Walgreens, America’s largest drug store chain, says they are leaving the United States because our tax rate is too high. It must really be killing them, but it’s hard to know because last year they upped their CEO compensation by 13%, had increased 2014 third quarter earnings of 15% compared to a year ago, and their stock price has doubled in the last two years.
Corporations are busy grousing about the high corporate tax rate in the United States. At 35% it sounds high, but any corporation that pays anywhere near that much has lousy tax lawyers. Of course, your guess about what they pay is as good as mine because they are certainly not going to tell you, but if they did it would be explained in language more confusing than a cell phone contract.
They are playing the international tax rate game, which is the Major League version of the state tax rate game, aka, “the race to the bottom”. The way corporations play it is to convince state “A” that their tax rates are too high to be competitive and should be brought into line with state “B”’s which has a lower tax rate. In their zeal to win the blessings of business, state “A” does state “B” one better, and sets their tax rate even lower than state “B”. The next move is obvious; state “B” is now “less competitive” than state “A”, so state “B” lowers its rate below state “A”’s rate. And on and on.
The oil business has been playing this game between North Dakota and Montana for decades, and those states play right along with them and the tax rates seesaw down. Wyoming, however, won’t play the game. A few years back, Wyoming did experiment with an oil tax “holiday” in which the first year of production is not taxed. It was to last for two years, but it was terminated after just one year by the Wyoming Legislature because it didn’t bring in more jobs and was bleeding the state treasury.
On the international scale, there will always be a country willing to charge little or no corporate taxes. Be it Ireland, Bermuda, Haiti, or Equatorial East Fenwick, there will always be an example to point to.
If you remember a few years back, corporations didn’t seem to worry as much about the tax rate. What they worried about then were the wages and benefits they had to pay American workers, so they convinced Congress to pass NAFTA and other international trade agreements, then took their ball to, in some semblance of order; Mexico, Honduras, Malaysia, Indonesia, India, Pakistan, China; anywhere where they could get away with paying even lower wages.
That wasn’t a great idea for America’s citizens, either.
It’s a game you and I will never understand. I don’t think it has much to do with actual commerce as much as it seems it should. There is a grand game that they play that has something to do with outdoing each other in financial dealings that have little to do with selling stuff to you and I. It has to do with the separate reality that they inhabit, and from what I understand, it’s not a reality where honesty or square dealing has much of a place. Or what you and I would characterize as honesty and square dealing, anyway.
It should seem simple; they want us to buy their products and they encourage “brand loyalty”. They should practice “National Loyalty”; make it here, sell it here, and pay taxes on your profits here.
I like to see a product label that says, “Made in America”. Now, I’d like to see one on taxes that says, “Paid in America”.