Pfizer, the giant drug company best known for Viagra, got smacked down this week for its snarky plan to save $35 billion in US taxes by becoming Irish. The Treasury Department is often a limp watchdog when it comes to policing arcane tax dodges, but this time, Treasury grew some fangs by tightening its regulations, which led Pfizer to call off the deal.
Tax law is not sexy, but Pfizer’s loss is a potent win for small-d democracy. It can provide a starting point for reinvigorating reform politics. Among Washington’s myriad scandals, the drug industry is the Goliath of our corrupted politics. Pfizer and its brethren in Big Pharma spread millions around the halls of Congress, and they always seem to get their way. The David throwing stones at Pfizer & Co. is a small but feisty reform group called Americans for Tax Fairness. It rallied support and argued that Treasury could stop the looting… and this time little David won.
The US Chamber of Commerce was not happy. “It’s punitive, it’s paranoia,” the boss lobbyist complained. Whenever the Chamber whines, we know something good has happened for the people.
Here is why I think this episode has great potential for inspiring a broader movement to confront the corporate dominance of American politics: Pfizer’s CEO, Ian Read, was stupid enough to announce that the company was abandoning US citizenship right in the middle of a tumultuous presidential campaign—one in which voters have expressed alarm and anger about their lost prosperity and continuing economic troubles.
The rebellion may have legs, regardless of who wins the White House this fall, because the corporate wise guys have unwittingly established a new context for how we look at tax debates and other economic issues: patriotism. Pfizer’s cynical ploy deeply insults the fervent national loyalty of most Americans. We celebrate patriots on every occasion, and—more than in so many other countries—love to wave the flag and sing the national anthem. Patriotism can be an empowering emotion; indeed, it may be the single thread that holds us together, in the face of a increasingly savage political environment and multiple divisions on so many issues. Some of us may not like our neighbors, and many of us despise the politicians—but don’t mess with America.
Pfizer, like so many other corporations, ignored this public sentiment and took the occasion to jump ship for greener pastures in Ireland. Of course, the company was not actually planning to go anywhere. It was only going to move its address offshore to reduce its tax bill dramatically. Both Hillary Clinton and Bernie Sanders jumped on Pfizer. Even our even-tempered president was appalled. Treasury took the cue and shut down the odious loophole that had allowed what is called “corporate inversion.” Blocking corporate inversions may also damage the demands of multinationals for another kind of multibillion-dollar tax giveaway regarding profits earned abroad, which I reported in this post last month. As with these untaxed profits, the lobbyists are using the threat of inversions to blackmail Congress—give us the money by reducing taxes here, or we move to another country.