Medtronic move shows U.S. in need of reforms
The chairman and CEO of Medtronic, Omar Ishrak, recently said the company is planning to spend $42.9 billion to acquire an Irish company that makes medical devices. In the merger, Medtronic will move its corporate headquarters from Minnesota to Ireland to take advantage of Ireland’s lower corporate taxes, and to access the billions in foreign profits it has stashed away.
Medtronic says it plans to keep its operational headquarters in Minnesota, that no jobs will be lost due to the acquisition, and that Medtronic intends to create 1,000 new medical technology jobs in the next five years.
“That is tremendous news for Minnesota and evidences the company’s continued commitment to our state,” said Gov. Mark Dayton, missing the bigger picture.
Medtronic’s decision is a sign that the corporate tax law in Minnesota and in the U.S. is flawed, driving companies to set up corporate headquarters in foreign countries to escape the higher tax rates in the U.S., and hindering further investment in this country.
By moving its corporate headquarters to Ireland, Medtronic will be able to take some of the $14 billion in foreign profits and use it in the U.S. without having to pay U.S. corporate taxes. Medtronic said it will be investing $10 billion in its U.S. operations over the next decade. Would it do so if it remained a Minnesota-based company that would have to pay taxes on those foreign profits at a 35 percent corporate tax rate? Or even the 17 percent rate that Medtronic pays, thanks to its accountants? Probably not.
If this corporate shuffle is necessary to allow Medtronic to invest more and grow its operations in Minnesota, then this merger will benefit Minnesota. But the fact that Medtronic has to do so should be a signal to Congress that it is time to put partisanship aside and make some common sense changes to the tax code.