Born down in a dead man's town
The first kick I took was when I hit the ground
End up like a dog that's been beat too much
Till you spend half your life just covering up
Born in the U.S.A., I was born in the U.S.A.
-Bruce Springsteen
A rapidly developing news story is that Walgreens is looking to move their corporate home to Switzerland.
Well, they are not really moving to Switzerland. The company would still operate in President Obama's hometown in Chicago, and keep their drugstores around the United States, but would change their tax base by buying a small company in Switzerland and calling it "home" for tax reasons.
It's the hot thing to do in corporate America. Also the smart thing for many companies. According to Andrew Ross Sorkin in the New York Times, several large companies have followed the strategy of an "inversion." They "merge," usually with a small foreign company, and then reincorporate in the new country.
Sorkin noted several companies have already done the tax dance and many more that are looking at it.
As a financial and tax adviser, I would be my fiduciary duty to note the advantages of the tax break to the Walgreens' Board of Directors. The goal of a corporation and its advisers is the maximize returns to shareholders and saving millions of dollars a year in taxes would certainly do that.
In Walgreens' case, it's not a good idea. They might be the tipping point that ends the whole inversion craze for good.
Robert Reich and others have suggested that if Walgreens goes through on their threat to move to another country, that we hit them on their ability to have "free speech" until their Citizens United decision.
The best way to get their attention is organize a boycott. Hitting them in the wallet is the place where it will hurt the most.
Some of the other "inversions" have slipped by quietly. Medtronic is a medical supply company that is looking to merge with an Irish company but Medtronic is not a household name the way Walgreens is.
Walgreens becoming a "foreign" company is a slap in the face to Americans for a number of reasons. As Sorkin noted, they received $16.7 billion from Medicare and Medicaid last year, which is about 25 percent of its corporate revenues.
"Born in the USA" or "Made in the USA" doesn't carry the kind of weight it used to. Like many people, I drive a foreign car, buy products made in other countries and if I happened to walk into a Walgreens or any other retail store, I would find the shelves stocked with consumer products made in China.
I have not seen "Born in the USA" boycott work in a very long time but Walgreens is different. It's not just about us and against them, it's about a move that is completely unfair and shines on what is really wrong with the United States tax system.
It also shines on what is wrong with Congress.
This tax break should not have been there to begin with and the fact that Congress is not stepping up to fix it immediately make a boycott of Walgreens, and the inversion issue in general, a huge campaign issue for any non-incumbent running for Congress.
It's one of the rare issues that cut across all party lines. A Tea Party Republican should be just as outraged as a bleeding heart liberal Democrat. One of the biggest name companies in American history, who get a huge part of their money from the American government, and the rest from American consumers, doing a blatant tax dance and expecting no one to care.
We do care. The only possible defenders are those Congressmen who are beholden to Wall Street.
Well, that is the majority of Washington but this is one issue where congressmen and senators need to throw Wall Street under the bus for their own survival.
We often feel helpless as Wall Street keeps Washington in a strangle hold but this is one where the American consumer and the American voter can make a difference in how Washington thinks. Putting the Walgreens issue on the front burner and on the front page will force the whole issue of "inversions" out in the open. I don't see a groundswell of Americans, other than those who work for hedge funds or Goldman Sachs, jumping up and down to save inversions. Walgreens is a corporate citizen who depends on consumer goodwill and the hedge fund investors who are pushing the tax break did not understand that. Their business is more than what shows up on a spreadsheet and I think the American public is about ready to let them know that.
In the long haul, Walgreens might have done us a favor. We could have gone on for years, with inversion after inversion taking place, if Walgreens had not made their move.
In the end it might bring us new laws. Or even better, it might bring us new law makers.
Don McNay is owner of McNay Consulting, www.mcnayconsulting.com , which does financial and tax consulting. He is the author of several best-selling books, including Wealth Without Wall Street: A Main Street Guide to Making Money.