A recent New York Times article by Andrew Sorkin is unintentionally hilarious from start to finish. He’s upset that a number of companies, such as Walgreen, AbbiVie, Medtronic and many others are all well on their way to moving overseas. I’d look for the Andrew Sorkin piece calling billionaire John Kerry “unpatriotic” for docking his luxury yacht out of state to avoid paying Massachusetts taxes, but I doubt it exists.

Mr. Sorkin wrote for the Times June 30.

Alarmingly, dozens of large United States companies are contemplating the increasingly popular tax-skirting tactic known as an inversion. Under the strategy, companies merge with foreign rivals in countries with lower tax rates and then reincorporate there while still enjoying the benefits of doing a large part of their business in the United States.

In Walgreen’s case, an inversion would be an affront to United States taxpayers. The company, which also owns the Duane Reade chain in New York, reaps almost a quarter of its $72 billion in revenue directly from the government; it received $16.7 billion from Medicare and Medicaid last year.

“It is unconscionable that Walgreen is considering this tax dodge — especially in light of the billions of dollars it receives from U.S. taxpayers every year,” Nell Geiser, associate director of Change to Win Retail Initiatives, a union-financed consumer advocacy group, said in a statement.

Frank Clemente, executive director of Americans for Tax Fairness, called it “unfair and deeply unpatriotic if the company moves offshore while continuing to make its money here, leaving the rest of us to pick up the tab for its tax avoidance.

The last time I checked, Walgreen provides goods and services worth at least $16.7 billion to individuals who utilize Medicare and Medicaid — it isn’t simply holding out its hands and asking for taxpayer cash. It would be an “affront” to American taxpayers if Gregory D. Wasson, the chief executive of Walgreen, refused to pay his water bills for a decade and then demanded someone else pay them when he was drowning in debt (i.e., the citizens of Detroit).

In terms of patriotism, Mr. Sorkin and Mr. Clemente of Americans for Tax Fairness have it backwards — the patriotic thing to do is for Americans to protest high taxation. I applaud Walgreen and any number of pharmaceutical companies for packing up and moving overseas. You can only demonize the men and women running businesses for so long before they get fed up and leave. Instead of asking, “How do we make America more attractive to companies on the other side of the globe?” the New York Times throws socialist temper tantrums.

Mr. Sorkin continues:

The current law allows a company to reincorporate abroad if it acquires a foreign company in a transaction that transfers more than 20 percent of the shares to foreign owners. President Obama has sought to raise the threshold to 50 percent. While many Democrats appear to support a short-term solution, some Republicans, arguing that a Band-Aid approach could have unintended consequences, instead want to address inversions only in the context of an overall corporate tax overhaul bill.

Whereas Republicans realize that perhaps the corporate tax code is a nightmare, President Obama just wants to force companies to withstand significantly more pain before they make the decision to move. The beatings will continue until morale improves.

And finally, we have Senator Dick Durbin of Illinois:

Senator Richard J. Durbin, a Democrat from Walgreen’s home state, Illinois, told The Chicago Tribune last week: “I am troubled by American corporations that are willing to give up on this country and move their headquarters for a tax break. It really speaks to your commitment.”

Poor Dick doesn’t realize that American corporations aren’t giving up on America — they’re giving up on guys like him.

If America is no longer capable of being one of the world’s few outposts of economic and political freedom, then corporations have a responsibility to search out countries that are willing to take on the role. If U.S. citizens are unhappy with the business landscape that takes shape in the years ahead, then the blame will rest squarely on the shoulders of men like President Obama and Senator Dick Durbin.

Related: Dick Durbin: If you have a tumor, letting it grow is always an option

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About the Author Douglas Ernst

I'm a former Army guy who believes success comes through hard work, honesty, optimism, and perseverance. I believe seeing yourself as a victim creates a self-fulfilling prophecy. I believe in God. I'm a USC Trojan with an MA in Political Science from American University.

34 comments

  1. History has shown us that when we lower taxes we collect more money. When our rates are high people will take their money to places that treat them more favorably and who can argue logically against that principle that is good business. High taxes are essentially pushing business out which in turn takes jobs away. Compare the economic performance of France to a nation such as Switzerland and you will see clear differences in how taxes have impacted each area.
    Or let us break it down to just states such as California to Texas (now don’t get me wrong Texas does have some problems) but it is clear that Texas has a better system for growing wealth and jobs. Look at the final result as you see many people leaving California for better opportunities. We also see many jobs and people leaving New York for the same reason.

