Handouts
for Corporate Tax Deserters
By
Phil Mattera, Dirt
Diggers Digest
President
Obama says “I don’t care if it’s legal—it’s
wrong.” Even Fortune magazine calls it “positively un-American.” But
will Congress do anything to block the brazen moves by a growing number of
large U.S. companies to reincorporate abroad to dodge federal taxes?
One
group of Democratic lawmakers is trying to discourage the trend by tightening
the restrictions on federal contract awards to so-called inverted companies,
but such firms still receive another form of financial assistance from Uncle
Sam.
The
lawmakers have drafted a bill with the appropriately provocative
title of No Contracts for Corporate Deserters Act. It would bar contract awards
to reincorporators which are at least 50-percent U.S.-owned and which do no substantial
business in the country in which they are nominally based.
Ingersoll-Rand, which purports to be an Irish company but derives 60 percent of its revenue from
the United States, has 80 percent of its long-lived assets in this country and
has its “corporate center” near Charlotte, North
Carolina, received $64 million in federal contracts in 2013. Eaton Corporation,
which also claims to have become Irish, received $131 million that year.
In
his July 24 remarks on the subject, President Obama
also declared: “You shouldn’t get to call yourself an American company only
when you want a handout from American taxpayers.” Such handouts are not limited
to lucrative contract awards. Inverted companies are also receiving cash grants
from the federal government.
Take
the case of Eaton. In 2013 it received a $2.4 million grant from the Energy
Department’s Conservation Research and Development Program. That was just one
of eight grants it received from Energy that year with a total value of about
$4 million.
Delphi
Automotive, which claims to be based on the island of Jersey in the English
Channel, has also received numerous grants from the Energy Department,
including $5.1 million last year through the Fossil
Energy Research and Development Program.
Grants
have also gone to companies involved in recent inversion deals. Pfizer, which
was seeking to undergo an inversion through a merger with AstraZeneca but which
has dropped the bid for now, received $3.8 million in assistance this year from
the Defense Department for work on nanoparticles.
These
grants are part of a controversial practice by which the federal government
underwrites commercial research activity by large companies in industries such
as food processing, pharmaceuticals, aerospace and electric utilities. And
this, in turn, is part of the larger sphere of federal financial assistance to
business that also includes direct payments, low-cost loans, loan guarantees
and the like.
These
activities, often labeled corporate welfare, are a frequent target of criticism
from both the left and the right. Conservatives are currently engaged in a
campaign to eliminate the Export-Import Bank, which provides financing for
deals benefiting corporations such as Boeing and Bechtel. Bipartisan efforts
such as Green
Scissors and the Toward Common Ground reports issued by
U.S. PIRG and National Taxpayers Union have sought to end funding for the most wasteful
programs.
Those
efforts are usually driven by ideology (conservatives don’t want governments
“picking winners”), by a desire to cut federal spending, or by other issues
(progressives point out that many federal subsidies promote environmentally destructive
practices). Now there’s another reason to be up in arms over corporate welfare.
The
fact that some “corporate deserters” are getting grants from Uncle Sam could
provide an additional form of pressure against the tax dodgers. Seeing these
companies get contracts is bad enough; realizing that they may be getting
direct handouts is even more infuriating.
