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Lower taxes are prescription to retain Walgreens

Corporate tax rate in U.S. is world's highest

Published: Friday, Aug. 1, 2014 1:15 a.m. CST • Updated: Sunday, Aug. 3, 2014 1:11 p.m. CST
Caption
Charles R. Walgreen 1873-1939 The founder of the drugstore chain had strong connections to Dixon; the city's airport still bears his name.

SPRINGFIELD – I picked up my vacation photos at Walgreens the other day.

And I didn’t hear any French, German, or Italian spoken.

How surprising.

I’ve read that the Deerfield, Ill.,-based drugstore chain is considering becoming a Swiss corporation.

I’ll admit the thought of a company that is essentially an American icon becoming a foreign corporation gives me pause.

After all, Walgreens is one of Illinois’ premier companies.

It was founded here in 1901 and is headquartered in Deerfield, Ill.

And now they are talking about moving their headquarters to Switzerland.

But what exactly does it mean when a corporation becomes Swiss?

Will they start having complimentary fondue in the checkout lanes?

Will the pharmacist yodel instructions to customers in the drive through?

Or is it a matter of some incorporation paperwork being filed in an office in the Alps rather than Springfield?

I would hate to see Walgreens – or any other corporation – renounce its U.S. citizenship.

Every time that happens, it reminds us that the business climate in this country is not what it should be.

One has to ask, why would a corporation founded in Illinois 113 years ago want to become Swiss?

The answer is as obvious as the Matterhorn.

Corporate taxes in Illinois and the United States are too high.

Way too high.

The United States has the highest corporate tax rates on the planet.

And, you guessed it, Illinois has one of the highest state corporate tax rates in the U.S.

Business corporations exist to make money by serving people. And when government makes it harder to earn in one place, they will look elsewhere.

We can spend a lot of time bemoaning that fact, or simply acknowledge that is the case and work to create a climate that attracts business and doesn’t repel jobs.

Still, the idea of Walgreens leaving is a bitter pill to swallow.

But here is the deal. When a company switches in what country it will be incorporated, as Walgreens is considering, it still pays taxes to the U.S. government on its U.S. earnings. And it would be paying them at the same rate that it always has.

On money it makes overseas, it would pay that country’s rate.

Seems fair, right?

Unfortunately, the U.S. expects companies headquartered here to pay the equivalent of the full U.S. rate on money earned elsewhere.

So, U.S. companies that do business overseas choose to move their headquarters elsewhere.

So, what’s the solution?

The answer would seem to be to lower the corporate income tax rate so that it is competitive with other Western nations. In fact, if the U.S. had the same tax policies as Switzerland – or most Western nations – Walgreens would pay billions less in taxes and wouldn’t be considering moving.

The billions saved could go to shareholders in the form of dividends, to employees through higher pay, and to customers through lower prices.

And what could be more American than that?

Note to readers: Scott Reeder's column is underwritten by the Illinois Policy Institute.

 

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