Let's cut all taxes and re-write the ancient tax code!

Jerry Robinson I would like to see Medtronic's shareholders NOT get HAMMERED by paying out a lot of tax... to subsidize Medtronic's "move"...

Dave... your set of choices are NEITHER one acceptable - nor do they address the root cause of what is going on.

In law right now - there are provisions against giving out contracts to "Inverters".. but loophole artist are hard at work cashing consultant checks and figuring out ways around the law.

What a disaster - just one of many...

--jr

Dave Sheppard, CMAA Jerry, what is your proposed solution ?

David Lim, Ph.D. RAC, CQA This could be a signal, calling for action for both Congress and corporations to have an amicable dialogue not a draconian version.

Jerry Robinson There are a HORDE of tax vultures working in and consulting for companies. IF you ELIMINATED ALL CORPORATE TAX... then these vultures will still need a job. They will pursue tax credits - having local governments subsidize warehouses, transport, and the list just goes on and on...

Take away the vulture's main diet - and they will just have to to find other way to sponge and eat.

******************
My solution is to:
1 - stop subsidizing offshoring - and inversion. This is not hard to do.
2 - reorganize top-to-bottom.... just who our government serves as agencies and as bureaucrats. I recognize that this may "not be possible"... but there is likely a million things that can be done - so...
a - make a list!!
b - list cost and benefit!!
c - list who benefits and who set up the government method of dealing with it...
This list does not require legislation - and can be made public.
d - rank order - by cost and benefit - all such items on the list...

example... for a double Irish Accounting Inversion and Trick... what laws allowed this? what rules or laws permit the process....? how much does it cost?

*************

would this be a start? I am sure the list could be expanded...

Paul Zalesky The "job creation" argument has been used ineffectively by a lot of politicians. There is a bigger picture with a simple concept that applies, or should apply, to every entity or company: equitability.

Wilbert van Deursen I agree with the initial assessment from Dave. US corporate tax laws seems to be fully outdated in relation to modern business. I am not a US citizen and as a result not really qualified to judge on this, however it seems to be strange that profits made outside US are being taxed IN US at this level.
The Medtronic justification of doing this has nothing to do with labor rates or job transfer, but all the more with avoiding tax on investments they would like to make IN THE US. Jobs will be transferred to locations elsewhere for every highly civilized (and taxed) country. This is even more true for a country like the Netherlands (where I live) than for the US (with much lower taxation on income and sales). I think US basically has too low taxes in that area and the government is actually profiting from the “closed” large market in that way (to enable to keep sales and income tax low).
So tax reforms will be required and rather than trying to “fix” something (that will be broken again in a year or 2), It will make sense to try to fundamentally change something. Reading about the political situation in the US currently, makes me think however, that these changes will not be easy. But if no attempt is being made, US will take the risk to fall behind for sure in this area. US is simply too much different from the rest of the world currently, but economic values are more and more global and that is what is causing this. Free enterprise does work, also outside of US. Get used to it and adapt.

Jerry Robinson With respect to a drop in corporate taxes leading to more jobs... That might be marginally true...

But I look back on all the places I worked - and I DO NOT think of any that actually hired people because the tax rate dropped... Not a one.. USUALLY - it (a) went to the owner (who was ALMOST NEVER satisfied with ENOUGH), (b) went to shareholders (who always wanted MORE), (c) paid off necessary expenses/borrowing/costs, or (d) something else...

This is place where genuine research has been done. It's been done on a large scale, too. To OFFSHORE - you need cash - and lots of it. This would be a good way to pile up some cash and offshore the business. So this is another place that tax elimination would work to offshore the business.

US tax code is certainly outdated. Loophole artist have done well creating ways to avoid paying taxes.

It is a "accepted story" that dropping taxes would create more jobs. A small effect that way does not equate to big effect proportionate to the amount of tax "eliminated".

Like Wilbert said... rules have changed for business - and people/companies have to get used to new realities. That is a good change - and may be the best effect of moving a real corporate office to another country: start thinking differently.

Daryl Mullins PMP, CSM, MBA, BSEE Don't discount the effectiveness upon ALL companies of withholding federal contracts. That "big stick" may buy the time needed to re-build the tax code. It also provides a message.

Note that while the US corporate tax rate is 35%, none of the inverting corporations are paying that rate. Latest group of inverters were collectively under 5% in my reading the coverage. Tax loopholes seemed to have benefitted them.

I agree congress should not "punish" Medtronic, and the current tax code needs to be reviewed. However, I believe Wall Street should levy out punishment. Inversion is a short-term strategy to growing business, companies need to refocus on investment in research and development.