    If you find yourself with some time you may enjoy this:
    http://mercatus.org/sites/default/files/Yakovlev-State-Economic-Prosperity.pdf

    If America is no longer capable of being one of the world’s outposts of economic freedom, then corporations have a responsibility to their shareowners to search out countries that are willing to take on the role.

    1. On the 4th of the july I tweeted:
      “Patriot: def, One who wishes to not outlive their country. ”

      Thanks Truth, now I’m getting more depressed every day I’ll end up outliving America. 😦 😛

    2. Just remember we still have the power to change this. I think we are at a time where we need to stand up and share the truth before it gets worse. This will take time and courage abd patience. This will not be easy but it is possible and blogs like this is not a bad place to start (or twitter).

  2. I’m not surprised that liberals are whining about this. The government overregulates and overtaxes everyone, and I don’t begrudge anyone who wants to keep more of their hard-earned money. I don’t blame California-based companies for wanting to move to Texas, as the latter state is much more business-friendly.

  3. If America actually was business-friendly, this sort of thing wouldn’t be happening, but that’s too much for liberals to understand. They throw tantrums because they’re obsessed with wasting other people’s money and this deprives them of money they can waste.

  4. Mr. Sorkin really should realize that Medicaid payments are not a handout. Pharmacies like Walgreens get dicey about Medicare/Medicaid because they never quite know what the reimbursement rates will be for the services provided. It has shrunk dramatically in the last 25 years, pharmacy gross profit % used to be above 30, now it rarely cracks 20%. Pharmacies much prefer private insurances because there is a contract and the pharmacy knows what it’ll get for each prescription.

    With the shrinking pharmacy returns has come the money crunch making taxes a bigger problem. In a sense when a corporation is taxed one of two things happen: its shareholders receive less dividends or in a retail setting (like Walgreens) that tax is reflected in the cost of goods at the store. Our liberal friends who love sticking it to corporations tax-wise are actually making our poorest citizens’ lives miserable. When bread goes up 50 cents a loaf, it really affects poorer families. We can address this by more social welfare, which leads to more tax and the snowball continues.

    Personally I think corporate tax should be heavily shrunk, while China/India etc has cheaper unskilled labor than the USA, we are actually competitive wage-wise in the skilled labor department. Even harsh critics of America respect our willingness to work and job dedication. With a low tax rate and dependable skilled workers, a lot of companies would come here. See Texas as Truth points out above. Imagine that on a national scale.

    If more companies come here, more jobs are available. The reason wages don’t increase is because there are more people than jobs, the supply for labor is high and the demand is low. Until that ratio changes things remain the same. Artificially raising the wage to $15 an hour will not change that ratio, attracting hiring businesses will. Again, some of our liberal friends think wealth disparity can be addressed by taxing these rich companies, the result is the opposite. Walgreens has been in Chicago for over a century, I doubt this potential move is taken lightly. Just my 2 cents.

  5. “If more companies come here, more jobs are available. The reason wages don’t increase is because there are more people than jobs, the supply and demand for labor is low. “

    I agree 100%.

    If we could generate more jobs we could then work at changing the pay scale. When there is 1 job available and 2 people want the job it gives employers the power to reduce wages. If we have 2 jobs and only 1 employee available it creates a more competitive job market for job seekers and that increases wages for all. Only increasing minimum wage increases inflation which in turn hurts everyone creating a negative economic relationship.

    1. To bolster our point, look at the oil boom in North Dakota. They can’t get enough workers up there. McDonald’s is hiring for 20 dollars an hour! I understand that is a unique situation, but it shows what happens when businesses are hiring.

    2. But that is the thing it does not have to be unique it could be standard if we could grow.

    3. That’s why I was so annoyed at those in Portland who blocked Trader Joes from coming in, Doug and Hube wrote about it some time ago. We need growth, especially in cities. Walgreens has always put stores in rough areas of cities that many companies won’t go to. Another reason why taxing them is a bad idea, as I said it’ll be passed off to the consumers and their customers in disadvantaged areas most certainly don’t need a price hike. Plus Walgreens hires. They train in basic management and especially pharmacy technician skills that can be useful for ones’ occupational life. The company grows and employees pick up skills; a win win situation when there is a positive business climate.

