The Wall Street Journal has claimed that the reason companies are leaving the US for Bermuda is because there is something wrong with the American tax code.

And it has called what the companies are doing pure capitalism and called for a tax reform in the US.

The editorial in the Wall Street Journal, which has a daily circulation of $1.8 million, headlined "The Flight to Bermuda", criticises the amount the US charges its companies in tax and says it puts American multinationals at a disadvantage.

The unusual editorial comes after outrage in the States that companies have been moving to Bermuda to save on their tax bills, and a vote by Stanley Works to move has incurred the wrath of both Congress and much of the US media.

The article stated: "Far from being an unpatriotic tax-dodger, Stanley Works is merely a messenger, alerting the politicians to what will happen in the absence of reform."

Yesterday The Royal Gazette reported on the first real move to halt US companies moving to Bermuda to lower taxes - a bill put before Congress which did not get past the starting blocks.

The move, sometimes called the Patriot or Repo Act, was piggybacked on to another piece of legislation to give tax relief to married couples in a bid to get it passed before the end of session.

But the bill was thrown out and the marriage tax relief bill postponed until next week when it will be put forward again.

The fretting in the US Congress and press has been growing all year, with newspapers running stories of allegedly unpatriotic US companies reincorporating to save on their tax bills. On Tuesday, both Cooper Industries and Leucadia National voted to reincorporate in Bermuda, adding fuel to the fire.

The US is currently one of a handful of countries that taxes on foreign-sourced income, and companies argue that in the global economy this makes them uncompetitive, prompting moves to a more tax-friendly environment. Companies say they can reduce their tax costs from about 35 percent to between 25 and 20 percent by moving to more tax-friendly environments like Bermuda.

The Wall Street Journal bucked the trend and laid the blame on US tax practices.

The article quoted Judge Learned Hand in 1934 as saying: "Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury. There is not even a patriotic duty to increase one's taxes." It points to Senators Max Baucus (D., Montana) and Chuck Grassley (R., Iowa) who propose punitive fees and fines for companies that reincorporate offshore and their House colleagues, Richard Neal (D., Massachusetts) and Scott McInnis (R., Colorado) want to redefine what constitutes a domestic corporation for tax purposes. The article stated: "All of these measures are being pushed in the name of saving jobs and preserving the US `tax base'.

"But they ignore the incentive side of the equation. The reality is that US companies are fleeing sky-high rates and a ridiculously complex tax regime. The legislation addresses neither problem, which means it does nothing to help make US firms more competitive." It finishes with: "Stop bashing businesses for practising capitalism, and get to work on reforming the tax code."