Keith Kretchmer Fix the structure of the tax code that provides incentives for these inversions. The government can certainly also decide whether or not to provide contracts to inverted companies for goods and services to benefit the citizens and residents of the US.

I work for a company based in Massachusetts that manufactures the best women's imaging and diagnostic equipment in the world. We also have large call centers in Massachusetts. Although no one enjoys paying excessive taxes, I believe companies that feel compelled to offshore their presence should be made to pay a tariff to level the playing field. I'd hate to see what has happened to manufacturing sector, happen to technology companies.

Kevin Busto Frank, Good point. I would like to see these deserters completely cut. If your goal of off shoring is to cut your taxes, then you can not import your products back in to the US.

At the very least, a huge tariff, that not just levels the field but unbalances it adversely for the off shoring companies.

By the way, good to see Hologic is doing well.

Dave Sheppard, CMAA Matt, I agree that companies need to refocus investment on R&D. With respect to Wall Street however, the argument is that there is a fiduciary responsibility by a companies board to maximize profits thru utilizing all available tax reduction methodologies.

Daryl, your comment about the 5% is why I'd like to see a simpler tax code. I'd love to see a lower rate and less loopholes. Find a way to make it equitable for everyone and creating incentive for corporations to move their cash from bank funds into actual growth innovation investments.

James Stout The effective tax rate is already the lowest it has been since WW II. Corporate profits are the highest they have ever been. Many corporations and rich individuals, e.g., Marriott Corporation and Mitt Romney, spend exorbitant amounts to lawyers and accountants to avoid taxes, with no sense of obligation to pay their fair share. A simpler tax code will go a long way toward reducing that kind of abuse.

Jerry Robinson Paying tax is one thing...

Gov't subsidies to support Inversion and Offshoring are an extreme problem. It ALL makes it harder on people that work in the US and want companies formed in US.

We have to compete worldwide... I don't see that anyone here speaks against that. We all just want a level playing field.

As a shareholder, I despise the MDT deal because they chose to pay the tax obligation of the insiders (i.e., themselves). But, I do not blame MDT for doing the deal.

The US corporate tax code has not been updated since 1986. This is an unconscionable lapse in fiduciary responsibility from the executive office and congress.

Jerry Robinson I agree with what you say, Steve.... but somewhere along the line - nasty things that support Inversions and Offshoring DID sneak into the tax code..

At some point... when do these problems get fixed? I have no clue...

David Lim, Ph.D. RAC, CQA Having all comments taken into consideration, what actionable items can/should we propose to the Congress? I propose we list our top five actionable items with justifiable reasons/reasoning.

By using terms such as punish and job growth in your question, you pretty much make this a political statement rather than a real discussion of a tough issue. The reality is that we continue to have a business community that pays less and less taxes to the government each year at at time when we have tremendous needs for health care and infrastructure. We need to look for ways to broaden our tax base which includes major profitable corporations such as Medtronic paying their fair share.

David Lim, Ph.D. RAC, CQA Here are general assumptions although our level of perception, whether it is good/bad or right/wrong, is different.

First, corporations frequently talk about "saving costs."
Second, corporations much less frequently talk about "product quality or patient safety."
Third, corporation executives never want to talk about cutting their own salary as part of cost savings although they do once in a blue moon (e.g., when they are forced to with whatever reasons).

Using a corporate tax scheme, how can we balance and come up with the most reasonable, least burdensome "FAIR SHARE" approach and convince the Congress?

I'd like to see Congress offshore itself. Is it possible that this is the best < .0003% that 330 million Americans can find to run things? Time push ReBoot!

I applaud Medrionic for maximizing their share holder value. They are only following the rules that Congress has established. If only the government would get out of the way and let businesses create products and jobs under an understandable and competitive tax environment.

Wilbert van Deursen I still have the feeling the discussion is missing the actual point of why companies are doing this "inversion". To lower taxes: yes. But specifically to lower taxes on bringing profits across the world to reinvest somewhere else. If it would be to reinvest cash from OUTSIDE the US to another country OUTSIDE the US, inversion would not be needed. Inversion is needed to bring profits from OUTSIDE the US, INTO the US. Yes, this could be to satisfy shareholders, but it is also needed for US based investments. So NOT doing inversion basically means supporting invenstments outside the US. Like buying an Irish company.........

I believe that the Tax Code needs to be addressed. US Corporate Tax rates are entirely too high. Congress needs to reduce Corporate Taxes to maintain current US employment and to create incentive for new US job growth.

