Obama's Inversion Crackdown Not Enough To Keep Chiquita In America

It was the best of times, it was the worst of times for companies to dodge taxes by moving to Ireland.

So far, results have been mixed for new Treasury Department rules designed to thwart deals known as "tax inversions," in which a U.S. company buys a company in Ireland or some other low-tax locale and moves its headquarters there to cut its tax bill.

Banana giant Chiquita on Tuesday stuck by a plan to merge with Irish rival Fyffes and relocate from Charlotte, North Carolina, to Ireland in one such deal. This came less than a week after Chicago-based pharmaceutical maker AbbVie abandoned a similar bid to buy Irish firm Shire specifically because of the new Treasury Department rules.

Chiquita's decision to press on with its inversion underscored the limitations of the new Treasury rules and the need for stricter laws that could raise more serious obstacles to inversions.

“We need stronger legislation that is more of a deterrent to do these deals by making it less lucrative to do these kinds of things,” Roger Hickey, the co-director of the nonprofit Campaign for America’s Future, told The Huffington Post on Tuesday. “We’re going to be pressuring Congress to act as soon as possible because we’re convinced that we don’t want to be doing this company by company.”

One way the new Treasury rules were effective was in prohibiting a scheme known as a "hopscotch loan," a way for multinational companies to tap cash held overseas by foreign subsidiaries without having to pay taxes on it. This strategy was a major reason for companies with a lot of money stashed abroad to go through an inversion deal. AbbVie’s inversion plans -- reportedly driven by the fact that a “significant portion” of its $10.2 billion in cash is stowed away overseas -- were dashed after the Treasury announced its new guidelines on Sept. 22.

But “earnings stripping,” another strategy used to shrink a company's U.S. tax bill, is still intact under the new rules. This is when a company with headquarters overseas lends a bunch of money to its U.S. subsidiary. Then, every time the U.S. subsidiary turns a profit, it sends that profit to its foreign headquarters as interest payments on the money it owes. Interest payments are partially tax-deductible under the U.S. tax code, so under that strategy, much of the company's U.S. profit is untaxed.

This means that under current law, ChiquitaFyffes -- the proposed new Irish parent company -- will be able to load the U.S.-based Chiquita up with debt, then wipe out most of its U.S. profits by absorbing them as interest payments on loans. Chiquita has only about $1.7 billion in cash overseas, so the end of hopscotch loans shouldn't bother it much. With earnings stripping still legal, Chiquita still has a financial incentive to go ahead with its inversion deal.

"In America, it’ll be making half of the payments it should be making to the American government because it’s making interest payments on the loans from the new foreign parent, which is really to itself," Frank Clemente, the executive director of the nonprofit Americans for Tax Fairness, told HuffPost.

Chiquita spokesman Steve Himes did not immediately respond to a request for comment.

To close this particular loophole, the Obama administration may need Congress’s legislative muscle. But that would mean going against the interests of Wall Street banks, which have raked in about $1 billion in fees on inversion deals in the past three years, according to Rebecca Wilkins, a senior counsel at the nonprofit Citizens for Tax Justice.

Given the cozy relationship between Wall Street power-brokers and the Republican Party, and the need for Democrats to raise money from those same financial giants, a strong legislative crackdown on other inversion incentives seems unlikely.

“In order for any legislation to get through Congress, they’ll have to stand up to multinationals and Wall Street,” Wilkins told HuffPost. “No to be cynical but,” she laughed, “I don’t know about that.”

Nevada Taxpayers Lose With Tesla Deal, Even If Factory Succeeds

Gamblers who play a hand of poker in Las Vegas may go home broke, but the house always wins. That's because casinos collect a percentage of every pot, known as the rake, in exchange for hosting the game.

In wooing Tesla Motors, Nevada offered the electric carmaker and its founder, Elon Musk, a deal that would never fly at the Bellagio. Pending legislative approval, Tesla will build a giant battery factory near Reno, but it won't pay the equivalent of the rake -- state or local taxes -- for a decade, officials said Thursday.

