FacebookTwitterGoogle+RedditEmail

USA RIP?

by

American pharmaceutical giant Pfizer wants to become British, joining the ranks of other major corporations opening “headquarters” in low-tax-rate countries. At 21.0 percent in the U.K. versus 32.8 percent in the U.S., it’s a no-brainer. At the same time, roads, bridges, and airports – infrastructure that helped make the U.S. great more than a half century ago – is falling apart. Is there a connection?

Pfizer’s move is an old-fashioned takeover, hoping to acquire AstraZeneca for more than $100 billion, creating the world’s largest pharmaceutical group in the process. The modern part is the right to pay almost 40% less tax than legislated in the U.S. One calculation put the savings at $3.8 billion.

Another American pharmaceutical company investing in “inversion” or relocating their tax base away from the U.S. has set up in Ireland, where the corporate tax rate is a measly 12.5%. Endo has hoisted its shingle in a basement office in Dublin, where a skeleton staff is claiming “headquarters” status for its 4,100 Pennsylvania-based employees. The move is expected to save $75 million in taxes.

According to the Financial Times (April 30), Endo’s most recent major purchase was a Nespresso machine and the basement door of their new global “headquarters” doesn’t even have a brass name plate. As they would say in any of a hundred Dublin pubs located only blocks from Endo and the nearby Irish parliament, “Are you taking the piss?” Indeed, as the Financial Times further noted, the effective tax rate for U.S. pharmaceutical companies over the past decade is, in fact, “less than 6 per cent on over $100 billion of Irish profits,” less than half the official measly rate. No wonder corporations want to be tax resident in Ireland or Britain. No need to be Swiss or Cayman any more.

Inversion is all the rage for corporations looking to improve shareholder value. By listing profits in low-tax-rate jurisdictions overseas, American corporations save billions. Of course, some established companies don’t bother to move, using their own home-grown loopholes to escape the tax man. The largest corporation in the United States, General Electric, made U.S. profits of $5.1 billion in 2010, yet paid no taxes. In fact, they claimed a tax benefit of $3.2 billion. But to park almost $60 billion in “trapped” foreign profits, they want in on the international game too, hoping to acquire French power giant Alstom for tax purposes, a company Industry minister Arnaud Montebourg referred to as a “national jewel.”

Anything to keep their money from the American government. At the same time, American infrastructure is falling apart, with little will to maintain roads, bridges, or airports, not to mention a failing education system.

Government seems loath to get involved in public works, despite the past success of major nation-building projects. The FDR-inspired New Deal helped to build the Hoover Dam, a national interstate highway system, and the Tennessee Valley Authority (TVA), the nation’s largest public utility that provides almost 200 billion kWh and more than 40,000 jobs.

Depending on which side of the fence one stands, the TVA represents all that is wrong with government – top-down planning and restricted competition – or all that is right with government – organized effort and economic development. The New Deal heralded a proud new America still reeling after a decade of economic misery. In short, infrastructure helped rebuild America.

The top-down planning of NASA’s Apollo program and subsequent space missions helped bring about necessary component miniaturization needed in space, paving the way for the modern microchip revolution. Where would high-tech giants such as Intel, Microsoft, HP, or Apple be, never mind the recent Internet behemoths Google, Amazon, eBay, or Facebook, without government investment in the space program?

In a slimmed-down crisis-filled world, however, the U.S. space agency can’t even get to the International Space Station now without hitching a Russian ride (made all the more difficult with the current European border crises). In 2007, the I-35W bridge in Minneapolis collapsed over the Mississippi River, what Minnesota Governor Tim Pawlenty called “a catastrophe of historic proportions,” before acknowledging the lack of government funding in highway infrastructure. Joe Biden even recently likened passing through La Guardia airport to being in a third-world country. From New Orleans to Detroit, basic federal infrastructure is decaying piece by rotting piece.

Unfortunately, the U.S. is becoming a user-pay society, with different rules for the wealthy, elaborate gated communities, and multi-tiered levels of health care. If you can provide your own high-priced lawyers, security forces, and medical staffs, you don’t need government infrastructure. You don’t need government.

But infrastructure is a part of any national identity, as governments and people decide what’s important and strategic. In Germany, the state bars intercity bus travel to protect state-run train travel. In Canada, a multi-billion-dollar potash company takeover was deemed not to be of “net benefit” to Canada and blocked. In China, government subsidies spur on green technology to combat rising pollution. Integrated travel, mineral resources, and clean energy matter. In the United States, it seems keeping shareholders happy matters.

Pfizer has even cheekily threatened the U.K. government not to block their takeover of AstraZeneca, the 7,000-strong, London-based company they hope to outmuscle for preferred U.K. tax status, and a place to park their $85-billion overseas war chest. Known for popular performers such as Viagra, Pfizer’s own hard-on now is for reduced taxes. Forget outside innovation or the so-called R&D pipeline, the real jewel is increased share value via reduced taxes.

One wonders what Pfizer would do if the government sent them the bill for educating its workforce, providing on-demand electricity and water, or policing streets to protect their assets, important infrastructure and utilities falling short now because of vast reductions in the government tax take. By the way, AstraZeneca makes cancer-therapy drugs, not that that matters to the bottom line or shareholder profits.