Corporation and Individuals will always try to maximize their economic outcome. Thus Government policy's & Tax changes almost always have unintended consequences as we see in this case. A tax code without all of the special targeted programs that change every few years will cause less disruption and a more efficient Medical device industry and USA economy. It is a global market so corporate taxes need to be in a competitive range. You get what you incentivize. Let's give US medical device companies an economic incentive to stay here.

Paul M. Stein I personally do not believe the current tax situation has anything to do with job creation. As R&D disappeared close to 10 years ago, with no new products, the only way to make money has been to save money. Layoffs and offshoring, being the most expedient, occurred before, during, and after the Great Recession as corporations looked to save on costs. After the massive recovery and Wall Street acceleration, few jobs and manufacturing have returned. Even if the tax code changes, the corporations will still look to save more and more money anywhere than R&D to maintain or increase profits. Eventually, this effort will fail, but that is another topic of discussion. The link of tax reform to job creation is a pure myth, perpetuated by radical laissez-faire-ists.

I have little sympathy for tax evaders.
If the US Government prefers to 'Buy American' these companies can move to America and pay American Taxes on the profits they earn from American Taxpayers.
If they expect American Taxpayers to give them a free ride and zero responsibility to maintain the country they profit off of, they may also find themselves being the object of a boycott by American Taxpayers.

Wilbert van Deursen Very well said!! I think all Swiss workers and taxpayers will also like to stop subsidizing American Taxpayers! So do the Irish Taxpayers and German and Chinese, Japanese, Brazilian, etc. At 35%, the United States has the highest nominal top corporate tax rate in any of the world's developed economies. Why would all these people that add at least 50% of the product value made by this (US headquartered) company, pay for American taxes? Why would investors? You may think this is an American company, but I rather see it as a global company. Just like many others companies that may originate in one country, but are no longer country specific. It would be good for some of us to really study on where big corporations are making their profits and on where their employees are working.
At the same time US individual income tax is lower than ever (specifically for the highest income levels!) and the income differences within the US are extreme and unhealthy for many of its inhabitants. Perhaps it is worth to look at that some more? And perhaps look at why some CEO level individuals pay a lower percentage income tax than their personal assistants?

Paul Levesque Corporate tax rates have almost nothing to do with job creation. Growing markets, innovation healthy competition a all. This is a myth driven by the politicos. Of course the tax code needs complete overhaul but its flaws should not be the justification for ever more greedy companies like Medtronic.
Someone suggested actionable solutions.
Why not reduce corporate tax rates in exchange for a sales tax e.g. 1% on securities transactions. The newly unemployed Wall Street types could then move to China and participate in in their 'majestic economy". These new ex-patriots ( ironic word) will only need to convince the politburo or "peoples central committee" or whatever to justify their $ multi-million bonuses tom of course stay competitive.

Tongue-in-cheek aside there are US corporations who will not play the foreign game by invoking the sanctity of globalization. The old HP practiced 'principled capitalism', made money, employed lots of people, and yes established foreign subsidiaries but only to support local markets. Dave and Bill became billionaires, many other shareholders became wealthy riding their dream. Fortunately there remain many great US corporations who value their American roots and home. Boycott Medtronic.

Paul Levesque
fewer@email.com

Dave Sheppard, CMAA Paul, while I understand your sentiments, do you really believe Medtronic's competitors are "clean" in all aspects of tax behavior ?

Wouldn't it simply be better to level the playing field by eliminating loopholes and simplifying tax rates ? Some would pay less and some would pay more but at least it would be a level competition.

David Lim, Ph.D. RAC, CQA I would support "action of leveling a playing field" based on a "fair-share" although there is no law which says everything should be fair: sometimes we wonder what level of (un)fairness is actually fair?

Paul M. Stein Or moral.

Terrell Williams If I have the numbers right, Medtronic has paid foreign taxes in the countries where they had earnings. That leaves $14 billion in earnings, $10 of which they say they would like to invest in Minnesota. And now they can if they follow the law and do the tax inversion. I was told that the US is the only country in the civilized world that penalizes companies from bringing their foreign earnings back home, right? The penalty is 35%

Anyone getting close to retirement should avoid investing in a company that seeks to pay more, not less, taxes, if you really could find one.

Ori Epstein There definitely needs to be some sort of US corporate tax return. Yes there is not equitability perhaps among US corporations, but think of the inequitability between US corporations and foreign corporations. How can US corporations compete in a global market if they have to pay 40% (Federal and State income taxes) versus a company in Ireland that may only have to pay 12.5% (assuming they meet certain criteria to secure that rate)?

The tax laws of the US allow for extensive deductions of operating expenses and other forms of developing or running a business. For example, any person who runs a small to large business knows that there are specific tax avoidance advantages in locating an office or production facility in an economic development zone. Another nifty deduction is establishing R&D capabilities, writing off operating expenses and a lot of other deductions can be used to lop off massive chunks of the tax bill.

