Here’s something you don’t see every day, a donor for President Obama admitting that America’s corporate tax rate is too high.
Mellody Hobson appeared on CBS This Morning on Thursday, August 7 to discuss pharmacy chain Walgreens’ decision to keep its headquarters in the United States. The CBS News contributor opined that even though she agreed with the company’s decision she acknowledged that in America “it's still the highest tax rate of any developed nation.” [See video below.]
The segment began with co-host Charlie Rose promoting how “President Obama says lawmakers are working to keep American companies from shortchanging taxpayers” before playing a lengthy sound bite of the president criticizing companies who switch their citizenship to reduce their tax burden.
Rose then turned to Hobson who cheered Walgreens’ decision to remain in the United States:
They're making a long term decision. I actually think in this situation they made the right decision. Because the other thing the U.S. Government has said, they may come back retroactively and tax some of these companies.
As the discussion continued, CBS’ Norah O’Donnell was the first person to lament how high America’s corporate tax rate is:
Since 2011 there’s been something like two dozen firms that have relocated. They save billions of dollars in tax money. I can remember when I was covering the White House two years ago this was a topic for the Obama Administration. Lowering corporate tax rates and still nothing has been done.
After being prompted by O’Donnell, the Obama donor concluded her remarks by admitting that the U.S. is hurt by having the highest corporate tax rate in the developed world:
Now compare that to someone like Ireland, a country like Ireland which is 12 and a half percent. You have a lot of these companies, particularly those that derive a lot of revenues overseas saying maybe I get a better deal by being somewhere else but everyone looks at this and says this is an arms race. You could lower the rate and then there's still going to be another country with a lower rate and maybe someone still defects.
See relevant transcript below.
CBS
CBS This Morning
August 7, 2014
NORAH O’DONNELL: Walgreens made a costly decision in more ways than one. America’s largest company is keeping its headquarters in the U.S. The store’s parent company called simply Walgreen considered a move overseas where it could pay a much lower corporate tax rate.
CHARLIE ROSE: Investors didn't like the choice. Walgreens’ stock dropped more than 14 percent in the past 2 days. President Obama says lawmakers are working to keep American companies from shortchanging taxpayers.
BARACK OBAMA: These accountants are saying, you know what? We found great loophole. If you just flip your citizenship to another country, even though it's just a paper transaction, we think we can get you out of paying a whole bunch of taxes. Well, it’s not fair. It's not right. There is legislation working its way through Congress that would eliminate some of these tax loopholes entirely.
ROSE: CBS News contributor and analyst Mellody Hobson is in Chicago. Walgreen is based in Illinois. Melody good morning.
MELLODY HOBSON: Good morning.
ROSE: So why did they decide not to relocate?
HOBSON: I think they looked at the tax savings, which is huge, $4 billion they could save. They compared that to the backlash growing, the concern. People feeling that these people who use this technique called an inversion, inverters are deserters we’re now hearing people say. They looked at that. And then they also looked at the revenues that they derive from the U.S. government specifically Medicare and Medicaid which represents $17 billion of their revenues and they said maybe we shouldn’t put that in jeopardy.
O’DONNELLL: And what about the stock getting hammered?
HOBSON: Well the stock got hammered because a lot of the investors say we don’t get this added profitability from this tax savings. And so they thought over the short term this doesn't look great for them. I think they're making a long term decision. I actually think in this situation they made the right decision. Because the other thing the U.S. Government has said, they may come back retroactively and tax some of these companies.
O’DONNELL: Melody, I mean since 2011 there’s been something like two dozen firms that have relocated. They save billions of dollars in tax money. I can remember when I was covering the White House two years ago this was a topic for the Obama Administration. Lowering corporate tax rates and still nothing has been done. Why and what does it mean for U.S. companies?
HOBSON: Right, so the U.S. tax rate has come down over the last couple decades. It was high as 46 percent at one point on the corporate side. It's now 35 percent. But it's still the highest tax rate of any developed nation. Now compare that to someone like Ireland, a country like Ireland which is 12 and a half percent. You have a lot of these companies, particularly those that derive a lot of revenues overseas saying maybe I get a better deal by being somewhere else but everyone looks at this and says this is an arms race. You could lower the rate and then there's still going to be another country with a lower rate and maybe someone still defects. So it's not just a question of tax policy.
O’DONNELL: Alright, Mellody Hobson good to see you. Thank you so much.
