Further to my blog of 7.22.14, inversions continue to occur and generate concerns by business folks and government, for opposite reasons, however. Inversions are acquisitions or mergers where a U.S. firm acquires a foreign company and moves overseas in order to take advantage of much lower corporate tax rates.

Our government claims the practice is wrong, characterizing it as taking advantage of a “loophole.” I disagree. The US corporate tax rate is simply too high; it is among the highest in the Western world. The exorbitant tax rate is the cause behind the exodus by American companies to Europe. We ought to make corporate tax rates more reasonable, incenting American companies to stay.

Here are two more recent inversion deals. U.S. drug maker AbbVie will purchase Dublin-based Shire for about $54 billion, one of the largest deals to date involving a U.S. company which creates a holding company in a foreign country with a lower tax rate. For another recent example of this, take a look at Mylan’s acquisition of Abbott Laboratories’ overseas generic-drugs business.

Hedge funds are getting into this business, wagering billions of dollars on companies they believe will benefit from a wave of takeover deals designed to lower taxes for U.S. acquirers. If you do not like this practice, the solution ought to be about modifying our tax code as opposed to “closing a [perceived] loophole”. See my Blog of 7.22.14.