Spouting off that the tax levels within the US are at 35% is beyond naive. It is purely a political statement.

I'm not saying the tax system in place now is equitable, fair or moral, but, it isn't what some would have us believe in order to justify the off-shoring or inversion tactics of US companies.

The off-shoring companies should see any incentives immediately disappear as they drain US dollars from the the US public i.e. people trying to earn a decent wage much less get a job. Off-shoring has been going on for several decades. Electronics, automotive, chemical and a whole host of other product types and corporate offices have been moved to other countries in order to avoid taxes and local labor rates. I have seen it happen first hand and been the victim of it's occurrence.

Share holders should also be given reason to assure that their income is coming from a company that is solid and has their long term investment in mind. In other words, if they want the company's products sold here, then they need to accept that the product is safely made and governed such that it will continue to be made that way. Versus finding out that the product has been so degraded with cheep components, from overseas, that it is actually poisonous. See articles about fillers made of melamine for example.

Taxes are the ugly underside of doing business. But, without them, parts of our society would unravel and a free-for-all would occur with regards to safety, security (don't even thin about get me going about the NSA), the future of society and the phrase "United States of America" would go away.

So, every pig that wants to feed from the trough, needs to understand that there is a fee to do so.

Ori Epstein "For example, any person who runs a small to large business knows that there are specific tax avoidance advantages in locating an office or production facility in an economic development zone. Another nifty deduction is establishing R&D capabilities, writing off operating expenses and a lot of other deductions can be used to lop off massive chunks of the tax bill."

As a counter, locating in an economic development zone is not a "tax avoidance" advantage. Majority of times these zones are not great areas and it has to make business sense to locate there. While states like New York have certain zones that allow for companies to not have to pay taxes for 10 years, other states like Georgia usually look for companies to create jobs and capital investments in these areas in order to reap a beneft.

The comment about R&D capabilities is a little bit of oversimplification. The IRS has pretty clearly defined what a company has to do in order to claim R&D tax credits. We work with a lot of companies on claiming the R&D credit and documenting and supporting these credits is a lot of work. My point being that in majority of cases this isn't some ruse put on by a company (although I'm sure there are those out there).

But bottom line, let's not lose sight of the fact that our politicians have demonized these corporations and are championing bills intended to hurt or cripple them. There seems to be no problem putting these bills together, but there is no movement on any meaningful tax reform.

Michael Ferguson, Ph.D. Why not focus on changing tax laws to incentivize companies to stay in US. You can't blame a company from inversion in this business environment. Policies have consequences.

A new system needs developed, its not possible for money and technology to exist together as technology cant go home and feed its family.. Every piece of technology which economizes a physical task, eliminates millions of skilled trades / labor positions (bulk of the previous workforce) and creates a few engineering / technical positions (educational positions); thus leaving huge gaps of unemployment to the bulk of the workforce. The jobs which are being created are absolutely worthless to the growth / benefit of humanity. An estimated 80% of occupations wouldn't even exist if currency was eliminated.. Its mathematically not possible to continue using a monotary system and I can prove it.

Such a coincidence that the US prison population went from 400K in early 80's to 7.9million today (2% of the US population), this happens to be when computers and automation (PLC's) hit the market.

If corporation pay our politicians then they work for the person that feeds them the most, that is the monetary system. Dich Cheney with Halliburton and Obama with GM, each have direct ties through huge campaign donations, significantly higher than his payroll.. So guess what, Obama works for GM, like Cheney worked for Halliburton.

I was a former republican till I educated myself, I was a Sergeant overseas. But I'm a mathematic wiz and its not possible and there has to be more than myself that can identify this.

James Stout Corporate taxes are already extremely low, with literally thousands of exemptions not available to human taxpayers. How about shaming corporations into setting an example of citizenship and decency? After all, to paraphrase Romney, 'Corporations are Republicans, too, friend.'

Terrell Williams After all expenses are paid (cost of sales, R%D, G&A, excise taxes.....) what is left is profit and profit is what is taxed. For Medtronic, after deductions for expenses, I estimate the tax rate for profit earned in the US at 40% (Federal, State and local income taxes that is). That leaves 60% for you as an investor in the form of dividends if, for example, you have a 401K.

Those are the facts, now apply the prism of your world view; liberal or conservative.

