As reporters pour over the recently leaked “Panama Papers”, searching the massive document dump for names familiar here in the U.S., the Obama administration used the occasion to push for a crackdown on corporate tax inversions — an ongoing problem draining the nation’s economy of revenue by the billions. Inversions are tax avoidance schemes in which corporations affiliate with foreign holding companies as a means to relocate as a phony headquarters overseas to enjoy the benefits of lower tax rates. Losses to the U.S. tax base are estimated to potentially be well over $100 billion, but GOP defenders of the shell game claim it is necessary because U.S. corporate taxes are too high.
Also in recent news is the story of Johnson Controls, a Wisconsin-based firm that announced earlier this year their intention to merge with Tyco International Ltd. to take advantage Ireland’s 12.5 percent corporate tax rate. Johnson does plenty of business in Michigan.
Fortune magazine lists the top inversion offenders, and not surprisingly Tyco made the list. But, are there any companies from Wisconsin’s neighbor to the east on the naughty list? Two Michigan companies made the top-tier — Perrigo PLC and Delphi Automotive PLC.
Perrigo, an over-the-counter drug manufacturer out of Allegan, also files under an Emerald Isle address. In recent years the company sued the FDA for not moving fast enough on approving a controversial OTC testosterone cream. By avoiding U.S. taxes, they are not paying their fair share in supporting the work of the FDA — thus, American tax payers doubly bear the burden of their corporate greed.
Delphi, a well-known automotive parts manufacturer from Troy, has incorporated itself for tax purposes in the Channel Islands. They benefitted handsomely from the auto industry bailout at great tax payer expense, but they weren’t yet done screwing-over cash-strapped Michigan.
Cheating Michigan Extra: Once, Twice, Thrice, and Beyond
Perrigo and Delphi have something else in common — they’ve both enjoyed untold tax breaks from their ex-pat home of Michigan. The corporate subsidy tracking database provided by Good Jobs First offers a glimpse into their stateside tax shenanigans. Over the years, Perrigo has bilked Michigan tax payers and communities out of at least $40.6 million in the form of multiple tax abatements and rebates. It is impossible to know exactly how much money was involved because, until recently, the record keeping was spotty at best — which is also the case with over two dozen property tax abatements awarded to Delphi.
Oh, and Johnson Controls, they’ve nicked Michigan too, for a whopping $317 million. They additionally took numerous property tax rebates for which full data is not available. Of the reported amount, there was a $168.5 million “megadeal” — a term used by Good Jobs First to describe obscenely large tax breaks which are often brokered by a corporation as terms for continuing to do business within a state or community — also known as extortion.
Some would have us believe that these kinds of tax dodges are simply the price of doing business with “job creators.” Unfortunately, the cost of the tax giveaways is often upside-down compared to the gross payroll generated. In other words, another kind of bad deal Michigan simply cannot afford.