Nevada officials are lauding the deal as a huge win for the state, touting the creation of 6,500 well-paying jobs that the factory is expected to generate, along with an another 22,000 indirect jobs. But the enormous cost of the deal, in terms of lost revenue to state coffers, is staggering: an estimated $1.3 billion. Paradoxically, it is a deal that could prove even more painful for taxpayers if the factory is a success.

"If the Reno area grows because of the deal, it will need more teachers, more trash collectors, more roads," said Greg LeRoy, the executive director of Good Jobs First, an employment policy group. "Tesla won't pay for that growth, which means either higher taxes or worse services."

Nevada's proposed tax giveaway to Tesla is only the latest example of how states are competing to persuade corporate giants to locate facilities inside their borders. Last year, Washington's state legislature voted to grant Boeing $8.7 billion in breaks to persuade it to locate production of a new jetliner fleet in the state.

Boeing's deal was the biggest tax incentive package ever. According to Good Jobs First, Tesla's would be the 10th-largest, if it is approved.

These deals have proliferated, despite growing evidence that the jobs they create are often not worth what states give away in uncollected tax revenue.

In a study last year, Good Jobs First analyzed 240 so-called megadeals, in which a state awarded a subsidy worth $75 million or more. For these projects, the average cost per job created to the state was $456,000, the study found.

In advance of the Nevada announcement, Musk sparked a bidding war by reportedly asking states to offer at least $500 million in tax breaks in order to secure the $5 billion factory, which will manufacture lithium-ion battery cells that the company hopes will fuel the next generation of electric vehicles.

California, Arizona, New Mexico and Texas were also contenders.

Though the full picture of why Nevada prevailed in the beauty pageant is not clear, the huge tax break package certainly played a role. In addition to essentially allowing Tesla to operate tax-free for 10 years, the state will grant a sales tax abatement for even longer -- until 2034, according to a summary released by the governor's office. Nevada will also spend $43 million to obtain a right-of-way for a road to make accessing the "Gigafactory" easier.

Tesla and the Nevada's governor's office did not respond to requests for comment, but the deal does include a measure likely intended to thwart criticism: Tesla agreed to contribute $35 million to Nevada schools over five years beginning in 2018.

Speaking in Nevada on Thursday, Musk said that the deal offered by Nevada "was not the biggest incentive package" and that "it wasn't just about the incentives."

"What the people of Nevada have created is a state where you can be very agile, where you can move quickly and get things done," he said. "It’s a real 'get things done' state."

Nevada won't collect taxes from Tesla until 2024. After that, the state expects to collect about $400 million in tax revenue over 10 years.

CORRECTION: A previous version of this article said Nevada won't collect taxes from Tesla until 2014. It is 2024.

Email: ben.hallman@huffingtonpost.com. And follow Ben Hallman on Twitter: @ben_hallman.

24 Years Of America's Unemployment Rate In 10 Seconds

The 2009 financial crisis wreaked havoc on American workers. This map gives a sense of just how dramatic its effect was on employment.

The map, created by data designer 'Metric Maps' and originally posted to Reddit, uses county-level data from the Bureau of Labor Statistics to depict the annual unemployment rate for every county in the U.S. from 1990 to 2013. Relatively low unemployment in the late '90s and early 2000s gives way to an explosion of red (denoting counties with an unemployment rate of 8 percent or greater) in 2009 following the crash.

Check it out below:

30 Years Of Music Industry Upheaval In 30 Seconds

In 30 years, we've gone from flipping cassette tapes to playing CDs to downloading iTunes to streaming Spotify.

These seismic shifts in the music industry are visualized in a fascinating GIF, created by Paul Resnikoff, founder of Digital Music News, using sales data from the Recording Industry Association of America.

Part of the story here is the massive rise of the CD in the 1990's, which Resnikoff calls "one of the most successful formats ever witnessed" by the music industry.

CDs peaked in popularity in 2003, when they accounted for 95.5 percent of market share. By 2013, their share had been whittled down to just over 30 percent.

