This story is about a gilded class of people and corporations enriched by the new American economy while the rest of its citizens pay the tab. The protagonists could be any number of institutional elites, but this column happens to be about a Democratic senator from West Virginia, Joe Manchin, and his daughter, Heather Bresch, the chief executive of Mylan, a giant maker of generic drugs based outside Pittsburgh.
Her company’s profits come largely from Medicaid and Medicare, which means her nest is feathered by U.S. taxpayers. On Monday, Bresch announced that Mylan will renounce its United States citizenship and instead become incorporated in the Netherlands – leaving this country, in part, to pay less in taxes.
This is the sort of story that makes blood boil in populists – voters from the Elizabeth Warren wing of the Democratic Party to libertarians who follow Rand Paul and including tea party conservatives. These disillusioned souls, growing in numbers, hate hypocrites who condemn the U.S. political system while gaming it.
Populists can’t be happy with how this story was told by Andrew Ross Sorkin of the New York Times. Under the headline “Reluctantly, Patriot Flees Homeland for Greener Tax Pastures,” Sorkin cast Bresch as a helpless victim of a system that has made her wealthy and her father powerful.
Heather Bresch grew up around politics. Her father is Joe Manchin, the Democratic senator from West Virginia and a former governor. She has heard him say repeatedly, “We live in the greatest country on Earth,” as he did in countless political advertisements. And it appeared to rub off on her: Ms. Bresch was named a “Patriot of the Year” in 2011 by Esquire magazine for helping to push through the F.D.A. Safety Innovation Act.
Ah, so she’s a patriot. Bresch told Sorkin that she engineered the company’s divorce from the United States “reluctantly,” and, the reporter added, “she genuinely seems to mean it.” That credulous line was followed by two paragraphs about corporate tax rates, an important reminder of how slowly political and business leaders are adapting to the global, tech-infused economy.
If Ms. Bresch’s deal is not a call to Washington to address what is clearly a growing trend that it has remained nearly silent on, the nation will most likely continue to lose large employers and taxpayers in droves to countries with lower tax rates. Almost 20 large United States companies have announced plans to give up their United States citizenship over the last two years. Just on Monday, the Irish drug maker Shire cleared the way for a merger with AbbVie, the drug maker based in Chicago, and Walgreen is considering an inversion through a deal with Alliance Boots, a European drugstore chain.
“It’s not like I’ve not been vocal and up there talking to anybody who’d listen to me,” Ms. Bresch told me in an interview about the crusade she had been on in Washington for years, talking to lawmakers about overhauling the corporate tax code to make United States companies more competitive. “But you know what they all say? ‘Yeah, uh huh, O.K. Uh huh.’ “
That’s ripe. The daughter of a U.S. senator and former governor – a Patriot of the Year, no less – says she got lip-service from Congress. Just like you and me.
To his credit, Sorkin says there is something “morally disconcerting” about a company bolting a country that is among its biggest customers. Still, he writes, Bresch “insists that the merger is being driven mostly by its strategic merits, and that the lower tax rate is just an added benefit.” OK, now. That’s hard to swallow. How much in taxes will she save by jilting the United States?
Ms. Bresch, who said the company’s current effective tax rate is about 25 percent, said the rate would come down to 21 percent in the first year of the deal and then move into the high teens after three to five years. Mylan will continue to pay taxes in the United States on its domestic profits, but not on its business operations abroad.
All of which raises an important question: Even if the United States were to revamp its corporate tax code, how low would the rate have to drop to be competitive and still raise enough revenue to pay for the services that citizens expect?
Corporate taxes will go as low as ordinary voters can stand it, no doubt, because their rates are determined by powerful special interests and elites like Bresch and her father. Manchin wouldn’t speak to me, but he did issue a nugatory statement to Sorkin – something about being “disappointed” when U.S. companies “feel the need to move overseas because of the U.S. tax code.”
Too bad Manchin isn’t in a postion to feel the need and find a way to keep Mylan paying taxes to the United States, the country that presumably will continue to enrich her firm via Medicare and Medicaid. Would he try to cut federal drug payments to Mylan by roughly the amount of taxes his daughter is taking to the Netherlands? I don’t know, because my call to the senator’s office was not returned.
As for Americans less privileged and powerful than these two characters, your role is clear: Just cast your votes and pay the bills.