As it turns out, the “corner of happy and healthy’ will not, as U.S. Sen. Dick Durbin of Illinois recently speculated, be “somewhere in the Swiss Alps.”
Walgreens, whose ads tout it as “the corner of happy and healthy,” will be happy for the foreseeable future in the United States. That’s good news. The company had considered reincorporating in Switzerland to cut its federal tax bill by as much as $4 billion over the next five years through a controversial but legal process called “tax inversion.”
Walgreens CEO Greg Wasson said moving was “not in the best long-term interest of our shareholders.” He added that becoming a Swiss company in conjunction with Walgreens’ acquisition of a Swiss pharmacy chain and drug wholesaler would have been immensely complicated.
We’d like to think a good part of the company’s decision involved preserving the company’s image as “America’s pharmacy,” an image that surely would have been bruised if Walgreens had pretended to be a Swiss firm. In addition to customer loyalty, we’d like to believe that loyalty to the country in which Walgreens began and has prospered for more than a century was a factor.
As has been stated elsewhere, public money has been invested for decades to educate Walgreens’ employees. What’s more, when Walgreens’ customers use Medicare or Medicaid to fill prescriptions, American taxpayers are helping to pay.
Walgreens has more than 8,500 stores nationwide, including, we’re happy to note, two in Manhattan. In fiscal 2013, the company generated $72 billion in revenue and recorded net income of $2.5 billion.
The money Walgreens could have saved through tax inversion is considerable, but Walgreens is hardly the only American company to consider moving oveseas to cut its tax bill.
According to the Congressional Research Service, 76 U.S. companies have moved their corporate headquarters overseas, including 47 in the last decade and 19 in the past year alone. The motive in most — if not every — instance has been to save on taxes.
Small wonder President Barack Obama has called tax inversions an “unpatriotic tax loophole.” Though he is said to be considering closing the loophole through executive action, such a decision should be left to Congress. Perhaps the president’s sense of urgency, if not the revenue losses, will be enough to spur Congress to action.
Just because tax inversions are legal doesn’t make them right. Taxes that corporations avoid must be made up elsewhere, yet U.S. corporations seek tax inversions because their taxes in this country are higher than they would be in many other countries. This disparity must be dealt with.
But it ought to be part of comprehensive reform that also generates enough revenue to help reduce budget deficits.
Postponing such reform only extends a series of inequities that affect corporate and individual taxpayers alike.