By CAP Action War Room

Some Corporations Are Moving Addresses Overseas To Dodge Paying Fair Share Of U.S. Taxes

We talk a lot about the grave problem of inequality and how our economy is not working for most Americans. One of the causes of this big problem is that corporations and the wealthiest are taking advantage of the system, exploiting tax loopholes, and rigging the game to benefit themselves, often at the expense of everyone else. The latest tax-dodging tactic that some corporations are considering using is a perfect example of this rigged system–and demonstrates why we need our legislators to take decisive action to stop it.

What Is The Problem?
A loophole in the tax code essentially allows a corporation to renounce its corporate citizenship in the United States, move its address overseas by merging with a foreign company, and dodge its U.S tax obligations by paying most of its taxes to a foreign government with lower tax rates than the U.S. The process takes place primarily on paper — most corporate operations remain here. The corporations that do this want all the benefits of being an American company without paying their fair share of taxes. That makes the rest of us pick up the tab.

The practice has become known as “inversion.” But what it really amounts to is desertion. And it could cost Americans tens of billions of dollars.

Who Is Taking Advantage?
There are 47 firms in the last decade that have exploited this loophole, according to new data compiled by the nonpartisan Congressional Research Service. But it’s a hot topic again because at least a dozen U.S. firms are currently considering taking advantage of it.

One of those corporations is Walgreen. The company has always prided itself on being America’s go-to pharmacy: from 1993 to 2006, it had the slogans “The Pharmacy America Trusts” and “The Brand America Trusts.” A biography of the company is entitled, “America’s Corner Store: Walgreen’s Prescription For Success.” Walgreen chief executive Gregory D. Wasson has said the company is “proud of our Illinois heritage.”

At the same time, Walgreen is currently considering merging with European drugstore chain Alliance Boots and move to Switzerland as part of a plan to dodge up to $4 billion in U.S taxes. The company that gets almost a quarter of its $72 billion in revenue directly from the government through Medicare and Medicaid is trying to reap even more profits while leaving taxpayers holding the bag.

Walgreen isn’t the only one. Pfizer, the pharmaceutical company, tried merging with the smaller U.K.-based AstraZeneca earlier this year and switch its address, where the tax rate is lower. It was estimated the move would save them at least $1 billion a year in tax obligations to the U.S. (the deal ultimately didn’t go through). Medtronic, a medical device company, plans to move its corporate address to Ireland, a tax haven, to avoid paying U.S. taxes on $14 billion. Chiquita, the banana distributor, is also heading to Ireland after acquiring Fyffes. These tax dodges, as Fortune magazine calls them in this week’s issue, are “positively un-American.”

What Can Be Done?
President Barack Obama’s 2015 budget proposes making these corporate desertions more difficult by raising the minimum levels of foreign ownership required to 50 percent (currently it is just 20 percent), which means that U.S. corporations could not move their address abroad unless they actually ceded a controlling interest to foreign owners. Congressional Democrats have made similar proposals. Treasury Secretary Jack Lew recently called for more “economic patriotism” and urged Congress to “enact legislation immediately” to close the loophole. Leaders on both sides of the aisle want comprehensive tax reform, but finding common ground in the current Congress could take a while. The simple fact is that as more and more companies exploit this loophole, a solution for this problem is needed right away–and Congress has the power the solve it.

BOTTOM LINE: More and more corporations are taking advantage of a tax loophole that helps their bottom line while costing American taxpayers billions every year. These companies want to continue to take advantage of the things that make the U.S. the best place in the world to do business, while at the same time pay less than their fair share by moving their corporate addresses overseas. That desertion is unfair, unpatriotic, and has got to change.

What Rebuilding America Means for You

Our nation’s infrastructure has long been our economic backbone. A well-performing transportation network keeps jobs in America, allows businesses to expand, and lowers prices on household goods for American families.

But we’ve been investing in our infrastructure less and less — and, as a result, congestion and maintenance backlogs have gone up:

• 65% of our roads are rated in less than good condition
• 25% of our bridges require significant repair or can’t handle today’s traffic
• 45% of Americans lack access to transit

It’s time to rebuild our roads and bridges in a smarter, more responsible way while supporting millions of jobs.

See how your state is affected, and learn how the President’s plan will rebuild America.

Weekly Address: Expanding Opportunity — It’s Time for Congressional Republicans to Do Their Part

In this week’s address, the President recapped his visits with folks who have written him letters about their own American stories — their successes and struggles. While congressional Republicans are blocking meaningful measures that would strengthen the middle class, the President continues looking for ways to grow the economy and expand opportunity for more hardworking Americans.

READ MORE

By CAP Action War Room

The Border Crisis Is Not An Opportunity To Play Politics

A growing humanitarian situation at the Mexico-U.S. border, with tens of thousands of children fleeing violence and organized criminal activity in Central America to the U.S. and neighboring countries, has brought immigration to the forefront of the political conversation again, highlighting both the need for immediate action and long-term reform. Tens of thousands of children and families have come across the border recently, leaving immigration officials with overcrowded detention facilities and little capacity to process them.

President Obama has issued a request for Congress to provide $3.7 billion in emergency funds to care for and speed up the repatriation of the more than 57,000 children. Vice President Biden, Secretary of State John Kerry, and Department of Homeland Security Secretary Jeh Johnson have all either visited Central America or the border to assess the crisis.

Meanwhile, too many Republicans are exploiting child refugees to score political points. Gov. Rick Perry, after meeting with Obama in Texas last week, asked “I don’t know whether [Obama’s] inept, or there’s something else going on.” Rep. Louie Gohmert (R-TX) went even farther, going on a diatribe against the migrant children and urging Texas to unilaterally declare war. Here’s what he said:

Even with $3.7 billion that’s requested, there’s no way for what’s being called for is going to stop the invasion that’s occurring. That’s why I’m hoping that my governor will utilize Article 1, Section 10, that allows a state that is being invaded — in our case more than twice as many just in recent months, more than twice as many than invaded France on D-Day with a doubling of that coming en route, on their way here now under Article 1, Section 10, the state of Texas would appear to have the right, not only to use whatever means, whether it’s troops, even using ships of war, even exacting a tax on interstate commerce that wouldn’t normally be allowed to have or utilize, they’d be entitled in order to pay to stop the invasion.

Article 1, Section 10 of the Constitution provides that “[n]o state shall, without the consent of Congress, . . . engage in war, unless actually invaded, or in such imminent danger as will not admit of delay.” We are not talking about war. We are talking about children—many younger than 10—who have experienced horrible conditions in their home countries and on the journey, and who are alone and scared.

Rep. Luis Gutierrez (D-IL) stressed this point and called out the xenophobia in this debate yesterday: “There is American exceptionalism, I believe in it,” Gutierrez said. “I say we are the strongest, wealthiest, most powerful nation in the world, and children are coming to our borders, we should protect them.”

BOTTOM LINE: We need to show compassion and take care of these children who have traveled thousands of miles from three of the most dangerous countries in the world. They deserve a hearing to determine if their claims are valid, and we should treat them humanely throughout that process, while sending resources to expedite it. Meanwhile, House Republicans must take responsibility to fix the long-term issue of a broken immigration system and stop refusing to vote on the bipartisan, comprehensive immigration bill that passed the Senate a year ago.