Michael Ferguson, Ph.D. Corporate federal tax can be as high as 35%, and an additional 5% on average at the state and local level. Granted different companies take differing deductions and lower actual taxes paid. If a company wants to go through an inversion, should we not look at the policies driving this? I don't believe anyone would argue that paying 0% in federal taxes is fair, and adequately paying for services from society. In a similar rationale, if we are taking 30+% in federal taxes, and other regions offer taxation rates at 15-20%, we should not be surprised for the move. A company, has to think of the best interests of the owners (stockholders) first. A simple solution (although not politically feasible now), is to lower overall tax rates, and remove some of the deductions. To continue to think that it is patriotic to force multi national companies to pay the highest tax rate in the developed world will lead to a continuation of inversions in my opinion, regardless of the public outcry.

Terrell Williams When it comes to bringing after tax earnings made in other countries into the United States, the corporate tax rate should not be 35%, but 0% as is the case for every other country in the civilized world.
I realize that there is the politics of demonization or successful big corporations, but having worked for Medtronic for 41 years, I'll have to admit that I don't understand that way of thinking. To the contrary, I am admittedly proud of Medtronic, and the work we have accomplished for healthcare since 1947.

Paul Levesque You should all take a look at Medtronic's financial statements before taking such opinionated and unfortunately politically-driven positions. To wit, from Medtronic's 2013 annual report:
Annual sales ~ $16.5B
Gross profit margin ~ 76% of net sales-- Among the most profitable device companies on the planet--they worked hard for that.
Profit before taxes: ~$4.3B-- about 21% of net sales--pretty good as well
Provision for income taxes: $784M . They are paying a corporate tax rate of 17.6 % --not 35%.
Net profit after taxes: ~3.5B-- about 18 % of net sales-- Also among the best!

So before we all drink the corporate PR BS and accept the far right tax mantra of "job-killing corporate taxes", consider the above, and if you really want to be entertained consider further that of the $3.5B net profit, Medtronic paid a perfectly acceptable ~$1.1B dividend to shareholders; but also paid ~$1.2B of its hard-earned profit to repurchase its own stock. The only benefactors of stock repurchase plans are of course shareholders (EPS is increased) and lo and behold stock option holders (read Medtronic execs) whose bonuses are tied to EPS growth, not to mention the appreciating stock price when they cash in their chips.

So, one of the richest corporations in the US is complaining about corporate tax rates when they only pay half of the statuary maximum and instead of investing in innovation, new products, and new jobs--they buy their own stock. Go figure

Paul Levesque

Paul Zalesky Excellent analysis!
PZ

Friends, friends, friends. You all know that politicized conversations not all the time end well, as they sometimes are emotional and will, many times, result in aggressive or irrational comments.

The Medtronic's case is very public, and is the one in today's crosshairs, but is not the first nor the last one to go through that same change, whether any of you like or not. At the same time, whether any of you like it or not, any "Invertor" will try, as any Corporation will, to increase and retain their profits at whatever cost and in any shore.

The Invertors new and old, or Medtronic, or XYZ, are not the guilty party here. This is not a case of the radical leftists "fair share", nor the hideous Corporate Oligarchs dark side , or the anti-communists hard rights.

The root cause of the problem lies solely, exclusively, in the sets of tax laws. A set that was created with more holes than the Swiss cheese we buy by the pound everywhere, that common people call "loopholes". These deficiencies in the battered tax law book are been exploited, and will continue to be exploited until that tax code is re-formatted and re-booted. Until that does not happen, these angry conversations will continue.

At the end you will see that the Corporations will win as they will fully use and abuse the current tax code as it sits in those smelly pages. Since everyone is fixated on Medtronic, look at the corporate rate in Ireland and compare it with ours.

No liquefied tax heaven, like the one advertised by the State of NY, will attract businesses to move there as at the term of the 10 years they will pay the infamous 35%, plus the State tax, plus the City tax, plus the payroll tax, where all the taxes saved for 10 years will be paid in less than 4, go ahead, I challenge you all to get a calculator and ROI it.

Conclusion?, no tax code change, more fuel to this burning fire, that continues to burn many acres per day.

PS.
Where was your outrage many years ago when Corporations decided to move to China, Costa Rica, Mexico, Vietnam, India, Pakistan, leaving a country that does not manufactures an aluminum screw, a simple PCB, an LED, a shoe. Having now a country of "service providers", retailers and cheap jobs.

We've created a tax structure that will be incredibly difficult to fix any time soon because at the end of the day, someone has to pay yet nobody wants to step up. And as our political parties will unlikely yield on the subject of who pays how much, we will have no other choice but to pass a few draconian laws prohibiting such moves. In fact, if we don't, I would predict a mass exodus.