"What you're witnessing is not only a radical transformation from physical to digital ways of listening to music, but within digital, a huge and ongoing shift from downloads to streaming," Resnikoff told The Huffington Post in an email. "The recording remains more popular than ever, but they way recordings are being listened to is shifting very, very quickly.

In the late 2000's, we see the rapid explosion of digital media formats for listening to music, including downloads from sites like iTunes and streaming services like Spotify.

Resnikoff says that the same disruption that has affected music has also shaped the rest of the entertainment industry.

"Music is not in a bubble: in the past decade alone, the demographic that is typically most interested in music is also devouring TV, film, games, and, well -- the internet -- in massive quantities," Resnikoff said. "Sitting around, smoking weed and listening LPs is a quaint memory of a simpler time in entertainment media."

Looks like those soulful days of smoking joints and savoring vinyl have been replaced by selfies, Twitter metrics, and musical "arrows through the heart."

Chiquita Bananas Could Face Boycott Over Plan To Ditch America

Chiquita may be the next major corporation to split from the U.S. to avoid taxes.

The banana giant rejected a $625 million buyout bid by Brazilian orange behemoth Cutrale Group and conglomerate Safra Group on Thursday and said it means to go ahead with a planned merger with Irish rival Fyffes. The combined company is then expected to register in low-tax Ireland in what is known as a tax inversion -- essentially renouncing U.S. corporate citizenship.

“Chiquita remains committed to completing its transaction with Fyffes, which it believes will create a combined company that is better positioned to succeed in a highly competitive marketplace,” the company said in a statement on Thursday.

Chiquita, which is based in Charlotte, N.C., originally inked a deal to acquire Fyffes in March.

But a lot has changed since March, with such inversion deals increasingly facing public scorn. Inversions have lately become a political target of several high-ranking lawmakers in Congress. President Barack Obama has considered an executive order to close the tax loophole and said of the practice earlier this month that “it’s not right.”

And a week ago, boycott threats forced drugstore-chain operator Walgreen to abandon its plan to re-incorporate in Switzerland after merging with European competitor Alliance Boots in an inversion deal.

Chiquita could be the next company to face such a backlash, according to Roger Hickey, the co-director of Campaign for America’s Future, a progressive nonprofit that collected more than 300,000 signatures on a petition against Walgreen.

“There will be a strong reaction,” Hickey told The Huffington Post on Friday. “Chiquita brands is very, very well-known, and they could be vulnerable to a boycott as well.”

Unlike Walgreen, which stood to save $4 billion over the next five years, Chiquita has said it would receive little immediate benefit from its move to Ireland. But nonprofit tax groups told HuffPost they suspect long-term benefits are driving the inversion deal.

“Our sense is Chiquita is hiding something in the deal by not publicly acknowledging and not publicly stating what kind of advantage they’re getting from this,” Frank Clemente, the executive director of Americans for Tax Fairness, told HuffPost. “The reason we think they’re doing this is to avoid bad publicity.”

Ed Loyd, a spokesman for Chiquita, did not return a call requesting comment.

Chiquita also had about $1.7 billion in profits parked offshore last December, according to documents filed with the Securities and Exchange Commission last March. If it pledges allegiance to Ireland’s tricolored flag, it can avoid paying U.S. taxes on that money, Rebecca Wilkins, senior counsel at Citizens for Tax Justice, told HuffPost.

“Instead, if they do the inversion transaction," she said, "over time, through fairly complicated legal and accounting maneuvers, they can move that money out of tax-haven subsidiaries to the new parent company and eventually get all of it.”

Rich New Yorkers Aren't Actually Fleeing Because Of Higher Taxes

Perhaps contrary to concerns that higher taxes could spur a disastrous exodus of New York City's wealthiest residents, history shows its one percent like to stay put.

A study conducted by the city's Independent Budget Office shows New York's highest earners -- those making more than $500,000 annually -- don't move at a higher rate than lower-income residents.

In fact, a higher proportion of those who did move stayed relatively close to the city in the suburbs of New York, New Jersey, and Connecticut in 2012 than in 2008. Both New Jersey and Connecticut are well known for having high income tax rates, which suggests that higher tax rates don't actually scare off the wealthy -- or that the wealthy aren't actually seeking tax havens.

