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If You Love Something, Tax It Less

by Nan Swift / /

The big, though not unexpected, news from the pharmaceutical industry today is the merger between drug-maker giant Pfizer and smaller Allergan, PLC, the latest major corporate inversion. Marketplace reports:

In the case of the Pfizer-Allergan deal, the smaller company, Allergan, will technically "buy" the larger Pfizer. This will allow Pfizer to take advantage of the tax rate in Ireland, where Allergan is based. That could mean paying an effective tax rate of 15 percent instead of 25 percent.

This comes despite recent actions on the part of the Treasury aimed at making it more difficult to engage in such a merger, the policy equivalent of throwing up a few more fences for corporations to climb over.

Critics of the deal – which could benefit Pfizer in numerous ways outside of just taxes – cite this as proof Congress needs to do more to keep corporations, along with their jobs and earnings, here at home. NTU would agree that Congress needs to take action, but that’s where the similarities end. For lawmakers on the left, “doing more” entails more roadblocks aimed at hemming in corporations and painting businesses that move overseas as “unpatriotic.”

Rather than creating more challenges for business, lawmakers should be taking steps to make the U.S. more competitive so that corporations WANT to operate here. They should start with cutting the corporate tax rate, currently the highest in the developing world. Making permanent deductions for investing in capital and research, and eliminating the employer mandate are just two of a myriad of other ways that Congress can improve the business climate, bringing with it much needed jobs and economic growth.

The more Treasury and lawmakers tighten the screws, the less businesses will want to grow or invest in here at home. Instead of getting angry and bemoaning corporate flight, lawmakers should take steps to make the U.S. a welcoming place where corporations want to go in the first place. The old adage that you catch more flies with honey than vinegar holds true, even in the business world.