The Free Press, Mankato, MN

State, national news

June 17, 2014

Medtronic's tax plan prompts calls for tax reform

Members of Minnesota's congressional delegation expressed concern Tuesday about Medtronic's plans to relocate its corporate headquarters to Ireland as part of its $43 billion acquisition of Covidien.

Such a move could potentially have a big effect in lowering Medtronic's tax bill to Uncle Sam. The planned deal comes as lawmakers say they want to overhaul the tax system — but remain deadlocked as to how.

To the members of the Minnesota delegation, the Medtronic deal speaks to a commonly held sentiment among members of Congress from both parties: The tax code is a mess that encourages corporations to shelter money overseas. The Medtronic deal, legislators say, highlights that problem, one that has companies spending too much and money determining how to avoid taxes.

"We don't need more lawyers and accountants or compliance officers ... to go through the machinations of how should companies be taking advantage of different deductions," said U.S. Rep. Erik Paulsen, a House Republican who sits on the tax writing Ways and Means Committee.

Democratic U.S. Sen. Amy Klobuchar agreed.

"We have a serious need for comprehensive tax reform," Klobuchar said.

Medtronic has nearly $14 billion parked overseas. If it brought the money back to the United States, it could be subject to the 35 percent corporate tax rate, the highest in the world.

But if Medtronic moves its headquarters to Ireland, the money would be subject to its 12.5 percent corporate rate.

Medtronic officials say by taking advantage of the lower rate, the company will be able to spend billions more in the United States.

Lawmakers have been talking about overhauling the nation's tax laws for years now with little to show for it, said Steven Rosenthal, a senior fellow at Tax Policy Center in Washington.

"There's a lot of disagreement about what tax reform would look like," he said. "Republicans generally view tax reform as a way to cut taxes and Democrats generally view tax reform as a way to shift the tax burden."

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