Pfizer, the makers of Viagra have agreed to buy Allergan, the makers of Botox for $155 billion. It sounds like destiny. Pfizer isn’t buying Allergan only for the drugs though. A big motivation for the deal is the tax savings. Post-acquisition, Pfizer will shift its tax base from the U.S. to Ireland. Ireland has one of the lowest corporate tax rates in the world at 12.5%. The U.S. has one of the highest.
The pols will of course demagogue Pfizer for abandoning America, but our tax code is a national disgrace. How are American companies supposed to compete with their foreign counterparts when they have to pay double what their competitors do?
We are now not only a nation that outsources jobs we are increasingly a nation that outsources companies. The blame for this trend lies squarely at the feet of this president and this Congress.
Our leadership apparently believes it’s possible to run an economy without labor or capital. Currency manipulation—our Congress says meh. A byzantine tax-code—our president thinks there are bigger fish to fry.
Maybe we can all just get jobs working for the Federal Government at $120,000 per year. Who will pay our salaries when tax collections from the private sector plummet, you may wonder. Easy, Mrs. Yellen has carte blanche over the printing press. The Fed can just print all the dollars the government needs to pay its bills. It sounds brilliant—almost too good to be true.
You can read the details of the Pfizer-Allergan deal here.
Jeremy Jones, CFA
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