Fortune Magazine is out with its list of “Top American corporate tax avoiders,” members of the S&P 500 that “sure seem American—except when it comes to paying taxes.”
These are companies that even a top cheerleader for the corporate class can’t bring itself to defend. What’s more, the list is accompanied by a blistering article by columnist Allan Sloan that makes the progressive case against corporate tax evasion as forcefully as anything Sens. Bernie Sanders or Elizabeth Warren might say on the Senate floor.
There is “a new kind of American corporate exceptionalism,” he writes: “companies that have decided to desert our country to avoid paying taxes but expect to keep receiving the full array of benefits that being American confers, and that everyone else is paying for.”
Fortune includes on the list Eaton PLC, which produces a range of mechanical and electrical components, which has its U.S. headquarters in Cleveland but its “tax residence” in Ireland. Its CEO, Alexander Cutler, Fortune helpfully notes, “also happens to be a member of the Campaign to Fix the Debt, a nonpartisan organization that advocates cutting government spending and increasing tax revenue. He wants to close tax loopholes – but he sure isn’t proposing to return his corporation to full U.S. taxpaying status.”
The company that makes Trane air conditioners, Ingersoll Rand, is now domiciled for tax purposes in Ireland. So is “the world’s largest manufacturer of over-the-counter drugs,” Perrigo, which Fortune reports is suing the Food and Drug Administration “(for which the company doesn’t pay its fair share) for allegedly not moving quickly enough to allow its testosterone gel to be sold without a prescription.”
There are a total of 28 companies on the list, including companies that have been “inverted” – they combined with a foreign-owned company so that they could declare their corporate tax home to be other than the United States – or they were originally incorporated outside the United States to begin with. And that’s just the corporations that are members of the S&P 500.
It’s all perfectly legal, Sloan writes, but “being legal isn’t the same as being right.” He cites a Joint Committee on Taxation report that says inversions alone will cost the U.S. Treasury – read “taxpayers” – $19.5 billion in lost tax revenue over the next 10 years, “enough to cover what Uncle Sam spends on programs to help homeless veterans and to conduct research to create better prosthetic arms and legs for our wounded warriors.”
“Undermining the finances of the federal government by inverting helps undermine our economy,” Sloan writes. “And that’s a bad thing, in the long run, for companies that do business in America.”
There are two more things that Sloan says about how to respond – and how not to respond. What we should not do, he says, is offer corporations that shelter profits overseas another “tax holiday” of deeply discounted tax rates if they “repatriate” that money back to the U.S. That would only “signal tax avoiders that they should keep sending tons of money offshore, then wait for a tax holiday,” he writes.
One thing we should do is push for passage of legislation introduced by Sen. Carl Levin and Rep. Sandy Levin (both Michigan Democrats) that would make it harder for American corporations to merge with foreign corporations in a way that enables them to operate as if they are American corporations while claiming to be foreign for tax purposes.
Ending corporate tax evasion and demanding that corporations pay their fair share of taxes has already become a core demand of the Populist Majority that crosses partisan lines. Now that a leading business magazine has joined in calling out some of the worst offenders, the ground on which lawmakers who coddle the corporate tax gamers stand has gotten just that much more politically toxic. The time is as ripe as ever to press for tax reform that ensures that the people and companies benefiting the most from what government provides pay their share of the cost.