does fear play in creating a recession? Are you confident or fearful of your future right now?

Here's a quick overview of the business cycle:

Assignment: Is the US economy growing or shrinking? Locate 3 articles on the Internet to find your answer. Analyze each article and write a brief summary. List your three URLs at the end of your paper. Write your paper in Google Docs, title it Economic Growth, and share it on your Google Drive. Use Times New Roman, 12 point, double-spaced format.Your paper is due at the end of class.

Discuss: Review the Fear and Greed index. What happens to stocks when investors are afraid? Last week, the fear index hit a rating of 5 which is "extreme fear." What do you think is driving investor fear despite a season of good earnings reports?