By Robert Reich
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| Does the Swiss Franc talk in US politics? |
Dozens of big U.S. corporations are
considering leaving the United States in order to reduce their tax bills.
But they’ll be leaving the country only on
paper. They’ll still do as much business in the U.S. as they were doing before.
The only difference is they’ll no longer be
“American,” and won’t have to pay U.S. taxes on the profits they make.
Okay. But if they’re no longer American
citizens, they should no longer be able to spend a penny influencing American
politics.
Some background: We’ve been hearing for years
from CEOs that American corporations are suffering under a larger tax burden
than their foreign competitors. This is mostly rubbish.
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| For more cartoons by Randall Enos, click here. |
Last year, the Government Accountability
Office, examined corporate tax returns in detail
and found that in 2010, profitable corporations headquartered in the United
States paid an effective federal tax rate of 13 percent on their worldwide
income, 17 percent including state and local taxes. Some pay no taxes at
all.
One tax dodge often used by multi-national
companies is to squirrel their earnings abroad in foreign subsidiaries located
in countries where taxes are lower. The subsidiary merely charges the U.S.
parent inflated costs, and gets repaid in extra-fat profits.
Becoming a foreign company is the extreme form
of this dodge. It’s a bigger accounting gimmick. The American company merges
with a foreign competitor headquartered in another nation where taxes are
lower, and reincorporates there.
This “expatriate” tax dodge (its official name
is a “tax inversion”) is now at the early stages but is likely to spread
rapidly because it pushes every American competitor to make the same move or
suffer a competitive disadvantage.
For example, Walgreen, the largest drugstore
chain in the United States with more than 8,700 drugstores spread across the
nation, is on the verge of moving its corporate headquarters to Switzerland as
part of a merger with Alliance Boots, the European drugstore chain.
Founded in Chicago in 1901, with current
headquarters in the nearby suburb of Deerfield, Walgreen is about as American
as apple pie — or your Main Street druggist.
Even if it becomes a Swiss corporation,
Walgreen will remain your Main Street druggist. It just won’t pay nearly as
much in U.S. taxes.
Which means the rest of us will have to make
up the difference. Walgreen’s morph into a Swiss corporation will cost you and
me and every other American taxpayer about $4 billion over five years,
according to an analysis by Americans for Tax Fairness.
The tax dodge likewise means more money for
Walgreen’s investors and top executives. Which is why its large investors –
including Goldman Sachs — have been pushing for it.
Some Walgreen customers have complained. A few
activists have rallied outside the firm’s Chicago headquarters.
But hey, this is the way the global capitalist
game played. Anything to boost the bottom line.
Yet it doesn’t have to be the way American
democracy is played.
Even if there’s no way to stop U.S.
corporations from shedding their U.S. identities and becoming foreign
corporations, there’s no reason they should retain the privileges of U.S.
citizenship.
By treaty, the U.S. government can’t (and
shouldn’t) discriminate against foreign corporations offering as good if not
better deals than American companies offer. So if Walgreen as a Swiss company continues
to fill Medicaid and Medicare payments as well as, say, CVS, it’s likely that
Walgreen will continue to earn almost a quarter of its $72 billion annual
revenues directly from the U.S. government.
But as a foreign corporation, Walgreen should
no longer have any say over the size of those payments, what drugs they cover,
or how they’re administered.
In fact, Walgreen should no longer have any
say about how the U.S. government does anything.
In 2010 it lobbied for and got a special provision in the Dodd-Frank Act,
limiting the fees banks are allowed to charge merchants for credit-card transactions
— resulting in a huge saving for Walgreen. If it becomes a Swiss citizen, the
days of special provisions should be over.
The Supreme Court’s “Citizens United” decision
may have opened the floodgates to American corporate money in U.S. politics, but
not to foreign corporate money in U.S. politics.
The Court didn’t turn foreign corporations
into American citizens, entitled to seek to influence U.S. law and regulations.
Since the 2010 election cycle, Walgreen’s
Political Action Committee has spent $991,030 on federal elections. If it
becomes a Swiss corporation, it shouldn’t be able to spend a penny more.
Walgreen is free to become Swiss but it should
no longer be free to influence U.S. politics.
It may still be the Main Street druggist, but
if it’s no longer American it shouldn’t be considered a citizen on Main Street.
ROBERT B. REICH, Chancellor’s Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies, was Secretary of Labor in the Clinton administration.
Time Magazine named him one of the ten most effective cabinet secretaries of
the twentieth century. He has written thirteen books, including the best
sellers “Aftershock" and “The Work of Nations." His latest,
"Beyond Outrage," is now out in paperback. He is also a founding
editor of the American Prospect magazine and chairman of Common Cause. His new
film, "Inequality for All," is now available on Netflix, iTunes, DVD,
and On Demand.
