Dick Durbin, the second-most powerful U.S. Senator in Washington, is upping the ante and “chiding” a sudden flurry of U.S. companies considering taking advantage of a loophole that allows them to avoid higher corporate taxes here by reincorporating overseas.
Amid mounting Congressional criticism of so-called inversions, the Illinois Democrat, No. 2 leader in the U.S. Senate and close ally of President Obama’s this week introduced his Patriot Employer Tax Credit Act that would offer a tax credit of about $ 1,200 per employee to corporations that kept their headquarters in the U.S. To get the credit, companies would also have to provide their workers with “fair wages” and retirement benefits, Durbin said.
The loophole already costs the U.S. Treasury $ 50 billion a year, Durbin said.
Walgreen Walgreen Co. (WAG), based in the north Chicago suburb of Deerfield, is nearing the completion of its acquisition of European drugstore giant Alliance Boots, and said Wednesday an inversion is still a possibility as the two companies consolidate “cost structures.” Meanwhile, Abbvie (ABBV), the drug business spun off from Abbott Laboratories Abbott Laboratories (ABT) last year, is considering an inversion as well as part of its effort to buy Ireland-based Shire Shire. Abbvie is located a few miles north of Walgreen along the Tri-State Tollway.
Durbin, who said his comments weren’t directed at a particular company, said he hasn’t called Walgreen or Abbvie executives directly but he’s clearly bothered and his rhetoric is taking on a personal tone. “When I run into their executives, I chide them,” Durbin said.
Other global brands based in the U.S. such as Pfizer Pfizer (PFE) and Medtronic (MDT) have attempted an inversion or are working toward one. Other members of Congress such as U.S. Sen. Carl Levin, a Michigan Democrat, and lobbies are beginning to call out the companies by name in an onslaught of statements and press releases with Levin saying a Walgreens inversion would cost taxpayers $ 4 billion over five years.
“Walgreens faces several obstacles to undertaking an inversion, including growing political opposition to companies exploiting this tax loophole,” Nell Geiser, associate director of Change to Win Retail Initiatives, a union-backed group, said in a statement. “Will Walgreens—a company which relies on taxpayer supported programs for nearly a quarter of its revenue—risk the mounting political and consumer blow black against tax avoidance?”
Even if Walgreen, Abbvie and others follow through with an inversion, members of Congress say a change to the tax code could be retroactive. Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat has said as much, putting companies on notice that any inversions would have short-term benefits if the loophole is eventually closed.
But Congress would still have to come up with a bipartisan effort to change the law and that’s been a difficult feat on a host of issues.
Durbin’s Patriot Employer Tax Credit Act proposal would “grant a tax credit equivalent to 10 percent of the first $ 15,000 of wages earned by each employee—worth about $ 1,200 per qualifying worker depending on the company’s federal effective tax rate,” the senator’s office said.
Companies would have to meet the following criteria:
- “Maintain headquarters in the U.S. if the company has ever been headquartered in America, has not inverted to avoid U.S. taxes, maintain or increase the number of workers in the U.S. compared to the number of workers overseas, and does not decrease the number of workers through the use of contractors.”
- “Pay at least 90% of U.S. workers an hourly wage equal to 150% of poverty for a family of three,” or about $ 14 an hour or $ 30,000 a year
- “Offer Affordable Care Act-compliant health insurance to employees.”
- “Pay the difference between regular salary and military compensation for all National Guard and Reserve employees called for active duty and have a plan in place to recruit veterans.”
- “Have a plan in place to recruit employees with disabilities.”
Senator Dick Durbin
Senators Say Walgreen Domicile Move Like "Giving Up On America"
