NEW YORK (CNN/Money) - Last week, in a rare outburst of bipartisanship, Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa, laid into Stanley Works (SWK: up $0.48 to $46.35, Research, Estimates) and Ingersoll-Rand (IR: up $0.36 to $50.00, Research, Estimates), two venerable American companies that are reincorporating in Bermuda.

Noting that both firms sell to the government, Grassley charged them with "evading U.S. taxes and making profits off the taxes of middle-class Americans who are paying their taxes honestly." Baucus accused the companies of, "in effect, renouncing their U.S. citizenship to cut their taxes."

A year ago Congress paid about as much attention to corporate governance as the Pentagon paid to the weather in Kabul. But today, war has forged a bipartisan consensus that equates paying corporate taxes with patriotism. And things have changed.

Bermuda has much to recommend it: a highly literate workforce, balmy year-round temperatures, pink-sand beaches, and lovely golf courses. But CEOs aren't making the trek across almost 600 miles of Atlantic Ocean swells for afternoon tea. They're going for the island's nonexistent corporate income tax, which can turn a poky jalopy into a supercharged earnings machine.

Case in point is electrical-products company Cooper Industries (CBE: down $0.01 to $41.34, Research, Estimates), which reincorporated in Bermuda in February. "Cooper's effective tax rate, post-reincorporation, will be reduced to a range of 20 to 25 percent from approximately 32 percent," the company noted. The move will generate "additional cash flow of approximately $55 million annually, and add approximately $.58 per share to earnings." Voila! Growth!

Other high-profile corporate expats that have recently set similar courses to Bermuda include Accenture, Foster Wheeler, Global Crossing (GX: Research, Estimates), and Tyco (TYC: up $0.60 to $32.58, Research, Estimates).

In the wake of Sept. 11, some executives have become downright defensive about such tax-reducing corporate peregrinations. "We didn't move our headquarters to Bermuda," explains a spokesperson for Tyco, which reincorporated in Bermuda in July 1997. "We did a reverse merger with ADT, whose headquarters was there." Of the hundreds of companies that this corporate Pac-Man has devoured in the past decade, this was the one whose locus of incorporation it randomly chose to assume? Please.

Accenture has a better excuse. Its predecessor, Andersen Consulting, was a global partnership with operations in 47 countries. And of its 75,000 employees, about two-thirds reside outside the United States. So when it incorporated in May 2001, two months before its IPO, it made a certain amount of sense for Accenture to choose a neutral country -- that just happened not to have a corporate income tax.

Moving to Bermuda may be legal, but it's not the savviest political move at the moment. With federal revenues on the decline, and defense and security budgets on the rise, it's unseemly for Fortune 500 companies to take steps to avoid what is generally regarded as a civic duty. And it's still an open question as to whether headquartering in Bermuda improves stock performance.

Tyco's stock is up more than 50 percent since it set sail for Bermuda nearly five years ago. But Global Crossing shareholders never reaped the benefits from Bermuda's lower tax rates. As for Foster Wheeler, the construction company's stock was at $12.65 when it reincorporated May 25, 2001. Since then, its valuation has disappeared into the Bermuda Triangle: It's down to $3.08.

Finally, while a lower tax rate may generate more cash to pay down debt or add to the bottom line, it's hardly a portent of superior performance. Tax rates won't tell investors how many reciprocating compressors Ingersoll-Rand is selling. And they say nothing at all about one of the investment community's favorite metrics: Ebitda.

In the United States, higher tax rates -- for both individuals and companies -- are something of a badge of honor. You pay more than your neighbor only if you're outearning her.

Would Dell and Wal-Mart rather pay lower taxes than those paid by Gateway and Kmart? Sure. But given a choice, they'd rather kick in more to the federal coffers while continuing to focus on kicking the competition in their Bermuda shorts.

Eric Hellweg is on vacation. Daniel Gross is the author of Bull Run: Wall Street, the Democrats, and the Politics of Personal Finance (PublicAffairs).

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