We’re all people, not citizens
Remember when Mitt Romney told a citizen, “Corporations are people, my friend”?
This once-false belief was made real by Citizens United – one of the worst-ever Supreme Court decisions in recent times.
Because of this judicial ruling, corporations are not only really people – they are also citizens. And as we all learned in Civics 101, citizens pay taxes.
Oh, wait. Not so fast. Corporations once paid taxes. Now they say only human people should pay taxes. Businesses like Walgreens have been seriously considering renouncing their citizenship to avoid paying taxes on their overseas earnings.
Although physically remaining in America, businesses are stripping themselves of their U.S. citizenship by taking up tax residences overseas. They then become citizens of that foreign nation.
For instance, Walgreens, whose founding family gave our culture the iconic American drug store lunch counter, wants to be Swiss. Pfizer, begun from scratch by a German-American in a small brick building in New Jersey, prefers to be British.
So far, according to the nonpartisan Congressional Research Service, 72 companies have renounced their U.S. citizenship since 1983. But – get this – they’re keeping all the benefits that come from being “a person” in America. According to Bloomberg Financial News, their reasons for fleeing “had nothing to do with manufacturing costs or access to foreign markets. It was to escape taxes.”
Sadly, it’s simple greed.
The Economic Policy Institute is a Washington think tank created to include low- and middle-income workers’ interests in economic discussions. The EPI’s Thomas Hungerford discovered that AbbVie, a Chicago business, would rather be Irish, and Mylan, a Pittsburgh business, wants to become a Dutch firm.
Hungerford says these companies are fleeing our “dysfunctional corporate income tax system.” There is agreement in Congress that we need comprehensive tax reform. But when House Ways and Means Committee Chairman Dave Camp, R-Mich., ran a bill by House Speaker John Boehner, his first reaction was literally, “Blah, blah, blah, blah.”
Sen. Elizabeth Warren, D-Mass., doesn’t think corporate tax reform is “blather.” She nails it: “These companies are renouncing their American citizenship, turning their backs on this country, simply to boost their profits. They are taking advantage of all the good things that our government helps provide – educated workers … patent and copyright protections – and then running out on the bill.”
After two dozen American corporations had become foreign citizens a few years ago, two economists, Mihir A. Desai of Harvard University and James R. Hines Jr. of the University of Michigan, studied the impact.
Their 2002 study found that “market participants raised their expectations of future cash flows by more than could be justified (through) reduced repatriation taxes.”
Stephen Shea, a former Treasury official during the Reagan administration, has urged President Obama to take action on his own. Shea says invoking regulatory power from Section 385 of the Tax Code would be a “slam dunk” for the president and should stop many corporate flights for greed in their tracks. The law can stop a drain of billions from Treasury revenue that working- and middle-class citizens could have to make up out of their own pockets.
This is simply one of those issues for which Congress must end its stonewalling and focus on a comprehensive tax package that will ensure we have a revenue base to pay for essential government services.
Lawmakers cannot continue to say they are for tax reform but refuse to deal with it. Some are even saying it’s no big deal if a company isn’t American. What? How can corporate executives think of their companies as being American when they willfully choose to make them citizens of a foreign nation?
“People should not dawdle,” Shea says. Members of Congress have gone home to their districts or off on vacation. If a former Reagan official thinks business tax avoidance is so critical that it requires President Obama to go after these sunshine patriots with existing law, he should consider doing it.