When Bank of America merged with NationsBank and moved out of its headquarters in San Francisco after 94 years to decamp to North Carolina, people said that's just business. When Boeing announced it was moving its headquarters halfway across the country after 85 years as a mainstay of the Seattle economy, people said that's just business, too.
So, isn't it just business when companies move their headquarters to places like Bermuda or Ireland for the purpose of saving on taxes out of the U.S. completely? Executives of the cruise ship company Carnival work out of Miami, but the company's tax home is Panama. The GPS navigation company Garmin has letterhead that reads Kansas, but its tax home is Switzerland. The medical devices company Medtronic is based in St. Paul, but after its planned merger with Covidien, its tax home could also move to a foreign land.
The insider lingo for this tax maneuver is "inversion," and inversions are perfectly legal. Let me say that again: they break no law. But, longtime Marketplace contributor Allan Sloan is angry and thinks companies should stop with the inversions, and stop now.
It may matter that Mr. Sloan is angry. He is senior editor-at-large for Fortune Magazine and a veteran business writer who knows now to kick up a ruckus when he wants to. His Newsweek cover story in 1996 about mass layoffs in corporate America is the stuff of legend. Its headline, "Corporate Killers," drew the ire of many a corporate chief and went on to become a topic of national conversation.
Sloan has written the cover story for the latest Fortune. The article is about these inversions but its headline is in plain English. Sloan's article carries the title: "Positively Un-American." Sloan argues American taxpayers get stuck paying what the companies who shift their tax home to other countries save. By one estimate, we are talking more than $19 billion over 10 years.
Again, Sloan acknowledges that inversions are legal. Companies say they adopt this strategy to increase shareholder value. Sloan rejects that argument, saying long-term shareholder value will come from investing in the USA, not from leaving it. Then, in case anyone has missed that he is angry about this, Sloan calls the companies who switched tax homes "deserters."
Yes, fighting words, I know.
What bugs Sloan most is seeing companies that benefit in so many ways from being in America seeming to abandon it. Sloan told me he is the grandson of immigrants and comes from a family that would have been destroyed if the United States hadn't welcomed them. He thinks it is just plain wrong for companies to switch their tax home just to make more money.
"They don't even leave," Sloan told me. "They just go off and stick you and me with the tab, and that makes me pretty angry." Did I mention he's angry?
Some elected officials are talking about legislation to make switching tax homes less attractive to companies. Many corporations oppose this, arguing a better strategy would be for the U.S. to lower corporate taxes. Sloan is not opposed to comprehensive tax reform, he just doesn't see it happening any time soon. What is happening soon is that more and more U.S. companies are running the numbers on this "inversion" thing and switching to foreign addresses.
Speaking of which, there is a pharmacy on almost every American street corner by the name of Walgreen's. It is a brand so American that you can see a Walgreen's in the background of that famous photo of the sailor kissing a lady on VE day in Times Square. The Walgreen company is now thinking of moving its tax residence out of the United States, with a decision possible any day now.