Tuesday, August 26, 2014

Walgreens' Founder Wouldn't Approve Company's Unpatriotic Tax Dodge 

By Jim Burke

Charles Walgreen Sr., founder of the nation's biggest drugstore chain, would not approve of what the management of his company is planning. He would never have considered moving his headquarters address to a foreign country just to avoid paying the company's fair share in U.S. taxes. He loved his community and country too much.

How do I know? Because I'm the mayor of the small city in Illinois where Charles Walgreen spent his formative years, went to public school and had his first experience working in a drugstore. Later, after Walgreens bought a pharmacy in Chicago and grew it into a hugely successful chain, he became a major benefactor of the city of Dixon because he believed that a good business gives back. Now, instead of giving back, the company he founded soon may turn its back on our nation.

Walgreens' management may decide by the end of July whether to renounce its corporate "citizenship" in the United States.

To be clear: the corporation wouldn t move any of its 8,200 U.S. stores overseas. It likely would not move its management, employees, or headquarters offshore. Just its corporate address would change -- on paper -- from Deerfield, Illinois to somewhere in Switzerland, a tax haven country. With that simple switch, the company would avoid $4 billion in U.S. taxes over the next five years, according to a recent analysis.

Walgreens would still derive almost all of its $72 billion in annual revenue from loyal American customers. A quarter of that income comes from public sources -- Medicare and Medicaid prescription payments. Even if you don't shop at Walgreens, as a taxpayer, you're aiding its bottom line.

Even with its new offshore address, Walgreens would still benefit from all the services U.S. taxes pay for -- from roads to education to stable markets to our legal system to national defense. But it would pay far less for that privilege, leaving American taxpayers to pick up the tab.

I'm not anti-business. I'm a small business owner myself. I believe in free enterprise. As mayor, I encourage economic development and the jobs it creates. But I also believe that Americans have the right to expect that the corporations they support with their patronage should return their loyalty.

That's how it worked here in Dixon -- and we can thank Charles Walgreen in large part for that. He saved the Dixon National Bank during the Depression, donated 100 acres to create Dixon s public golf course, established our municipal airport and even helped erect a statue to another Illinois success story, Abraham Lincoln.

Like Lincoln, Walgreen rose from humble origins. Charles R. Walgreen, Sr., was born to Swedish immigrants on a farm near Galesburg. At 14, he moved with his family to Dixon, where he attended public school, played sandlot baseball and swam in the Rock River. He worked in a local shoe factory, general store and finally found his true calling in a drug store.

He started his business after moving to Chicago as a young man, but soon returned to Dixon. And as his business thrived, he made sure its home thrived as well. Now his successors want to abandon that ideal by abandoning our country.

Walgreens wouldn't be the first corporation to try this change-of-address tax dodging trick -- more than 75 others have done it since 1983. And at least a dozen other companies -- including AbbVie, Medtronic, Mylan and others -- are quietly planning to announce their own plans to abandon America.

If Walgreens becomes the first big retailer to abandon the United States, it could start an even larger tide of corporate defections that could cost U.S. taxpayers almost $20 billion over the next 10 years according to the non-partisan Joint Committee on Taxation. More and more U.S. corporations will unscrew the nameplate on their U.S. headquarters building, tack it up in a tax haven offshore and dodge billions in U.S. taxes -- all while continuing to receive all the privileges and benefits of operating here in America.

Where is their sense of shame? Where is their patriotism? Where are the morals that guided Charles Walgreen?

Unless Congress acts, we won't be able to block these shady maneuvers. But I expect that many Walgreens' customers may vote with their feet and pocketbooks, passing by the local Walgreens to shop at another drugstore chain or a neighborhood pharmacy that is paying their fair share.

Walgreens executives say they still haven't decided whether or not to pull off this accounting sleight-of-hand. Before they decide, they should give some thought to their founder -- and also to a young kid who used to caddy for him at that public golf course he built. The caddy's name was Ronald Reagan, another Dixon native, whose patriotism and sense of public duty were surely encouraged by the example of Charles Walgreen.

Burke is mayor of Dixon, IL.

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