In Medtronics case, if you only look at their current tax rate its easy to conclude and ask "what in the hell are they complaining about". However, what the numbers fail to show is HOW they achieved their current CORPROATE rate. (You need to understand if their corporate rate is what they paid exclusively to the US or what they paid in total regardless of what country they paid it to) My point is that the revolution has already begun. Moving the HQ is just the final step.

In my simple world its a simple formula.....investors punish corporations that fail to squeeze out every penny of profit they can. What one investor sees as a great return another sees as "you could have done better". In turn this drives corporate behavior. Since the Clinton administration the low hanging fruit has been around moving direct labor to lower cost geographies and in doing so, enjoy the benefits of both lower labor rates and lower taxes.

Medtronic and most other medical device corps have already transferred large portions of their direct labor workforces to lower cost OUS manufacturing locations and thus are already reaping the benefits. Most of these OUS locations offer tax rates well under 5% which when averaged in against a 35% US rate....you do the math. So if you want to play on an even playing field even the most patriotic CEO has no choice but to concede or be replaced. I personally hate the thought of closing US plants and moving them to OUS locations but what other choice does one have?

The plan is incredibly simple: make the tough decisions associated with reducing government spending and reduce the taxes. And when this doesnt happen we need to start punishing our law makers for failing to deliver against their promises. But again...I cannot see this happening so this leaves passing the BS laws to prevent the exodus which at best will be a very short term fix as we will undoubtedly find ways to get around this as well.

SOS in Washington:)

Terrell Williams Recent posts suggest that the political common ground, upon which all agree, is that owning Medtronic stock generates income (dividends plus buyback appreciation). Share holders in their choice of well-run companies, like Medtronic, have the potential for more income, form which they may be proud to pay more taxes. Everybody wins.

Jerry Robinson Terrell...

I don't think those numbers hold up...

A 10K SEC filing should provide actuals, though....

--jr

Terrell Williams Democratic Senator from Minnesota, Amy Klobuchar, kindly responded (on August 12, 2014) to a letter I wrote to her. She reported that "Medtronic has stated that as a result of this merger, 1,000 jobs will be created in Minnesota over the next five years and an additional $10 billion will be invested in the United States over the next ten years."

All of the teachers in the public school system in Minnesota must contribute to the teacher's union. If you asked young democrats coming out of that system whether large corporations should be allowed to make a profit, the answer would be no. I suspect that for a democrat, attempting to lowering the corporate tax rate in the US would be a career changing event.

Jerry Robinson Medtronic may have a plan... but a publicly announced plan may not be the one...

Is Amy Klobuchar experienced in business and strategic business planning? No... Although she is a very experienced lawyer - and has a solid background from family and growing up with education and business - she isn't an "offshoring" insider. I think that is a very good thing...

A better indicator is to look and the background and business operations of Omar Ishrak, CEO. I think you can expect a LOT OF LAYOFFS - certainly more than a 1000 - to come out of mergers and Inversion. IF the company lays off 5000 overall then hires 1000 people... then should not ignore the "net"....

It is CERTAIN that the huge amount of money, time, and effort being spent in "Inversion" is going to dramatically take away from attention on R&D and new products. That is going to have a devastating effect in the long run.... It's just simple math.

It is ALSO CERTAIN that the tax NO LONGER PAID will affect all "charitable giving" (since there is no tax to offset from), university contributions (same reason), and etc. Donations will come out of tax free "profit" - not amounts subject to taxation...

It's CERTAIN that the little that Medtronic DID PAY in income taxes - will now have to paid by your fellow citizens - and yourself... or else inflationary printed by our mutual US Govt. That's simple math, too.

I know what you are saying about students coming out of school... we sure agree... why an University Dean should be making 220K and the President making 562K (as happens here in TEXAS) - when the PhD Graduation rate is 27% is something those
"new grads" ought to agitate about...

Terrell Williams One of the tenants of the Medtronic Mission has to do with good citizenship in all communities where they have operations world wide. That won't change.

Medtronic has been a global company for decades and perceives the need to focus more outside the US to realize the Mission vision of tenant #! (...alleviate pain, restore health and extend life), and that is why my job was eliminated, even though I am named on 47 US patents owned by Medtronic. In fact, I am still a freelance inventor.

It's no fun any more to try to help visionary doctors with intuitive new medical devices to test on perhaps dying patients. As I have said before, the first wearable pacemaker which was not seen as appropriate by the average cardiologist or surgeon at the time, did not take 10 to 15 years of R&D for commercialization. In fact, I learned at the U of M that from the first use in an animal to the first commercial use in a child was less than 24 hours. Obviously, that approach, which we like to call ready-fire-aim, saved countless lives due to speed to market. So, one way to remain competitive, in my opinion, is to get far away from FDA for more freedom to innovate. That means, invest in R&D where the dollars are effective, then bring new technology back to the US, as has been done by getting clinical approval Europe first, for many yeas, but not so attractive any more.

