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Editorial: Attention Walgreens shoppers

America’s two biggest drugstore chains – Walgreens with 8,221 stores and CVS with 7,660 – face off at the intersection of Loudon Road and East Side Drive, where each claim a corner.

CVS is the relative newcomer. It was founded in Lowell, Mass., in 1963; Walgreens in Chicago in 1901. Both are American corporations, but within weeks, Walgreens could merge with a foreign drugstore chain and move its base, for tax purposes, to Switzerland.

In a process called an inversion, the chain is considering a union with Alliance Boots, a Swiss-based company with about 3,150 drugstores globally and 2,500 in Great Britain. Walgreens will maintain its U.S. presence. The lion’s share of its $72 billion in annual revenue, one-quarter of it from payments by Medicare and Medicaid, will still come from the chain’s U.S. sales. But Walgreens will, critics say, avoid taxes by becoming a foreign company in name only.

The inversion, if Walgreens goes through with it, will matter to hedge funds and other Walgreens investors seeking higher returns. The move is expected to lower the company’s corporate tax rate by 10 to 20 percent. The change in status will matter, or should, to America’s taxpayers, who will have to make up the $2 billion to $4 billion in taxes Walgreens would otherwise pay each year. The question is, will a Walgreens move abroad matter to consumers, most of whom are also taxpayers?

“Buy American” campaigns have never been particularly effective. Consumers, though they may prefer doing business with a company that’s a good, taxpaying, corporate citizen, shop where they believe they get the best value. That raises a scary possibility.

Will CVS, Rite Aid and other rivals be able to compete if Walgreens gains a huge tax advantage? If not, will they and other retailers join the many pharmaceutical companies that expatriated themselves by moving to foreign tax havens?

It’s a possibility that should have members of Congress crossing aisles to stop a corporate flight that could rob the Treasury of billions of dollars in tax revenue. The missing money will have to be made up by individual taxpayers, working stiffs who can’t use complicated tax dodges to avoid paying Uncle Sam a fair share of what it costs to run a civilized country.

Some members of Congress, among them New Hampshire’s senior Sen. Jeanne Shaheen, have sponsored legislation that would slow the offshore rush by making it more difficult to carry out corporate inversions. President Obama is seeking congressional support for measures to severely narrow the inversion loophole. In the short run, either measure is better than doing nothing, which is what Congress of late has been good at.

Republicans and Democrats alike agree that the real problem lies with America’s unfair, labyrinthian, loophole-riddled tax code, and a corporate tax rate that at 39.1 percent counting state taxes, is perhaps the highest of all developed nations. (The effective corporate tax rate is actually much lower and some companies pay no taxes at all.) The corporate tax rate should be lowered and the code’s loopholes pulled tight. But few expect this famously fractious Congress to make much progress.

To prevent a rush to the border, we dearly hope Walgreens does the right thing and remains an American corporation. And if it doesn’t, we expect regulators to strictly enforce laws that prevent foreign companies from spending to influence political decisions that should be made by Americans. Expatriates, as Walgreens could learn, may gain some revenue but they lose their right to vote.

Legacy Comments17

For the record, this whole highest business tax rate in the industrialized world line is as factual PBR's posts. The actual printed tax rate is 39% including state and local taxes. Dick and Jane see 39% and Dick says, boy Jane 39% is an awful high number. Yes Dick that is a high number says Jane. Jane, that is why businesses are going overseas isn't it? Boy Dick you are really smart says Jane. Well in the adult world we know that things are not always as they seem. The taxes paid by US Corporations in 2011 were 2.6% of the GDP. This ranked us number 11 out of the 27 wealthiest countries. The effective corporate tax rate in reality was 12.6% after you figured in tax credits and numerous deductions and the massive number of loopholes. There are multi-billion $$ companies out there that make their livings by finding creative ways to hide money from the evil tax man. From 2009-2012 just Apple Computer was able to hide $74 billion by using weaknesses in the code. In the same time period Microsoft was able to avoid $7 billion in taxes. This is only 2 companies. So let's leave the 39% figure with Dick and Jane where it belongs.

