This morning, I came across an article by Jonathan Alter over at The Daily Beast that makes a lot of sense in regards to the practice of corporate inversions. In this piece, he argues that American companies should have to sign a contract, or “non-desertion agreement” in order to keep receiving federal contracts. In addition, we should also consider a public shaming campaign for companies that move offshore that do not partake of federal money.
Recently, Walgreens has come under fire from Bernie Sanders and others for considering moving their corporate headquarters to Switzerland in order to save about $800 million in taxes annually through a process known as a “corporate inversion.” Other companies have already used corporate inversions by moving to Switzerland, Ireland, the Cayman Islands or other tax shelter havens, and yet still continue to receive federal dollars.
As an example, Walgreens wanted to make this move to save $800 million annually. After all, who wouldn’t jump at the chance to save that kind of money? The only problem is that Walgreens makes about $18 billion each year from Medicare and Medicaid. $800 million is a lot of money, but when you stack it up against the $18 billion they get from the government, it’s only a fraction of that – like a mere 4%.
Under Mr. Alter’s proposal, Walgreens could conceivably move to Antarctica if they wanted to, and they could continue selling to the American public. However, they would just have to give up that $18 billion they make each year from the government.
Some people would ask why can’t we just pass a comprehensive tax reform bill? Puhleeze, have you seen Congress lately? These shmucks couldn’t even pass a resolution recently congratulating the Pope, of all people. Besides, even if a tax reform bill did pass without being loaded full of additional loopholes and unrelated amendments, you have this problem:
Even if comprehensive tax reform miraculously passes, it wouldn’t reduce the corporate tax rate enough to stop the desertions. That’s because other countries have slashed their corporate taxes or eliminated them altogether.
What’s the solution? It’s actually pretty easy. Make every company that receives federal money through contracts or subsidies sign something like an NDA (Non-disclosure agreement), except it would be a Non-desertion Agreement:
So it’s time for red-blooded Americans to take matters into our own hands. My answer is to make every corporation sign something…
Because oaths and pledges are a little creepy, this effort needs something else—something that comes out of the legal and business worlds: a contract. More specifically, an NDA.
Non-disclosure agreements are common in corporate America, where tens of thousands of senior managers and employees sign contracts promising to keep all sorts of information confidential. It’s often a condition of employment. (Source)
Why not? Conservatives sure love to make people who receive federal assistance jump through all sorts of hoops and red tape to get a few dollars worth of food or medical care. Want unemployment insurance? Better piss in this cup to make sure you aren’t a pothead. Why? Because everyone knows that the only reason you’re poor and in this predicament is because you’re lazy and do drugs – at least that’s how their logic goes.
However, when it comes to corporations, these lawmakers and pundits argue that we have to give them subsidies, tax breaks and loopholes in order to remain competitive. They also think it’s OK for companies to use corporate inversions, because the law currently allows them to. But if Mitt Romney is right and “corporations are people, my friend” then shouldn’t they at least be subject to the same proposed rules as the rest of us when it comes to public assistance?
Some people want to argue that we should make our tax code competitive with other countries and that will fix the desertion problem. As Mr. Alter points out, these countries have extremely low or no corporate taxes altogether. So how does that work and why can’t we do the same thing?
Here’s the difference: through corporate inversions, only the headquarters ends up being based in these countries, often only as a post office box or a small office in a building. It costs a country like Switzerland or Ireland little to nothing in infrastructure to have one of these corporations set up their headquarters there. They don’t need to build new roads, educate workers for the factories or provide extra public safety – all because the bulk of the operations remains in the country the corporation is moving the headquarters from. In other words, the company saves billions while the host country has none of the cost and gets maybe a few million in tax revenue in exchange. Sounds like a great deal, right?
Meanwhile, back here in the United States, we still have to maintain the roads they move their products on. We also have to educate their workers, provide government assistance for those who aren’t paid enough to survive otherwise, and public safety personnel to show up in case of a fire or robbery.
Then how about the companies that don’t get federal money? If they’re not getting money from the government via Medicare or other contracts, legislation or an executive order wouldn’t affect them. However, there’s another alternative: public shaming.
Believe it or not, public shaming does work. In the era of the Internet with Facebook and other forms of social media, it isn’t hard for a company to end up with a public relations nightmare on their hands in a very short period of time. Just look at Walgreens, which seems to have finally bowed to public pressure and decided, at least for now, not to move to Switzerland.
If companies want to use corporate inversions to shirk their tax responsibilities, then go ahead. However, they shouldn’t be able to receive any sort of contracts or subsidies on our dime. It’s only fair.
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