Traverse City Record-Eagle

Opinion

August 17, 2013

Another View: Tax code shouldn't make companies go overseas

Perrigo Co. found the equivalent of a pot of gold when it went to Ireland and acquired pharmaceutical maker Elan Corp. for $8.6 billion. The “gold” wasn’t just in Elan’s successful product line. By moving its official corporate base from Allegan to the Emerald Isle, Perrigo will become the latest American company to reap big tax savings by moving its corporate domicile overseas. It’s another sign of all that’s wrong with the U.S. tax code and the pressing need in this country for tax reform, for both corporations and individuals.

Perrigo’s move isn’t likely to have a perceptible impact on the West Michigan economy — the company will maintain its administrative, research and production operations in Allegan, where it was founded by Luther Perrigo way back in 1887. However, the grass is greener in Ireland in more ways than one way for Perrigo — it estimates it will save about $150 million a year in taxes by taking advantage of Ireland’s 12.5 percent corporate tax rate.

Faced with that kind of savings, you can’t blame a publicly traded company obligated to maximize return for its stockholders for relocating its home base. The corporate tax system in America essentially combines the worst of all worlds. Our 35 percent corporate tax rate is the highest in the industrial world, deterring new investment and discouraging companies from repatriating their profits from foreign sales back to the United States. At the same time, the tax code is riddled with exemptions and loopholes (often handed out by Congress as political favors) that benefit some corporations more than others and allow some corporations to pay little or nothing in taxes (think General Electric and Apple).

According to a recent study by the Congressional Accountability Office, profitable U.S. companies pay an effective average tax rate of 12.6 percent. So we have a system with an official rate that’s so high it scares people off, that’s so complex that it creates an unequal playing field for business, and that’s so full of loopholes that it still doesn’t generate the revenue the federal government needs.

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