Corporate Deserters ?

In the next few weeks, the Walgreens drug store chain may decide to pick up their corporation from its Illinois roots and head off to another country and set up headquarters. President Obama referred to them as corporate deserters? Are they?

Walgreens is considering a merger with Alliance-Boots, a company from Switzerland, after they purchased 45% in it. They would then consider moving their headquarters to the low-taxed country and still maintain their present operations in the United States.

This is called “inversion” and 47 American corporations have done this over the past decade which reeks of no loyalty to the United States. They are only bottom line feeders.

What would this move mean to the bottom line of Walgreens?

Over the next five years, the company could save over $4 billion in taxes that would go to the United States government.  The major reason that the firm could buy a huge stake in a foreign drug chain was its profitability — $2.5 billion last year alone – most of which resulted from its U.S. operations.

This company has benefitting from the U.S. citizens for many years and now want to “take their money and run.” The “inversion” scheme generally involves profitable U.S. corporations buying smaller overseas firms in lower tax countries and then declaring that their headquarters for tax purposes is in the low tax country – even though most of its operations remain in the United States. This trick is exactly the kind of move that is intended to drive down the fraction of overall taxes that are paid from big corporations and other owners of capital and raise the share paid by working people from income earned through their labor.

And to those who excuse the actions of these companies by saying that these companies are just making a “smart” use of the American tax code there are two answers:

ü  Change the tax code to eliminate this outrageous loophole;

ü  Punish the “corporate deserters” who have built their companies with the benefit of American support and know-how and now want to abandon America so they can avoid paying their fair share of our tax burden.

How do you punish “corporate deserters”? Government can do it by cutting off access to federal subsidies and contracts. Consumers can do it – especially with companies like Walgreens – by voting with their dollars and refusing to shop there. Walgreens might be a good place to start, since the company is still contemplating whether the value of its status as an American corporation is worth the money it would forgo by paying its fair share of taxes in the United States.

The opinions in this blog belong to Tom Knuppel