CEO’s of major American corporations are increasingly isolated and insulated from the rank and file of the companies they run, and from the effects of their actions, including actions that may harm their company, or may not be in the national interest. Capital flight, of which this is a variation, can arguably be taken as an act of disloyalty to the nation, in the name of greed. Here are some details on Walgreen CEO Greg Wasson, who wins even when the company loses. “Walgreen Co. did about as well in 2013 as it did in 2011. CEO Greg Wasson, on the other hand, is doing much better. Mr. Wasson's total compensation for the fiscal year ended Aug. 31 rose more than 13 percent to $13.7 million… there's a gap between Mr. Wasson's pay and Walgreen's performance. Net income of $2.45 billion this year was a big jump from 2012's $2.13 billion, but it's less than the $2.71 billion Walgreen recorded in 2011. Revenue was essentially flat over the two-year period at $72.2 billion. Yet Mr. Wasson's 2013 pay was almost 13 percent higher than his 2011 total. That's because the drugstore chain has chosen to insulate him from certain costs resulting from his management and decision-making. He picked a fight with pharmacy benefits manager Express Scripts Holding Co., one of the biggest prescription drug buyers in the country. His refusal to accept Express Scripts' prices shut Walgreen's doors on millions of customers. He capitulated after about six months, but that was too late to prevent a 21 percent decline in 2012 profits.You might think the disastrous performance would have earned Mr. Wasson a big pay cut for 2012. You'd be wrong. His total compensation slipped less than 1 percent to about $12 million. Why does Mr. Wasson get double-digit raises when performance rises, but only a minuscule pay cut when results decline by a similar rate? It's all in the performance metrics.These metrics had another benefit in 2013: helping to boost Mr. Wasson's annual bonus 78 percent to $2 million. Similar exclusions helped lift his stock awards 9 percent to $6.8 million. Those payments would likely have been much lower if compensation calculations had included such expenses as amortization and other costs related to acquisitions, and the money Walgreen paid to settle DEA charges that company operations in Florida mishandled drugs…This is an example of the “heads I win, tails I win even more” executive compensation policy many publicly traded companies embrace. By picking and choosing which costs to include in performance metrics and setting relatively easy targets, Walgreen ensures that Mr. Wasson's pay rises even when company performance isn't all that impressive by standard benchmarks.”

it's a blog, what is missing is perspective. I am sure that you believe "who needs to earn that much". That is between shareholders and Wasson.

HEADLINES you will never see here: "Where’s the media outrage? Democratic senator’s daughter uses maneuver to avoid US corporate taxes" - Yup the exact same maneuver as Walgreen's but not a peep from this liberal peanut gallery - The democrats are MASSIVE HYPOCRITES, OOPS.... I forgot they are all LIDV's and simply ignorant of FACTS

EXACTLY! And not ONE progressive responded to you post or commented or acknowledged the fact that she did so.

Yes I do enjoy reading stories geared to LIDV's. For a company started in Chicago in 1901 to grow to it's present size is no small feet. America was the land of opportunity now it appears that some feel that Big Business should be a participant in their communities as opposed to a vehicle for stockholders to reap greater benefit. To hell with the workers, they had no part in the rise to profitability for them. The fact that they were able to grow and expand in America should be of no consequence either. I constantly see the No Information Right jump on the whatever business wants to do bandwagon. I also see the constantly uninformed RWTP, (right wing talking point) regulations are driving business away repeated. Name one regulation you think is driving business away. Just one, anyone can blame a made up regulation - let's see you put some truth where your words should be............... Look at MB, Artie T ran a profitable business with happy workers and satisfied customers. What evil did he perpetrate? He had the audacity to want to pay cash for merchandise to keep prices low. The gall of this obvious LDIV, fortunately Arthur S. was able to kick this lunatic out. Now he and his handpicked brown noses, board of directors included, can use all this operating cash to pay enhanced dividends to stockholders that were being cheated. No need for large cash on hand when we can run the business on credit. Higher prices for consumers but the leaches now get more dividends. The workers and customers are what built MB along with Arthur T. The Board and the shareholders were just in it for the money. So by all means pity the poor stock holders and their struggle to get by on the work of others. You want to benefit by being in America fine but this comes with a cost, live with that.

.... NAME JUST 1 ! OK.... NOBAMAKARE .... Knocked it out of the park - Profit is a signal to financial markets and that helps businesses raise capital. Higher profits mean higher tax revenues also. Stocks rise, raising the value of individual retirement accounts. Profit is an unalloyed social good. But when taxed to death..... money is like water and it seeks the shortest route to the safest most productive place. Democrats are taxing every entity to death.

The ACA is causing business to flee the U.S.? Seriously? And "profit is an unalloyed social good"? Really? One can easily imagine any number of circumstances where private profit harms the "social good". Your statement is simply not true under all circumstances. Even you should be able to come up with some real world examples. We won't hold our breath though.

I prefer to simply ignore PBR and his even more uniformed junior partner. You never receive an answer. Providing benefits which once were taken for granted - is an oppressive regulation. If this is such a business killer why wouldn't the business community do something about the obscene healthcare costs other than cutting it as a benefit?

