WASHINGTON - There's a much bigger, largely untold story behind the renewed debate over U.S. corporations who merge with foreign firms to reduce their federal tax bills.
The latest chapter in the story concerns Walgreen, the nation's largest drugstore chain, which plans to go ahead with a cash and stock purchase of a Swiss company that could have resulted in a big tax cut on its corporate profits.
Walgreen, however, decided against moving overseas, saying it plans to keep its corporate roots in the U.S. But the back-story involves far more fundamental issues that the news media either played down or ignored entirely.
It has to do with our 35 percent top corporate tax rate, the highest in the industrialized world, and why it's forcing U.S. businesses to move abroad, sometimes by merging with foreign firms; why it's hurting capital investment, job creation and economic growth here at home; and why President Obama's policies are in large part responsible for what is happening in the corporate world.
While Walgreen abandoned its plan, dozens of other corporations were considering moving abroad, costing tens of billions in lost federal revenues unless changes are made to eliminate tax loopholes and other exemptions.
Another part of the story deals with a failed, bipartisan effort in the House and Senate to overhaul the IRS code to do just that in order to lower the tax rates, an idea Obama stopped dead in its tracks. More on that in a moment.
Last month, CVS Caremark's chief executive Larry Merlo urged Senate leaders to get busy on tax reform to prevent the flight of major corporations seeking to avoid punishing tax rates that this year could reach 40 percent.
If nothing's done to change the tax code, Merlo warned that CVS "might be forced" to join other firms preparing to move their corporate headquarters abroad.
"What we're seeing is one more manifestation of why the business tax structure needs to be fixed," said John Engler, the former Michigan governor who now heads the Business Roundtable, a blue chip association of top chief executives.
"We're the proverbial frog that's being boiled in the water, and a few frogs have decided to jump out," Engler said.
If anyone is looking to the White House to deal with this looming economic disaster, they can forget it.
As usual, Obama saw this a political opportunity to once again play the Democrats' class warfare card for all it was worth -- questioning the patriotism of business executives whom he called "corporate deserters."