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.

Weekend Edition
February 12-14, 2016
Andrew Levine
What Next in the War on Clintonism?
Jeffrey St. Clair
A Comedy of Terrors: When in Doubt, Bomb Syria
Ismael Hossein-Zadeh – Anthony A. Gabb
Financial Oligarchy vs. Feudal Aristocracy
Paul Street
When Plan A Meets Plan B: Talking Politics and Revolution with the Green Party’s Jill Stein
Rob Urie
The (Political) Season of Our Discontent
Pepe Escobar
It Takes a Greek to Save Europa
Gerald Sussman
Why Hillary Clinton Spells Democratic Party Defeat
Carol Norris
What Do Hillary’s Women Want? A Psychologist on the Clinton Campaign’s Women’s Club Strategy
Robert Fantina
The U.S. Election: Any Good News for Palestine?
Linda Pentz Gunter
Radioactive Handouts: the Nuclear Subsidies Buried Inside Obama’s “Clean” Energy Budget
Michael Welton
Lenin, Putin and Me
Manuel García, Jr.
Fire in the Hole: Bernie and the Cracks in the Neo-Liberal Lid
Thomas Stephens
The Flint River Lead Poisoning Catastrophe in Historical Perspective
David Rosen
When Trump Confronted a Transgender Beauty
Will Parrish
Cap and Clear-Cut
Victor Grossman
Coming Cutthroats and Parting Pirates
Ben Terrall
Raw Deals: Challenging the Sharing Economy
David Yearsley
Beyoncé’s Super Bowl Formation: Form-Fitting Uniforms of Revolution and Commerce
David Mattson
Divvying Up the Dead: Grizzly Bears in a Post-ESA World
Matthew Stevenson
Confessions of a Primary Insider
Jeff Mackler
Friedrichs v. U.S. Public Employee Unions
Franklin Lamb
Notes From Tehran: Trump, the Iranian Elections and the End of Sanctions
Pete Dolack
More Unemployment and Less Security
Christopher Brauchli
The Cruzifiction of Michael Wayne Haley
Bill Quigley
Law on the Margins: a Profile of Social Justice Lawyer Chaumtoli Huq
Uri Avnery
A Lady With a Smile
Katja Kipping
The Opposite of Transparency: What I Didn’t Read in the TIPP Reading Room
B. R. Gowani
Hellish Woman: ISIS’s Granny Endorses Hillary
Kent Paterson
The Futures of Whales and Humans in Mexico
James Heddle
Why the Current Nuclear Showdown in California Should Matter to You
Michael Howard
Hollywood’s Grotesque Animal Abuse
Steven Gorelick
Branding Tradition: a Bittersweet Tale of Capitalism at Work
Nozomi Hayase
Assange’s UN Victory and Redemption of the West
Patrick Bond
World Bank Punches South Africa’s Poor, by Ignoring the Rich
Mel Gurtov
Is US-Russia Engagement Still Possible?
Dan Bacher
Governor Jerry Brown Receives Cold, Dead Fish Award Four Years In A Row
Wolfgang Lieberknecht
Fighting and Protecting Refugees
Jennifer Matsui
Doglegs, An Unforgettable Film
Soud Sharabani
Israeli Myths: An Interview with Ramzy Baroud
Terry Simons
Bernie? Why Not?
Missy Comley Beattie
When Thoughtful People Think Illogically
Christy Rodgers
Everywhere is War: Luke Mogelson’s These Heroic, Happy Dead: Stories
Ron Jacobs
Springsteen: Rockin’ the House in Albany, NY
Barbara Nimri Aziz
“The Martian”: This Heroism is for Chinese Viewers Too
Charles R. Larson
No Brainers: When Hitler Took Cocaine and Lenin Lost His Brain
FacebookTwitterGoogle+RedditEmail