    4. As I said, it’s a unique situation that exploded quickly. There is a demand for infrastructure and many other things for the towns that will create jobs. The family at the beginning of the article said themselves they choose to go there; and with the salary he’s making the oil worker is hoping for a better life for his family; it sounds like he may be in a position to do that soon. Things may not be rosy now, but the worker is making 200K, which is better than bad conditions with no support coming in (like Detroit).

      The irony doesn’t escape me that the article in the link was sponsored by an ad from Shell Oil.

    5. Things may not be rosy now, but the worker is making 200K, which is better than bad conditions with no support coming in (like Detroit).

      Exactly. That whole article was somewhat bizarre in that it tried to paint an economic boom in the most negative light possible. I suppose someone can even look at a $200,000 glass and see it as half empty…

  6. As Patrick said first look at the sponsor, that tells us that this may not be very objective from the start. Also notice it was their choice to be there and 200,000 is far from a bad wage.
    As the article states “Like many oil boom families, the Tolberts left home to find a brighter future. They chose to live in rural Montana to avoid the bustle at the center of the oil rush 30 miles away, in Williston, North Dakota.”
    This was a boom and the area was not yet ready for it which means this is a temporary growing pain. This can happen to any area and it can be stabilized with a good master plan for the area. So other than short term growing pains this should provide a strong positive impact. It is a rose that is in bloom.

  7. a rose blooming, beautiful analogy. but very wrong. crime has shot up in the area, drug use is exploding (making I-90 a major drug corridor) and human trafficking is rampant. rent has also skyrocketed, increasing homelessness in places like Billings.

    if their is infrastructure investment, it will be because of those taxes you guys love to bash.

    1. Straw men!
      Also consider this, higher population will also have more crime because they are more people that is expected. The same for drugs and human trafficking.
      The same holds true for rent due to supply and demand which is why I stated the area has to adjust to be able to handle the influx of people.
      When the area works up to demand (the growing pain I mentioned) they should have a more solid and competitive environment.
      FYI lower tax rates have historically brought more tax revenues which means faster growth to meet the population needs.

    2. My problem with Lizard’s statement is the suggestion that I oppose all taxes. I don’t. I oppose excessive taxation, a nightmarish tax code, and an ever-expanding federal government that will always spend more than it takes in, etc.

      If the government taxed me at 90 percent of my income, it would spend 90 percent…and then some. That’s why when you try and nail down these people on what “fair” means to them they just start hemming and hawing about “the rich.”

    3. Good point, people assume that we oppose all taxes which is not correct. I am fine with taxes at reasonable levels for the social good.

  8. Something to think about:
    If you want to blame prosperity for crime explain crime rates and homelessness in Detroit?
    How about explaining human trafficking in Ohio?

    1. Exactly right. And in this area, as opposed to Detroit and parts of Ohio, there is money coming in. When there is a natural resource boom, people must flood to the area of the resource; as opposed to a Walgreens that can be built anywhere. Starting with a few businesses won’t cause huge growing pains; Bakken is a whole different set of circumstances than Walgreens from the article, I mentioned it as an example of the supply-demand labor curve.

      No one said “no taxes” for roads and police; and now you have a higher wage earning population to work from. Plus the influx of people will spurn other business (stores, dentists, saloons etc) that will employ more people. As Truth said, with people working, it doesn’t require a high tax rate to generate income.

      A growing pain is still a very real pain, and Lizard brings a valid concern, especially the fact that Montana hasn’t benefitted like North Dakota has. However, I’d still rather have a growing pain that can be addressed as opposed to the pain of sections of the rust belt where crime and infrastructure problems are more rampant with seemingly no hope of fixing them.

  9. Patrick, you have a good point that the negative issues that lizard19 provided are a real concern and any pain is still pain. Even if the negative is inflated it must be addressed. Every area has what is called a master plan that should deal with these issues (I also teach real estate). The problem is that the master plan is not always ready for large unforeseen changes. With that said the plan must be changed and the infrastructure and other elements must be modified to meet the social needs of the area. As you said growth in the economy is a good problem to have. I would rather have to deal with growth than decline any day.

