Cross-posted from Smirking Chimp
Medtronic's global headquarters in Minneapolis, US.
(image by Photo: courtesy of Medtronic.)
Medtronic is as American a company as they come. The surgeon who created its original technology was born and raised in Minnesota, where he lived his entire life. He was educated at a public university there, which is where he eventually conducted his research.
Medtronic's workforce was educated at American schools. Its products have been carried over American roads and rails for decades. Its medical devices continue to be purchased by American government insurance programs like Medicare and Medicaid, as well as private insurance premiums paid by American workers and their employers.
And if Medtronic's management has its way, the company will soon become Irish.
Medtronic's biggest customer is the United States government. How does it expect to get away with a move like that?
Because everybody evades their taxes nowadays -- at least in the corporate and billionaire crowd.
As French economist Gabriel Zucman observes, society has experienced "a profound shift in attitudes" toward taxes since the 1980s. Before then, the behavior of a company like Medtronic -- along with General Electric, Starbucks, Walmart, Apple, and dozens of others -- would be the source of public embarrassment for its executives. But, as Zucman rightfully observes, Reagan-era anti-government rhetoric soon made it socially acceptable for corporations and extremely wealthy individuals to evade their taxes.
Zucman, a student of the now-famous Thomas Piketty, became curious about the fact that the world's balance sheets seemed to show more liabilities than assets. As Jacques Leslie wrote in the New York Times, it was "as if the world is in debt to itself." Something invisible was out there, like economic dark matter warping the global financial universe.
Zucman found his answer: tax havens.
Zucman wrote up his results in a short book called The Hidden Wealth of Nations, which quickly became a French best-seller. (The Piketty crowd apparently has a penchant for best-selling books whose names are a play on classic economic titles -- see Capital in the Twenty-First Century.)
The Lawlessness of Large Numbers
Zucman's findings were striking. As Leslie puts it, the economist "has put creditable numbers on tax evasion, showing that it's rampant -- and a major driver of wealth inequality." (A version of the book is here.) Among Zucman's findings:
- The actual corporate tax rate paid for US corporations has dropped from 30 percent to 15 percent since the late 1980s, even though the official tax rate hasn't changed;
- 20 percent of all corporate profits in the United States have been moved offshore;
- Tax avoidance costs the government one-third of the tax revenue it should be receiving from corporations.
Zucman also found that $7.6 trillion of personal wealth is hidden in tax havens, which amounts to 8 percent of the world's total personal wealth. He estimates the global tax revenues would increase by more than $200 billion if these tax avoidance practices were ended.
Strikingly, Zucman also disproves the myth that "our country is in hock to China." If the wealth and tax havens were properly measured Europe would become a creditor, not a debtor, and US indebtedness would be cut in half (from 18 percent of GDP to 9 percent).