Reid Remarks On Ending Corporate Citizenship Scams

“The company that Charles Walgreen started is reportedly considering a renunciation of its American citizenship and a move to Switzerland, just to avoid paying its fair share of taxes. Re-established as a foreign corporation, Walgreen’s would be required to pay a smaller share of taxes. This practice, what some call ‘inversion,’ is a tax trick – a loophole.”

 

“When these companies reincorporate overseas, it is, simply put, unfair. It’s unfair to the American taxpayer, to the American government, and to the many companies who refuse to engage in this deceptive practice.”

 

“The Bring Jobs Home Act would end senseless tax breaks for outsourcers, while offering companies a 20% tax credit to help with the costs of moving jobs back to the U.S. Much like the Bring Jobs Home Act, ending this corporate citizenship scam will encourage American companies to pay their fair share.”

 

Washington, DC – Nevada Senator Harry Reid spoke on the Senate floor today on the importance of ending corporate citizenship scams, encouraging American companies to pay their fair share, and protecting American jobs. Below are his remarks as prepared for delivery:

Over a century ago, a small drugstore opened up for business in the Barrett’s Hotel in Chicago. The pharmacist, not yet 30 years old and a veteran of the Spanish-American War, borrowed $6,000 to open a drugstore. That was Charles Walgreen’s first store, but certainly not his last. As his chain grew, the pharmacies became a fixture in American culture – even the vintage image of soda fountains and milkshakes at a drugstore counter has become a staple in American films. This is what Walgreen’s started.

Now 113 years later, the Walgreen family no longer heads the company. But there are over 8,200 drugstores nationwide that still bear the Walgreen name. The company that Charles Walgreen started is reportedly considering a renunciation of its American citizenship and a move to Switzerland, just to avoid paying its fair share of taxes. Re-established as a foreign corporation, Walgreen’s would be required to pay a smaller share of taxes. This practice, what some call “inversion,” is a tax trick – a loophole.

Of course Walgreen’s won’t actually move to Switzerland.  Instead, they plan to acquire a European company and officially make Switzerland home to their new “headquarters.” But in reality, the bulk of Walgreen’s operations will probably stay right where they are now, in Illinois. That’s because Walgreen’s doesn’t want to actually leave America. Why would they ever want to do that?America has the most sophisticated workforce in the world. Why would Walgreen’s give that up? America has an infrastructure that, though in need of updates, is still the most extensive in the world. It provides Walgreen’s with the roads and transportation it needs to supply its stores. Why would Walgreen’s give that up? America has a legal system that Walgreen’s can trust to enforce its business contracts and uphold its intellectual property protections. Why would Walgreen’s give that up? America has a Medicare system that pays for seniors to buy pharmaceuticals at Walgreen’s. I’m sure that Walgreen’s won’t be turning away that cash. Let’s not forget that America enjoys a law enforcement apparatus that protects the company’s assets. Why would Walgreen’s give that up? And our military, which is second to none, will continue to protect the country where all those Walgreen’s stores are located. I’m sure Walgreens wouldn’t want to give that up. Not to mention the fact that America is a pretty great place to live, so why would Walgreen’s executives ever want to move their families across the world? That would be silly – Walgreen’s leadership will probably stay right where they are in Illinois. And while they remain here, Walgreen’s will still expect American tax credits – even as it dodges an estimated $4 billion in taxes over the next 5 years.

So essentially what Walgreen’s is saying is: “We love being in America. But we’re not going to pay for it.” The Oxford Dictionary defines the word ‘exploitation’ as: “the fact of making use of a situation to gain unfair advantage.” What the Walgreen Company is doing sure seems like exploitation to me. After all, this is a corporation that made $16.7 billion dollars from Medicare and Medicaid last year alone. But Walgreen’s isn’t the only corporation jumping ship on the American taxpayer. Major American companies like Medtronic and AbbVie have already announced plans to give up their corporate citizenship – who will be next? A decade ago, the senior Senator from Iowa warned of “unpatriotic companies that dash and stash their cash.” Now we are seeing this dash-and-stash scheme become common practice for major corporations who don’t want to pay taxes. In fact, the two largest transactions to move American companies overseas, in history, have taken place within the last month.

When these companies reincorporate overseas, it is, simply put, unfair. It’s unfair to the American taxpayer, to the American government, and to the many companies who refuse to engage in this deceptive practice. Why should other American pharmacy chains, such as CVS Caremark and Rite Aid, be disadvantaged because Walgreen’s balks at paying its fair share of taxes? To uphold our free enterprise system, and ensure that American businesses are competing on a level playing field, Congress must close this loophole.

I‘ve been encouraged by recent statements from the Chairman of the Senate Finance Committee, who has indicated that he will work to close this loophole for runaway companies. The Chairman of the Permanent Subcommittee on Investigations, the senior Senator from Michigan, has also been leading on this issue. Senator Levin’s bill, the Stop Corporate Inversion Act, puts a 2-year moratorium on inversions by U.S. corporations. This moratorium will give Congress time to thoroughly and thoughtfully consider the issue. But frankly, I’m open to all ideas. What I am not open to is the idea that this corporate exploitation of the American taxpayer is somehow acceptable.

Today we are considering legislation that would amend the U.S. tax code to fight outsourcing, protect American jobs and encourage job creation within our borders. The Bring Jobs Home Act would end senseless tax breaks for outsourcers, while offering companies a 20% tax credit to help with the costs of moving jobs back to the U.S. Much like the Bring Jobs Home Act, ending this corporate citizenship scam will encourage American companies to pay their fair share. It will also let corporations know that cheating the American people with a tax trick is not a viable business plan. As Benjamin Franklin once said, “Tricks and treachery are the practice of fools, who have not wits enough to be honest.”

If corporations want to leave the United States, that is their right. But American taxpayers shouldn’t be forced to foot the bill when U.S. companies want all the benefits of commerce in this country, without having to pay their fair share.