When finance replaces industry as a national goal, decline follows. At the peak of the British Empire, business received preferential government treatment through an expanded circle of merchant bankers, who were no longer subject to any one government. Giovanni Arrighi noted in The Long Twentieth Century: Money, Power, and the Origins of our Times that “the massive relocation of surplus capital from industry to finance resulted in unprecedented prosperity for the bourgeoisie, partly at the expense of the working class.” In Empire, Niall Ferguson noted that of the more than threefold increase in per capita British GDP during almost 200 years of Indian rule, most of the profits “went to British managing agencies, banks or shareholders.” Over the same time, the Indian GDP per capita grew by only 14%. Basically, money any way you can get it.

To be sure, economic competition is a hazard when everyone wants the same limited resources or, in modern economic-speak, the same low tax rates. Regulation disappears, junk becomes gold, and the citizen consumer ends up with the bill. Barack Obama has gone on record saying he will tackle tax evasion, including a proposal in his most recent budget to outlaw inversion. But in fact, Obama and Co are really thinking about how to implement their own low corporate tax rate to keep pace with global competition.

The reality is that to fight low-rate tax regimes elsewhere countries are becoming low-rate tax regimes at home. It’s a fight that hurts everyone, and curbs much-needed infrastructure. Indeed, borderless corporations are defining the modern state. In the new user-pay USA, one can now expect either low corporate tax rates or a steady increase in corporate “inversions.”

Forget about new roads, modern electricity grids, and innovative changes to education. Forget about potholes on your street. Welcome to more pay for corporate shareholders. Welcome to third-world status. Sadly, the U.S. is being eclipsed by its own worst self. RIP USA (1776-2014?).

JOHN K. WHITE, an adjunct lecturer in the School of Physics, University College Dublin, and author of Do The Math!: On Growth, Greed, and Strategic Thinking (Sage, 2013). Do The Math! is also available in a Kindle edition. He can be reached at: john.white@ucd.ie.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
May 26, 2017
Friday - Sunday
Anthony DiMaggio
Swamp Politics, Trump Style: “Russiagate” Diverts From the Real White House Scandals
Paul Street
It’s Not Gonna Be Okay: the Nauseating Nothingness of Neoliberal Capitalist and Professional Class Politics
Jeffrey St. Clair
The ICEmen Cometh
Ron Jacobs
The Deep State is the State
Pete Dolack
Why Pence Might be Even Worse Than Trump
Patrick Cockburn
We Know What Inspired the Manchester Attack, We Just Won’t Admit It
Thomas Powell
The Dirty Secret of the Korean War
Mark Ashwill
The Fat Lady Finally Sings: Bob Kerrey Quietly Resigns from Fulbright University Vietnam Leadership Position
John Davis
Beyond Hope
Uri Avnery
The Visitation: Trump in Israel
Ralph Nader
The Left/Right Challenge to the Failed “War on Drugs”
Traci Yoder
Free Speech on Campus: a Critical Analysis
Dave Lindorff
Beware the Supporter Scorned: Upstate New York Trump Voters Hit Hard in President’s Proposed 2018 Budget
Daniel Read
“Sickening Cowardice”: Now More Than Ever, Britain’s Theresa May Must be Held to Account on the Plight of Yemen’s Children
Ana Portnoy
Before the Gates: Puerto Rico’s First Bankruptcy Trial
M. Reza Behnam
Rethinking Iran’s Terrorism Designation
Brian Cloughley
Ukraine and the NATO Military Alliance
Josh Hoxie
Pain as a Policy Choice
David Macaray
Stephen Hawking Needs to Keep His Mouth Shut
Ramzy Baroud
Fear as an Obstacle to Peace: Why Are Israelis So Afraid?
Kathleen Wallace
The Bilious Incongruity of Trump’s Toilet
Seth Sandronsky
Temping Now
Alan Barber – Dean Baker
Blue Collar Blues: Manufacturing Falls in Indiana, Ohio and Pennsylvania in April
Jill Richardson
Saving America’s Great Places
Richard Lawless
Are Credit Rating Agencies America’s Secret Fifth Column?
Louis Proyect
Venezuela Reconsidered
Murray Dobbin
The NDP’s Singh and Ashton: Flash Versus Vision
Ron Leighton
Endarkenment: Postmodernism, Identity Politics, and the Attack on Free Speech
Anthony Papa
Drug War Victim: Oklahoma’s Larry Yarbrough to be Freed after 23 Years in Prison
Rev. John Dear
A Call to Mobilize the Nation Over the Next 18 Months
Yves Engler
Why Anti-Zionism and Anti-Jewish Prejudice Have to Do With Each Other
Ish Mishra
Political Underworld and Adventure Journalism
Binoy Kampmark
Roger Moore in Bondage
Rob Seimetz
Measuring Manhoods
Edward Curtin
Sorry, You’re Not Invited
Vern Loomis
Winning the Lottery is a State of Mind
Charles R. Larson
Review: Mary V. Dearborn’s “Ernest Hemingway”
David Yearsley
The Ethos of Mayfest
May 25, 2017
Jennifer Matsui
The Rise of the Alt-Center
Michael Hudson
Another Housing Bubble?
Robert Fisk
Trump Meets the New Leader of the Secular World, Pope Francis
John Laforge
Draft Treaty Banning Nuclear Weapons Unveiled
Benjamin Dangl
Trump’s Budget Expands War on the Backs of America’s Poor
Alice Donovan
US-Led Air Strikes Killed Record Number of Civilians in Syria
Andrew Moss
The Meaning of Trump’s Wall
FacebookTwitterGoogle+RedditEmail