Del. and Cayman Islands share something special — and it ain’t the beaches

Saturday’s New York Times made a direct comparison between the incorporation laws of Delaware and those of off-shore tax havens like the Cayman Islands. Is it a fair comparison?

No one will confuse Delaware’s beaches for those of the Cayman Islands, but The New York Times did dedicate part of Saturday’s business section to pointing out how the state’s incorporation tax laws are no different from those of that Caribbean resort.

Is it fair to compare Delaware to off-shore tax havens?

Tell us in the comments below.

Everyone knows 1209 Orange Street is the legal address of 285,000 business. Because of that incorporation, Delaware can collect $860 million in taxes each year.

The laws that allow that to happen exist in Delaware, Wyoming, Nevada, Oregon, and the Cayman Islands. Usually, it’s the off-shore companies that get the heat.

Says the Times:

“The First State … increasingly resembles a freewheeling offshore haven, right on America’s shores. Officials in other states complain that Delaware’s cozy corporate setup robs their states of billions of tax dollars. Officials in the Cayman Islands, a favorite Caribbean haunt of secretive hedge funds, say Delaware is today playing faster and looser than the offshore jurisdictions that raise hackles in Washington.”

Now the way Delaware has done business since 1792 is coming under fire.

First, there are reports in Pennsylvania that many of the companies doing business along the Marcellus Shale want to incorporate in Delaware. That takes precious tax revenues away from Pennsylvania. The Times story points that out that Senator Carl Levin (D-Mich.) wants to close the loop, but the committee where the bill would be heard will soon be chaired by Senator Tom Carper (D-Del.)

Do you think this represents a conflict of interests?

A spokesperson for Carper said the senator “has some concerns” about the bill, namely that, as drafted, it might unfairly burden states and legitimate businesses in shaky economic times.

“Senator Carper shares the concerns of law enforcement officials and Sen. Levin about money laundering and the financing of illegal activities and hopes that we can find a workable solution that doesn’t hurt legitimate company formation and doesn’t unnecessarily strain our states’ limited resources,” the spokesperson said.

Governor Jack Markell’s office didn’t want to add any comment other than to say they stand by the comments made by the National Association of Secretaries of State and Delaware Deputy Secretary of State, Richard Geisenberger.

Is it fair to pick on Delaware as a rip-off to the tax system? Should the federal law be changed? We invite your comments.