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.