WDEL Blog: Allan Loudell

Will Walgreens face U.S. consumer backlash if it becomes a 'Corporate Deserter'?

Chicago-area based Walgreens - which gobbled up Delaware-based Happy Harry's in the earlier part of the millennium - could decide soon if it's prepared to endure the outcry from re-locating its official corporate headquarters to lower-tax Switzerland.

It would be a classic example of corporate or tax "inversion", where a corporation shifts its official headquarters to a lower-tax country while maintaining most of its basic operations, retail & otherwise, in the higher-tax country. No matter that the company in question has the bulk of its customer base in the United States, and in the case of Walgreens, profits from taxpayer-financed Medicare, Medicaid, and now, the President's health-care overhaul.

President Obama last week blasted such U.S. corporations. Mr. Obama wants Congress to shut that loophole. Addressing an audience at Los Angeles Technical College, the president used the term "economic patriotism":

"Even as corporate profits are higher than ever, there's a small but growing group of big corporations that are fleeing the country to get out of paying taxes. They're technically renouncing their U.S. citizenship; they're declaring their base someplace else even though most of their operations are here. You know some people are calling these companies 'corporate deserters.'

My comment: Corporations may be people - in the eyes of the U.S. Supreme Court under Chief Justice John Roberts - but they don't need passports.

So Congressional Democrats are crafting legislation to thwart corporate inversions.

This article from The HUFFINGTON POST makes that case...


http://www.huffingtonpost.com/robert-creamer/walgreens-may-face-consumer-backlash_b_5625593.html


What the above article fails to mention:

* The U.S. tax code almost uniquely clamps income tax on the profits U.S. corporations earn abroad. This double-whammy is a driving force towards inversion.

* According to the OECD, the U.S. corporate tax rate towers far above the rates for other major (and not so major) countries. The Federal rate is about 17%, but mushrooms to 50% or more when you count state and local taxes.

* The proposed legislation to shut the inversion loophole might effectively transform U.S. corporations into foreign companies, as overseas owners would pressure their majority ownership.

As for U.S. consumers boycotting Walgreens: What do you think?

I rather doubt the efficacy of such a boycott since it's unlikely average Walgreens customers would even know about the boycott, let alone act on it. And when it comes to pharmaceuticals, many people go to the most convenient drug store and/or the one which takes their insurance plan.

That said, a Walgreens move overseas might get much more attention in an election year. The company is also getting as black eye for its failure to follow CVS's lead in giving up tobacco sales.

(Even one-time Happy Harry's owner Alan Levin - now the director of the Delaware Economic Development Office in the Markell Administration - applauded CVS' move at the time.)



Posted at 7:53am on July 28, 2014 by Allan Loudell

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Comments on this post:

Mike from Delaware
Mon, Jul 28, 2014 8:36am
Have people stopped going to Walmart due to Walmart getting most of its products from China, Vietnam, and Mexic, or because Walmart pays its employees slave wages, causing them to have to use government services that you and I provide as taxpayers? Nope. They go to Walmart because of the prices.

So I doubt seriously if Walgreens' customers will stop going to Walgreens' drug stores. Most Americans are looking for the best deal or price, as people vote with their wallet. The only folks who can hold such lofty views and would boycott and go out of their way driving further to get their Tylenol are those rich ultra-liberal Democrats from Hollyweird. They'll just tell "Geeves" to go and pick up their prescriptions, etc., at the CVS or Rite Aid.

So the DEMS are going to try legislatively to try to stop companies like Walgreens from moving their corporate offices overseas. Do they really believe the G.O.P./TEA folks in the House are going to go along? I think not. They'll simply say that the U.S. needs to cut its corporate tax rate. So that isssue isn't going anywhere until the G.O.P. loses the House.

Question, do you use Bayer Aspirin? That is a German company and many folks drive Hondas, Toyotas, VW's, Saabs; watch movies on Sony TVs and films made by Sony Pictures [formerally Columbia Pictures]; drugs from Astra-Zeneca; etc. All foreign companies. This isn't 1940; Americans aren't as hung up on that as they once were. So no, I doubt this would be a real issue.

Now IF Walgreens was closing its U.S. stores and moving them to Europe, that might upset people.

EarlGrey
Mon, Jul 28, 2014 9:08am
If the prices don't go up... then people won't care and will continue to shop at Walgreens.

Now, if Walgreens moved its headquarters to Texas (or some other low-tax / right-to-work state) there might be some (at least in Delaware and in Chicago) who would boycott them...

Arthur
Mon, Jul 28, 2014 10:06am
It's the closest one to my house. It's been completely remodeled and is very bright and clean, and the staff members are nice. I don't care what corporate does unless the corporation fires all the staff that work and live in my community. Plus, Walgreens' milk sales are pretty good.

JimH
Mon, Jul 28, 2014 10:46am
The low-information voters who elected the idiot Obama twice don't have any idea where corporations are headquartered for tax purposes. And why should they care?

mrpizza
Tue, Jul 29, 2014 9:57pm
As long as they continue to have Arizona iced tea sales at 2 cans for a dollar and milk for $2.99 a gallon, I don't care.

mrpizza
Tue, Jul 29, 2014 10:05pm
Sounds like Mike from Delaware wants the G.O.P. to lose the house. That puts him in a minority. considering most Christians identify with the Republican Party, per a CBS News poll (notice Mike, I said CBS, not Fox, not Rush, not Hannity, but CBS):

http://www.cbsnews.com/news/religious-americans-more-likely-to-be-republican-poll-shows/

Mike from Delaware
Wed, Jul 30, 2014 8:43am
Mrpizza: What in my comments makes you believe I want to the G.O.P. to lose? I've been rallying about the G.O.P. trying to shoot itself in the foot over Boehner's lawsuit and this latest thing about impeachment.

I'm a registered Independent who is a moderate, but who leans right. Unlike you, I don't blindly support the G.O.P., because they say some God stuff once in a while to tickle my ears. Their party isn't any more faithful to God than the DEMS; the DEMS are just more open about it. For me, I vote issues and the person running, NOT the party.

So as I've said many times here, unless the G.O.P./TEA folks speak out in very clear terms about not screwing with Social Security for those of say, 55+, then I'll vote DEM. There's no way I'm supporting someone who wants to stick it to me after I've faithfully paid into the Social Security insurance plan for 47 years. Issue, not party.

Interestingly California's economy seems to be rebounding now that they've raised taxes while other states, like Kansas - which cut taxes - are still not doing well. Another proof that Reaganomics doesn't work.


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