    1. I see Lizard is back, spewing out more straw men. It doesn’t matter to him that the economy is doing well up in the North Dakota oil fields; he (like the media) only focuses on the negatives. These things happen; freedom can have a downside. Bad people will try to take advantage of a good thing.

      I’m also opposed to excessive taxation and a government that wastes my money on frivolous things.

    2. Yes, I’d totally rather see growth, the master plan/infastructure will catch up. We and the article headline deemed it a “growing pain” implying that it will be addressed.

      The oil worker chose this because he sees an opprotunity for his family, and I trust he and his wife to make the most of it, and give their children a better life; whether it be in Montana, ND, or back in his home state. And there are many more like him, so I’m glad the boom provided an opprotunity for them. I tend to see the glass half full, I believe this family and those like them will make good things happen when given the chance to earn a good living.

  10. Carl, good point but to be fair it is good to explore all aspects of the situation. With that said his statement did miss some key points such as population increase that would lead to other increases such as crime.
    Would it also be fair to say that you are okay with sensible taxation?

    1. I don’t have a problem with sensible taxation at all. And population increase does lead to an increase in crime. Last year, where I live, there was a rash of burglaries in broad daylight. Countless meth labs have been busted in the area.

    2. I guessed that, but I just wanted it fleshed out since it seems to be a common deceptive tactic for particular groups. Sorry about the increase in crime, has the area been economically depressed?

    3. Well, the meth labs have been around for years and were there back when I moved to this area in 2001, so that’s been going on for years. The increase in crime hasn’t been that big, but the rash of burglaries last year did raise a few alarms since such things are rare out here.

  11. but Patrick, is the growth sustainable? the flip side of boom is bust, and Montana has been through this before with the copper kings. when the resources are gone, the land ravaged, infrastructure abandoned, will people in these small towns see the boom as good? probably not.

    with taxes, I think it’s a matter of scale. in the town I live property owners continue to see their taxes go up every year. everything gets more expensive, but wages never seem to keep pace. so for individuals, taxes can be incredibly tough.

    but for corporations? do commenters here think, for example, that Apple should keep billions offshore to avoid taxes?

    At Apple’s Worldwide Developers Conference in June, protesters loudly criticized Apple for keeping $54.4 billion offshore to avoid paying U.S. corporate taxes.

    GE, Microsoft, Citigroup and Medtronic are other high-profile companies have also come under scrutiny and criticism for similar tax avoidance behavior.

    The fact is that over $2 trillion in U.S. corporate profits is parked offshore. This should infuriate many law-abiding, taxpaying citizens. What’s the justice in this?

    how can anyone justify this kind of corporate tax avoidance?

    1. That field is so vast, i believe it to be sustainable for a while; but I know you live in Montana and have probably seen first hand the growing pains, so I totally see your concern. I definitely go traditional conservative with the business environment, but you’ll never get an argument from me that growing pains and abuses (Walmart, Monsanto) need to be addressed.

      We may part ways on this, but I don’t know if you can truly tax a corporation as they pass the tax to its customers with higher prices. They act as tax collectors in my opinion. I think it best to take tax out of the business equation, let them hire and tax individuals sensibly. If it was law, then certainly apple and others should pay their taxes, however these loopholes they all use are written in (or left in) by congress. I question if congress will ever truly revamp the tax code, because levying tax and rewarding their donors is how they flex 90% of their muscle. I think Doug’s line that Walgreens isn’t giving up on America but giving up on guys like Durbin is very accurate. Walgreens does pay taxes, and I’m sure they look at Apple and say “wtf?!?”.

  12. Should Apple keep money offshore to avoid taxes?
    Yes (from a business standpoint)

    Until we get competitive tax codes I can see why they do. Lower our taxes so that they no longer have a benefit of having money offshore. This will bring the money back and we will get more money in tax revenue. The tax laws created this issue and it needs to be addressed.

    Not all Booms will lead to a Bust, that is why the master plan for areas are not making decisions on need jerk temporary issues (most of the time). The new business should foster other forms of new business so that the area is not supported off just one industry. If an area is too heavy on one industry you will get a disaster like Detroit when something goes wrong. This is one reason why local government is important and people need to take more care when making decisions locally.

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