How Google Avoids U.S. Taxes and How to Prevent It

My old colleague Jesse Drucker had a fascinating Washington Post article last weekend on corporate taxes. http://www.washingtonpost.com/wp-dyn/content/article/2010/10/30/AR2010103004613.html
It explains how one of the world's most profitable companies, Google, managed to virtually eliminate international taxes and minimize taxes paid anywhere by transferring its intellectual property to an Irish subsidiary. It then turned the profits of that subsidiary over to a Bermuda unit, via a Netherlands subsidiary.
You can get mad at Google for doing evil by ducking taxes. But that's unrealistic. Every company will do the most it can to cut its taxes. The U.S. 38% corporate tax rate is the highest corporate tax rate in the world, next to Japan. There will always be countries that see a benefit by having low corporate taxes. Ireland's tax-friendly laws resulted in the gainful employment of 2,000 Google workers in a shiny building in Dublin.
To me, the worst consequence of this is that the profits Google shelters from taxes have to stay overseas or be subject to the U.S. tax rate when they're brought back to the U.S. That gives Google an incentive to invest the money overseas either by buying foreign companies or building its business in Ireland and elsewhere. The Obama administration wants to force U.S. companies to pay taxes on some of their foreign profits. But that will put them at a big disadvantage against European and Asian companies that have lower tax rates. That, in turn, will hurt U.S. exports.
It seems to me that we'd bolster the U.S. export economy and the competitiveness of U.S. business a lot if we lowered the corporate tax rate to 15%. Then many companies will bring their profits back to the U.S. and invest where it makes the most economic sense rather than the most tax sense.

I just saw that Megan McArdle at Atlantic blogged on this issue advocating a zero-corporate-tax rate. http://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/