Unpatriotic US Corporations Becoming Hot Political Issue That Unites Right and Left

by Ralph Nader

CEO Greg Wasson of the giant Walgreen drugstore chain may be thinking of other things than patriotism this 4th of July. He confirmed last month that, to save on taxes, he and his Board of Directors may be renouncing the company's U.S. citizenship and moving its incorporation to Switzerland or some nearby tax haven.

Were Mr. Wasson to quit America, where the company rose to great profits and where it receives one quarter of its annual $72 billion in sales from Medicaid and Medicare reimbursements, he would be grossly underestimating the reaction of many Americans.

Following intentions by corporate welfare kings Pfizer and Medtronic to quit their native country to get further tax escapes, Walgreen is unique in that it has 8000 pharmacies -- convenience stores well situated for citizen picketing.

Imagine the signs:

"Walgreen Goes For the Green Instead of the Red, White and Blue."

Or "Walgreen: Where's Your Patriotism?"

Or "Walgreen: Pay Your Fair Share of Taxes and Stay Loyal to the U.S.A."

Or "Walgreen: American Taxpayers Fund Your Sales But Not If You Abandon America."

"The average person who pays taxes cannot take advantage of the tax loopholes exploited by corporations and they don't think it's fair," says Professor Klaus Weber at Northwestern University's Kellog School of Management. Nell Geiser, associate director of Change to Win Retail Initiatives, declared that "Walgreen should show its commitment to our communities and our country by staying an American company." While Senator Dick Durbin (D-Ill.), who has filed legislation to make it harder to move overseas to cut taxes, bluntly asserted that he is "troubled by American corporations that are willing to give up on this country and move their headquarters for a tax break." Durbin must be upset to challenge one of the biggest corporations in his own state of Illinois.

Nonetheless, Mr. Wasson seems unperturbed by the coming uproar and damage to his 103 year old corporate brand name. He still says the company is "looking at everything" that could reduce their effective tax rate. Analysts estimate Walgreen saving $4 billion in taxes over five years.

I wonder if Mr. Wasson is ready for the public reaction implicit in Senator Carl Levin's (D-Mich.) recent statement: "Average taxpayers are fed up with profitable U.S. corporations using tax haven gimmicks to dodge their tax obligation, while still benefitting from this country's laws, infrastructure and workforce."

The senator could easily have added more grist for the "fed-up" mill. These include U.S. companies shipping jobs and whole industries, encouraged by our tax laws, to fascist and communist regimes abroad that know how to keep their workers in their serfdom. Or very profitable drug companies, lathered with U.S. tax credits and U.S. taxpayer-funded research and development of new drugs, still going to China and India to make 80 percent of the ingredients in medicines that Americans buy so as to make even more profits and avoid tougher safety regulations here.

Mr. Wasson will be taking many considerations before making a decision for his company's nearly $80 billion in annual sales. Let's hope he does this before the public blowback starts adversely affecting the company's stock price. Over the years, it is amazing how oblivious to public opinion and mores these overly monetized CEOs can be. All these U.S. chartered, big corporations better get used to corporate unpatriotism becoming more and more a political electoral issue.

As the U.S. Supreme Court rules again and again that corporations (never mentioned in the Constitution) are "persons" under the Constitution and in federal statutes, it should not be surprising if real people start judging them by such human values as loyalty, reciprocity, gratitude and love of country.

The days when Big Business can have it both ways -- as an artificial, power-concentrating entity with special privileges and immunities, on the one hand, and all the constitutional human rights of real people on the other hand, are coming to an end. When the public sentiment changes and becomes politically and electorally operational, it won't matter what Chief Justice John Roberts and his band of four other corporatists think. For their decisions subordinating the sovereignty of the people to the domination of corporations will be consigned to the 'dustbins of history.'

The subject of unpatriotic corporate behavior, at huge cost to the people, is emerging as a left/right unifier.

Ralph Nader

Ralph Nader is a consumer advocate, lawyer, and author. His latest book is The Seventeen Solutions: Bold Ideas for Our American Future. Other recent books include, The Seventeen Traditions: Lessons from an American Childhood, Getting Steamed to Overcome Corporatism: Build It Together to Win, and "Only The Super-Rich Can Save Us" (a novel).


The Limits of Corporate Citizenship

The Limits of Corporate Citizenship: Why Walgreen Shouldn’t Be Allowed to Influence US Politics If It Becomes Swiss

by Robert Reich

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.

It’s true that the official corporate tax rate of 39.1 percent, including state and local taxes, is the highest among members of the Organization for Economic Cooperation and Development.

But the effective rate – what corporations actually pay after all deductions, tax credits, and other maneuvers – is far lower.

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.

obert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.

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