Back to the main point of discussion, the concept of punishing of law abiding, successful organizations is silly, but not necessarily ineffective in moving companies out of their comfort zone, into more productivity global environments.

Its always funny, the word "loophole" gets tossed around when someone does something that another doesnt like, yet is totally LEGAL. To use the argument of being un-American is also a lame argument.

I also wonder how many of these "law makers" even really understand the medical device industry enough to see that the Covidien / Medtronic merger makes excellent market sense as they really do compliment each other in the others blind spots.

The fact that the inversion takes place is clearly a fair and legal component as well and just makes even more sense to pursue.

As others have mentioned here. Fix the current tax system and dont penalize the players who play the current system.

Paul M. Stein It IS fun to help visionary doctors...just not at places that don't have that same ideal, however. We all know the names of those places, where lawyers and bean counters, and acquisitions, layoffs, off-shoring, and other sundry "cost-controls", all trump good ol' R&D. Should those warm souls who truly wish to do good finally abandon those places? And, should that sort of corporate laziness and diversion from their original, lauded missions be "punished"?

Jerry Robinson Gloriously accurate comment, Paul...

I am helping a startup. We have very little money... All of these issues - create an extremely turbulent startup landscape.

As a first hand "backup" of your comments, there was an Irving, TX med-tech company looking for a Senior Electrical Engineer - with 5-10+ years of experience - mostly in Med Tech to do "leading edge design and development". They were offering effectively $13 per hour - with no benefits under "contract". Since Costco offers shelf stockers $13.65 per hour (plus some benefits).. that gives a good idea where the result of "offshoring" and "fraudulent business practices" may lead.

Joseph.. I would like to remind you that Slavery was legal for almost 100 years in the US - early in this country... It was a bad idea that led to terrible consequences, though.

Those of us who DO pay taxes - resent Inversion and Offshoring. We KNOW that millions of Americans do NOT have jobs because of this. You can NOT blame some other country for the rules that we get "snookered" with.

GE plays in health care. They figured out how to NOT PAY BILLIONS of dollars in taxes - and get government "refunds" as well... All of us tax payer - get to pick up thier bill - and give them a check to boot. This is a problem.

Jerry Robinson Terrell...

In the past, Medtronic has done great things - and done a lot of good. But the management is a whole new crew these days....

The possibility of fixing the US tax system - is likely beyond the realm of possibility at this point. Offshoring and Inversion AREN'T just about tax code anyway.. there is a lot more at stake..

For US competitors of Medtronics, it also means that they are going HAVE to Invert or Offshore. This would be necessary in order to compete on a level playing surface. IF THEY CHOOSE NOT TO - then they are GOING TO HAVE TO GET CREATIVE.....

For a startup, it means that "we" must be extremely agile and creative - in order to play against "big companies" with powerful tax advantages. I think this is possible, but will likely make what remains of hair - turn white (it's already grayish.. see the photo at left).

Paul M. Stein Jerry, those who make that startup attempt will be the New Medtronic's. It's definitely worth the try.

James Stout One wonders what people who post here are reading, what happened to their presumably superior education. Economists of all political stripes have been telling us for years that the factors that influences job growth most are policies that increase consumer demand. Tax rates for corporations and wealthy individuals have virtually zero effect upon job creation.

Ken Brown If our Socialist Government wants to punishing Medtronic for lawfully structuring themselves to save money then they should punish every American citizen who shops Wal Mart instead of paying more at local stores. The federal government controls the tax code, if you don't like the scenario that multi-national companies are incentived to move jobs to Ireland then change the tax code to the point it is no longer adventageous to move jobs to Ireland. You don't even have to give a tax break to all corporations, just target those they may potential shift jobs due to tax reasons. Don't punish someone for playing by the rules, make the tax code fair relative to Ireland and other tax havens and jobs will come back on there own because will make more business sense to do so. It's not rocket science (although we do that better then manage this country).

James Stout Ken Brown: Of course our government is socialist. Every government today is some mixture of socialism and capitalism. Socialism is just the government providing goods and services that the private sector could. Examples written into the US Constitution are the army, the post office, the patent office, customs collection, etc. Our government also used to operate armories. So calling our government socialist as if it were some kind of evil thing is meaningless, and also shows a lack of understanding of basic political theory.

