Andrew Ross Sorkin writing in the NYT
* * *
In the fall of 2008, with General Motors and Chrysler on
the precipice of bankruptcy, executives at the car parts supplier Johnson
Controls flew to Washington. The company’s president testified before a Senate
panel and implored lawmakers to bail out the auto industry.
“Speaking for our company, and, I am sure for all auto
parts suppliers, we respectfully urge the members of this committee, and the
Congress as a whole, to provide the financial support the automakers need at
this critical time,” Keith Wandell, then the president of Johnson Controls,
said, warning that the failure of even one automobile company would “implode”
the supply chain and lead to broad job losses.
Congress approved a bailout plan worth almost $80 billion
for General Motors and Chrysler, saving the automakers and, indirectly,
suppliers like Johnson Controls.
* CONGRESS (A DEMOCRATIC CONGRESS - BOTH HOUSE AND SENATE
AT THAT POINT) ACTED IN DIRECT CONTRADICTION TO WHAT THE VAST MAJORITY OF
AMERICANS WANTED - NAMELY... NO BAILOUTS!
By 2010, with its business back on track, Johnson
Controls doubled the pay of Stephen Roell, then its chief executive, to more
than $15 million.
* IN 2010 DEMOCRATS HAD COMPLETE CONTROL OF GOVERNMENT -
OBAMA WAS PRESIDENT AND DEMOCRATS CONTROLLED BOTH HOUSES OF CONGRESS.
Despite the federal government’s rescue — and hundreds of
millions of dollars in tax breaks over the last several decades from states
like Michigan and Wisconsin — Johnson Controls said on Monday it was renouncing
its United States corporate citizenship by selling itself to Tyco International,
based in Ireland, a deal struck in large part to reduce its tax bill, which it
said should drop by about $150 million annually.
(*SILENCE*)
Monday’s announcement by Johnson Controls is just the
latest effort by corporate America to flee the United States.
(*NODDING*)
In the last year, Pfizer said it was leaving for Ireland,
as did Medtronic, the medical device maker. Coca-Cola’s largest bottling
company, after selling its domestic operations, is heading to Britain. (The
company, Coca-Cola Enterprises, insists it isn’t for tax reasons.)
* FOLKS... YOU STUPID BASTARDS... DON'T YOU SEE THAT OUR POLITICIANS
ARE DESTROYING OUR COUNTRY VIA THEIR INSANE HALF-SOCIALIST, HALF-CRONY-CAPITALIST
POLICIES...?!?!
Until Washington lawmakers reform the tax code, we will
continue to see an exodus of American companies from our shores in search of a
lower tax rate.
* FOLKS... THIS IS THE NYT!
(*SNORT*)
By my count, based on a series of conversations with
investment bankers, there are probably at least another dozen deals of
meaningful size being negotiated in the pipeline. The question is what it will
take for Congress to not only take notice, but to pass legislation to thwart
this steady corporate migration.
* BULLETS. I'D SAY... BULLETS.
(*SHRUG*)
The Obama administration has taken action to rein in
so-called inversion deals. Last year, the Treasury Department implemented a
rule that an American company could not complete an inversion if it owned more
than 60% of the combined company; Johnson Controls will own 56% of the combined
company.
The presidential candidates are paying attention.
On Monday in Iowa, Hillary Clinton lambasted Johnson
Controls. “It is outrageous when large multinational corporations game the tax
code and shelter money overseas to avoid paying their fair share, including
through maneuvers like inversions,” she said. “I have a detailed and targeted
plan to immediately put a stop to inversions and invest in the U.S., block
deals like Johnson Controls and Tyco, and place an ‘exit tax’ on corporations
that leave the country to lower their tax bill.”
* Er... FOLKS... HOW MANY YEARS WAS HILLARY A SENATOR?
HOW MANY YEARS WAS BILL CLINTON PRESIDENT?
(*JUST SHAKING MY HEAD*)
* FOLKS... IT WAS THEIR POLICIES WHICH LED TO THIS!
(*MASSIVE MIGRAINE HEADACHE*)
Even Carl C. Icahn, the activist investor who has long
pushed companies to consider cost-saving maneuvers, has now begun to worry
about the harmful effect of corporate inversions. He has begun waging a
campaign in Washington to reform the corporate tax system.
“How will representatives and senators, with an election
year approaching, explain to their constituents why they are out of work
because their employers left the country, when it could so easily have been
avoided?” he wrote on the Op-Ed page of The New York Times last month.
* THE AVERAGE AMERICAN NEITHER KNOWS NOR CARES WHAT THEIR
REPRESENTATIVE OR SENATORS ARE DOING... NOR DOES THE AVERAGE AMERICAN READ CARL
C. ICAHN'S OP-EDS IN THE NYT.
(*SNORTING AS I SIGH*)
* FOLKS... MY LIFE IS SPENT WATCHING A TRAIN WREAK IN
SLOW MOTION...
(*SIGH*)
And consider this: Johnson Controls, currently based in
Milwaukee, has aggressively sought — and received — a series of tax breaks and
other deductions to do business in the United States. Between 1992 and 2009,
the company received at least $149 million in tax breaks from Michigan alone.
(*HEADACHE GETTING WORSE*)
Last year, Johnson Controls had to pay a $3.75 million
penalty to Michigan after it received a $75 million tax break in exchange for
creating 400 jobs at its Holland lithium ion plant. The company fell short on
the job creation, so it was forced to compensate the state and give up its
tax-exempt status at the plant. In 2011, Johnson received a tax break from
Kentucky in exchange for expanding its operations there.
Johnson Controls said on Monday that the Tyco deal was
not a tax-driven transaction but was being done for strategic reasons.
At this point, it would be easy to cue the national
anthem and argue about the need for corporate patriotism and loyalty to the
United States. But unfortunately, simply shaming companies that reduce their
tax bill through these inversion maneuvers isn’t a solution. And pushing for
laws to bar companies from these deals seems increasingly quixotic. Every time
a new tax law is enacted, the lawyers and accountants find a way around it.
Ultimately, the only way inversions will stop is when the
corporate tax code changes so it becomes more attractive for American companies
to be American companies.
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