How to Renounce America and Still Be Called a Patriot

Her father is a senator, she’s a CEO, and her company is forsaking its U.S. citizenship.

National Journal
Ron Fournier
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Ron Fournier
July 16, 2014, 5:58 p.m.

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.

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