Ken Brown James Stout: The issue isn't whether this country has, nor always has had some socialist elements to it, it's a question of whether this country is predominately characteristic as being capitalistic or socialistic. For the first 200 years of our existence we were predominately capitalistic. We have now, unfortunately become predominately socialistic. Hence a government seeking punishing someone, be they an individual or corporation, for making a free, legal choice that they wish did not make for government's controlling selfish reasons; something that common place in Soviet Union. Yes, I believe socialism is inherently evil. I was military officer during height of the cold war. And while some European nations have successfully inistituted a less totalatarian form of Socialism, is still stiffles free will and true indepedence. America was a much greater and more admired nation in the 20th century than we are in the 21st. While I can't blame all this on shift from capitalism to socialism, that is just one symptom of the moral decay that is slowing killing what our Founding Fathers started. I have a good understanding of political theory and economics (since capitalism and socialism are actual economonic, not political systems, but they are closely connected).

Jerry Robinson Ken...

I certainly agree with your positions.. What I have a problem with is government subsidies (of various kinds) for Inversion and Offshoring that lead to entire industries being eliminated from the US. Medtronics is Inverting perhaps because of the nature of those subsidies. Textiles are essentially GONE from the US. Food production involving manufactured goods and many farmed goods is also headed offshore - or just plain gone. Shrimp production is one item... Vaccines are another item.. generic pharma is another item..

Objectively - and factually - why are these industries gone? Perhaps it is because companies that operate offshore are more shielded from lawsuits... more shielded from US Govt oversight.. more shielded from US securities controls and rules.. The list just goes on and on...

Terrell Williams Thanks, Ken Brown.

James Stout Why is the assumption that it is an either/or question? Congress can create a better environment for jobs by encouraging consumption, such as by raising the minimum wage. This is what almost all economists, including several Nobel Laureates, are recommending. Corporations that shirk their public responsibilities like Medtronic, by moving their headquarters offshore, and Marriott, by spending millions on accountants and tax lawyers to further reduce their already low tax burden, deserve sanctions. These are two separate issues.

Terrell Williams For those who like to punish big corporations, you should be gratified that there are still two legitimate entities who are more than capable of punishment. Those are the owners (share holders) and customers. (For example, I learned in 1979 that doctors don't implant pacemakers that don't work very well, government notwithstanding.)

Jerry Robinson I am not interested in "punishment" or "persuading congress". I think creative energies, time, and effort end up wasted - when being diverted to political sinkholes. With minor exceptions, our Congress is mostly interested in VOTES.. When I see money spent in the campaigns... who do you think ends up with the income and profits from that process?

All the money spent on Inversion, Offshoring, political "handouts", and finagling - is time and energy diverted from improving device innovation, new inventions, and a real attempt to cost reduce medical care.

James... we don't need sanctions.. really... these things will eventually blow up the companies involved - should the decision be bad. BUT, it could also remake the company in a better or more creative organization. This second possibility does not seem likely given the level of health care fraud and bungling.

Dave Sheppard, CMAA The bottom line is that we (consumers, employees, payors, etc) bear the burden of whatever tax policies are in place. Corporations exist to make profits. Corporations will ALWAYS pass their costs along to other stakeholders whenever possible. Therefore, doesn't it make sense to actually find meaningful tax reform that is equitable AND is also stimulative to the economy (jobs, incremental taxes, etc) ?

Jerry Robinson Corporations DO NOT always exist to make profits.. EG: 501(c) Corps....

Often.. Corps are structured because of writeoffs that are available - that the average person does not have access to...

If you want to pass profits through, then structure as a LLC - or figure out something more creative....
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That said... I like that Corps can work to limit tax consequence. The RULES are out of wack, we can both agree. But if you think that CONGRESS is going to structure a new, "fair " tax structure... then I certainly disagree...

The REAL problem is that US Jobs and work is subsidized toward offshore - in a lot of fashions. Good accountants know this. They could make suggestions - that would really fix the problem.. but I don't see them posting here... Why not?.... Good Question!! Big Pharma has move offshore - in a major way... why? Where is a good case study? Why should US Universities continue to educate in Pharma careers when the jobs are gone? And this happens a LOT... There are more things that could be talked about

As was posted on this discussion.. . Taxes - just aren't really the motivating factor behind what we see as companies move offshore - manufacture offshore - or INVERT to offshore. It's a mutually incestuous relationship as "foreign" companies and financial institutions come "here" for their own tax travails...

I am all in favor of "Peace on Earth and Goodwill Towards Men (Women, too....)"... But I think that will happen before Congress gets around to equitable tax reform...

Terrell Williams I have run out of loopholes. The one I liked best was writing off the interest I paid on my mortgage, but that was paid off. Should I buy a bigger house and start over?

What's your favorite loophole, or are you too patriotic to write off legal expenses?