Company run by daughter of Dem senator moves to Europe to escape US corporate tax
US taxation of corporate profits is the highest in the world, and hobbles American companies competing on world markets, thereby costing American jobs. Just last month, medical equipment giant Medtronic announced plans to move its headquarters from Minneapolis to Dublin, via the acquisition of a company located there, and taking the new company’s domicile as its own. Now, it is being followed by a company run by the daughter of a US senator. Andrew Ross Sorkin of The New York Times:
Heather Bresch grew up around politics. Her father is Joe Manchin, the Democratic senator from West Virginia and a former governor. She has heard him say repeatedly, “We live in the greatest country on Earth,” as he did in countless political advertisements. And it appeared to rub off on her: Ms. Bresch was named a “Patriot of the Year” in 2011 by Esquire magazine for helping to push through the F.D.A. Safety Innovation Act.
Ms. Bresch is the chief executive of Mylan, the giant maker of generic drugs.
Until now, Ms. Bresch ran an unabashedly proud American company based in a Pittsburgh-area suburb, one of a handful of success stories that kept the once-thriving steel city relevant.
But on Monday, Ms. Bresch announced plans to renounce her company’s United States citizenship and instead become a company incorporated in the Netherlands, where the tax rates are lower. She did so by agreeing to acquire Abbott Laboratories’ European generic drug business.
Sorkin is a highly regarded reporter for the New York Times, so perhaps he feels free to express opinions that run contrary to Democratic Party orthodoxy:
If Ms. Bresch’s deal isn’t a call to Washington to address what is clearly a growing trend that it has remained nearly silent on, the nation will most likely continue to lose large employers and taxpayers in droves to countries with lower tax rates. Almost 20 large United States companies have announced plans to give up their United States citizenship over the last two years. Just on Monday, the Irish drug maker Shire cleared the way for a merger with AbbVie, the drug maker based in Chicago, and Walgreen is considering an inversion through a deal with Alliance Boots, a European drugstore chain.
“It’s not like I’ve not been vocal and up there talking to anybody who’d listen to me,” Ms. Bresch told me in an interview about the crusade she had been on in Washington for years, talking to lawmakers about overhauling the corporate tax code to make United States companies more competitive. “But you know what they all say? ‘Yeah, uh huh, O.K. Uh huh.’ ”
Taxing corporate profits is what I call a “seed corn tax” – a tax that diminishes the capacity to generate wealth, and overall diminishes the prosperity of a country. It would be much better to eliminate it entirely and then tax dividends at full income tax rates. Or, even better, replace income taxes with consumption taxes – sales or value added taxes – so that society encourages production. That would also have the advantage of capturing black economy [drug dealing and the like] income that currently escapes taxation.
In the meantime, expect more corporate headquarters to exit the United States. I hold no grudge against companies that do so, especially if they face overseas competitors in world markets. To remain here is to handicap themselves.
Hat tip: Jim Netolick