Monday's report is good news for Mayor Bill de Blasio (D), who reportedly spooked the city's wealthiest residents with a pledge to hike up taxes in order to pay for universal pre-K. A tax hike was eventually avoided with a deal brokered by the state, but not before de Blasio's predecessor Michael Bloomberg (I) warned any move to raise taxes is "dumb" -- a reversal from Bloomberg's own 2008 stance insisting none of his rich pals were leaving the city over high taxes.

Conservative pundits including Glenn Beck have claimed the rich will flee in droves over de Blasio's progressive agenda.

"One friend says 10 wealthy people have told him they are leaving and another says disgusted New Yorkers bought $1 billion in residential property in Florida since the November election," New York Post columnist Michael Goodwin wrote in a column back in March. "The Sunshine State confers an automatic tax cut of about 12 percent because it has no city or state income tax, nor does it have an inheritance tax."

Florida's portrayal as a tax haven for the absconding rich was also upended by Monday's report. Although it's the third most popular destination for exiting New Yorkers, that position apparently has nothing to do with income level.

Florida was the destination of more than 10 percent of the households moving out of New York City in 2012, making it the third most popular destination. Given the state’s popularity among retirees, it is perhaps unsurprising that the share of high-income households relocating to Florida was relatively small—just 2 percent of those who moved in 2012.

Customer Service Hall Of Shame: 24/7 Wall St.

When it comes to companies we dread dealing with, we all know who they are. Let’s put it this way, would you rather go to the Apple Genius Bar to fix something with your iPhone or to the Bank of America teller to reverse a surprise interest charge?

It’s perhaps no wonder Bank of America leads the nation in bad customer service. The massive U.S. financial institution has made the Customer Service Hall of Shame every year since 2009.

Click here to see 24/7 Wall St.’s customer service hall of shame:

In collaboration with research survey group Zogby Analytics, we polled 2,500 adults about the quality of customer service at 150 of America’s best-known companies in 15 industries, asking if that service was “excellent,” “good,” “fair” or “poor.”

Those with the highest percentages of “excellent” rankings make up the Customer Service Hall of Fame; those with the highest share “poor” ratings make up our Customer Service Hall of Shame. (See how the survey was done and full results on the last page of this article.)

Many of the other companies with the bottom-rated customer service have earned spots on the Hall of Shame list in the past. Eight of the 10 companies in the Hall of Shame have made at least three previous appearances since 2009.

It is difficult for businesses in some industries to win consumer praise. Bank of America, Wells Fargo and Citigroup — three of the largest banks in the country — received some of the worst customer service ratings in the nation.

For banks, the many fees they charge may contribute to a customer’s poor evaluation of a company. “As soon as you take out your Bank of America ATM card you get charged,” said Praveen Kopalle, professor of marketing at the Tuck School of Business at Dartmouth College.

In addition to unpleasant and repeated charges and fees, these large banks engaged in questionable and often unlawful behavior that contributed to the housing crisis. For example, “[Banks] assured customers that [mortgage-backed securities] were actually good products when, in fact, they were pretty toxic,” Kopalle said.

Cable and satellite TV companies are another segment that has repeatedly received poor customer service ratings. Shep Hyken, a customer satisfaction expert, explained that these companies are often unclear about their service charges. “Customers get shocked when they get their bill,” Hyken said.

In some instances, companies have little incentive to offer good service. “If people really don’t like the customer service that they receive from telecom companies, they don’t have a lot of choice,” Tim Calkins, clinical professor of marketing at the Kellogg School of Management at Northwestern University, explained. Without competition from other companies, “there is just not that pressure to deliver great service.”

Future consolidation in these industries may exacerbate the problem. Companies like AT&T and DirecTV, as well as Time Warner Cable and Comcast, are driving merger and acquisition activity that will likely close this year, pending government approval.

Many of the companies with the worst customer service, however, are still market leaders and manage to maintain impressive profit margins. Seven of the 10 companies in the Hall of Shame dominate their industries.

This is 24/7 Wall St.’s customer service hall of shame: