Editorial: Sticking it to the U.S.

Tuesday, Oct. 21, 2003 | 8:56 a.m.

Last year the public was outraged by the growing number of U.S. corporations switching their mailing addresses to locations overseas so they could avoid paying federal taxes here. But now Nabors Industries, a Texas company that in 2001 decided to take advantage of this loophole and save itself $10 million in U.S. taxes last year, has placed a whole new twist on this outrageous tax-dodging practice. A story in Saturday's New York Times disclosed that Nabors, the largest operator of oil-well drilling rigs in the United States, believes one of its American subsidiaries should qualify for business that by law is open just to U.S. companies. The Jones Act mandates that ships involved solely in domestic trade must be built in U.S. shipyards, owned by U.S. companies and operated by American crews. The Times reports that Nabors, which has its working headquarters in Houston, owns 33 ships that serve oil drilling platforms, nearly 1 out of 10 such ships in the Gulf of Mexico.

Understandably, companies that are Nabors' rivals believe it's unfair for them to have to compete against a company with such huge tax advantages. In response, some companies say they will make their tax headquarters in Bermuda if that's what it takes to stay competitive. One of their supporters in Congress, Rep. Gene Taylor, D-Miss., told The Times he was "angry that a company that became foreign so it would not have to pay taxes still gets all the benefits the taxpayers provide, with the Coast Guard to rescue their ships if they get in trouble and the Navy Seals if they are attacked by terrorists."

Congress should clean up this mess and clamp down on corporate tax shelters. The U.S. tax code should be reformed so that it no longer offers a financial incentive for companies, which for all intents and purposes are American, to set up overseas so they can evade paying their fair share of taxes.