TO THE EDITORS: This is a form of black balling a company. In the past I have been critical of several local companies with whom I won't trade because of their actions and politics. How is this any different? This is kind of a sophomoric or as I would call it a sophomoronic editorial as rather than focus on spending which is over the top or the highest corporate tax rate in the industrialized world, they are worry about not having enough money for yet more "social programs". The truth be told, this is free enterprise. There are reasons why corporations go overseas and it is not about making unbridled profit, it is about avoiding oppressive regulations, bureaucratic red tape where public servants practice paralysis by analysis and high taxes. Did the genius Monitor editors ever think that extra profit might go to improve their infrastructure an preserve some jobs? The Monitor editors have never ONCE talked about the GAO waste and duplication report released each year. Referring to a 'civilized country' is code word for "it will be civilized when we say we have spent enough money or all things social" is and never will see enough public money for progressives. The only thing that is broken are the right arms of Democrats as they refuse to reach across the aisles and they can't accept any offers from Republicans as their arms are broken. Only their left arm seems to work.

If the move "is not about making unbridled profit" then why are they leaving the stores open here and only moving the corporate name. Profits are the only thing this is about. Of course we will still hear Walgreen asking for police protection, fire protection and better roads to ship the products around the US, they just don't want to pay for it. Like you and your choices, I choose to do no more business with them.

way to go JIM !!! boycott based on a 10 paragraph article from a massively liberal rag. You earn the LIDV award of the week but it is only Tuesday Tillie and Brucie still have time to beat you out.

They are merging with an overseas company, they are moving their headquarters. Many companies have overseas headquarters. You can shop elsewhere, I do when I don't like a certain NH restaurant chain because of the political leanings of the owner. Same with a certain Mexican restaurant which will not get $1300 of my money this year or a certain ice cream I don't buy. Or perhaps a certain yogurt company I will not pend my money with. You have that right. Of course they will still have police protection, the people working there pay taxes, don't they? Honestly, I don't shop there, it makes no difference to me but ask yourself, what is the 'fair share' for a company? What should it be? Does a company have rights to do business that improves their bottom line? I think so. We have the highest corporate tax rate in the industrialized world yet we ask why companies are relocating and doing things like this.

Walgreens will do what is right for its shareholders which is to maximize profits and minimize taxes. US-based corporations may vote with their feet and move to foreign countries and although they never had and hopefully never will have the right to vote, they have something better: the right to petition lobby on behalf of their corporate interests. Foreign-based multinationals corporations with US subsidiaries have been influencing political decisions for decades. The Monitor should report on why NH changed its BPT statute in 1986 from worldwide to water's edge combined reporting, why so many foreign-based multinational corporations control so many of the state's largest employers since 1986, and why the NH Supreme Court stated "We point out that the water's edge method was adopted for the benefit of foreign businesses" (Caterpillar decision). FYI worldwide combined reporting was approved by the US Supreme Court in 1983 and again in 1994 in their Container, Barclays Bank, and Colgate-Palmolive decisions ( by votes of 5-3, 7-2, and 9-0, respectively). The Monitor should also report on Maine's recent attempt to close the water's edge loophole - beaten back with help from a DC-based foreign trade group (

Here's an e-mail I got yesterday: " ". . . Both Democrats and Republicans Say, "We're broke" And can't help our own Seniors, Veterans, Orphans, Homeless, Etc.,????? But, over the last several years THEY have provided direct cash aid to.... Hamas - $351 M, Libya $1.45 B , Egypt - $397 M, Mexico - $622 M, Russia - $380 M, Haiti - $1.4 B, Jordan - $463 M, Kenya - $816 M, Sudan - $870 M, Nigeria - $456 M, Uganda - $451 M, Congo - $359 M, Ethiopia - $981 M, Pakistan - $2 B , South Africa - $566 M, Senegal - $698 M, Mozambique - $404 M, Zambia - $331 M, Kazakhstan - $304 M, Iraq - $1.08 B , Tanzania - $554 M,. . . . "

Don't ya just love to read 10 paragraph stories that are over simplified so the LIDV might understand enough to regurgitate it. I will make it easier for the LIDV - USA Corporate tax rates too high. USA spending ( caused by democrats) too high.

Q. " America’s taxpayers, who will have to make up the $2 billion to $4 billion in taxes Walgreens would otherwise pay each year" A. No. See: for to cut these expenses: " Disability, it seems, has become practically a career option for too many citizens. A teacher friend of mine asked one of her high school students what he planned to do upon graduation. ‘Go on disability for my nerves, I guess, like the rest of my family.’ "

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