By Robert Reich
That way it will pay less tax. Ireland’s tax rate is less than
half that of United States.
Ian Read, Pfizer’s chief executive, told the Wall Street Journal the higher tax rate
in the United States caused Pfizer to compete “with one hand tied behind our
back.”
Read said he’d tried to lobby Congress to reduce the
corporate tax rate (now 35 percent) but failed, so Pfizer is leaving.
Such corporate desertions from the United States (technically
called “tax inversions”) will cost the rest of us taxpayers some $19.5 billion
over the next decade, estimates Congress’s joint committee on taxation.
Which is fueling demands from Republicans to lower the corporate
tax rate.
Mike Huckabee and Ted Cruz want to eliminate the corporate tax
altogether. (Why this would save the Treasury more money than further corporate
tax inversions is unclear.)
Rather than lower corporate tax rates, an easier fix would be to
take away the benefits of corporate citizenship from any company that deserts
America.
One big benefit is the U.S. patent system that grants companies
like Pfizer longer patent protection and easier ways to extend it than most
other advanced economies.
In 2013, Pfizer raked in nearly $4 billion on sales of the
Prevnar 13 vaccine, which prevents diseases caused by pneumococcal bacteria,
from ear infections to pneumonia – for which Pfizer is the only manufacturer.
Other countries wouldn’t allow their patent systems to justify
such huge charges.
Neither should we – especially when Pfizer stops being an
American company.
The U.S. government also protects the assets of American
corporations all over the world.
In the early 2000s, after a Chinese company replicated Pfizer’s
formula for Viagra, the U.S. Trade Representative put China on a “priority watch list” and charged
China with “inadequate enforcement” against such piracy.
Soon thereafter the Chinese backed down. Now China is one of
Pfizer’s major sources of revenue.
But when Pfizer is no longer American, the United States should
stop protecting its foreign assets.
Nor should Pfizer reap the benefits when the United States goes
to bat for American corporations in trade deals.
In the Pacific Partnership and the upcoming deal with the
European Union, the interests of American pharmaceutical companies like Pfizer
– gaining more patent protection abroad, limiting foreign release of drug data,
and preventing other governments controlling drug prices – have been central
points of contention.
And Pfizer has been one of the biggest beneficiaries. From now
on, it shouldn’t be.
U.S. pharmaceutical companies rake in about $12 billion a yearbecause Medicare isn’t allowed to use
its huge bargaining power to get lower drug prices.
But a non-American company like Pfizer shouldn’t get any of this
windfall. From now on, Medicare should squeeze every penny it can out of
Pfizer.
American drug companies also get a free ride off of basic
research done by the National Institutes of Health.
Last year the NIH began a collaboration with
Pfizer’s Centers for Therapeutic Innovation – subsidizing Pfizer’s
appropriation of early scientific discoveries for new medications.
In the future, Pfizer shouldn’t qualify for this subsidy,
either.
Finally, non-American corporations face restrictions on what
they can donate to U.S. candidates for public office, and how they can lobby
the U.S. government.
Yet Pfizer has been among America’s biggest campaign donors and
lobbyists.
In 2014, it ponied up $2,217,066 to candidates (by
contrast, its major competitor Johnson & Johnson spent $755,000). And
Pfizer spent $9,493,000 on lobbyists.
So far in the 2016 election cycle, it’s been one of the top ten corporate donors.
Pfizer’s political generosity has paid off – preventing Congress
from attaching a prescription drug benefit to Medicare, or from making it
easier for generics to enter the market, or from using Medicare’s bargaining
power to reduce drug prices.
And the company has donated hundreds of thousands of dollars to
the candidacies of state attorneys general in order to get favorable settlements in cases brought against it.
But by deserting America, Pfizer relinquishes its right to
influence American politics.
If Pfizer or any other American corporation wants to leave
America to avoid U.S. taxes, that’s their business.
But they should no longer get any of the benefits of American
citizenship – because they’ve stopped paying for them.
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 fourteen books, including
the best sellers “Aftershock, “The Work of Nations," and"Beyond
Outrage." He is also a founding editor of the American Prospect magazine and
chairman of Common Cause. His film, INEQUALITY FOR ALL is available on Netflix,
iTunes, Amazon. His new book, "SAVING CAPITALISM: For the Many, Not the
Few" is out 9/29.
