Tuesday, May 13, 2014

What the US Government is Doing That is Causing Me to Defend Pfizer

By Simon Black

I have to start by telling you that I have absolutely no love for big pharmaceutical companies.

Can't sleep?  Sleep too much? Stressed out? Need energy? Too much energy? Too fat? They've got a pill for all of that.

Forget about living a healthy lifestyle. They've helped turn practically the entirety of western civilization into a bunch of pill-popping drug addicts who focus on treating symptoms rather than addressing the underlying root cause of disease.

All that being said, I am reminded of a quote by Evelyn Beatrice Hall; in her biography of Voltaire, Ms. Hall wrote "I disapprove of what you say, but I will defend to the death your right to say it."

I disapprove of much of the way the big pharma industry operates. But I still think they should be free to
conduct their business.

But as I was flying in to Santiago from Dallas overnight, I read a troubling story in the Financial Times about Pfizer's bid to take over British drug company AstraZeneca.

One of the prime reasons that Pfizer is so interested is because the takeover would afford them the opportunity to redomicile the business in England.

Why do this? Because right now they're paying US corporate tax... which is substantially higher than in the UK.

So by moving the business abroad, the company would save shareholders billions.

Uncle Sam has a big problem with this. And Congress is jumping all over Pfizer to block the deal... even going so far as to propose RETROACTIVE legislation.

In other words, they're willing to go back in time to kill the deal before it even gets started.

(I'm reminded of the first Terminator movie when I think about this approach...)

The FT quotes Oregon Senator Ron Wyden as saying "I don't approach retroactivity in legislation lightly, but corporations must understand that they won't profit from abandoning the US..."

Ummm, actually that's the whole point, Senator. The tax situation is so onerous that people do profit when they leave the US. That's WHY people leave the US. Duh.

But like the drug companies themselves, Congress isn't looking at the root cause. They're treating the symptom.

In this case, the symptom is American businesses heading overseas to escape the highest tax regime in the developed world.

The federal corporate tax rate alone can be as high as 38%, and that's before including state corporate taxes, or personal taxes on the dividend distributions to shareholders.

And that is precisely the underlying cause: everyone is taxed to the hilt so that the government can continue squandering it all and indebting future generations.

Anyone with the means can see the writing on the wall and is opting out of this system.

Bear in mind that what Pfizer is proposing is completely legal. There are no laws that prevent the company from acquiring another firm and moving the headquarters abroad.
None of this seems to matter.

'Cuz hey, why bother making the tax code more competitive and cleaning up the balance sheet when you can just threaten people at gunpoint?

As much as I dislike the industry, preventing Pfizer from leaving is a form of financial slavery. At a minimum, it's a form of financial repression and capital controls.

And this is something that should concern everyone.

Simon Black is Senior Editor  at SovereignMan.com. Follow Sovereign Man on Facebook, Twitter, Google+


  1. While I agree with regards to income taxes, Pfizer, like all the big drug companies is just too connected to the federal government (FDA, etc) for me to defend them. If congress really wanted to hurt them, they could just get rid of their regulatory advantages. But they won't do that, because when it comes to buying influence those in congress and regulatory agencies don't seem to care where a company is based so long as the checks clear or there is a high paying job for them on the other side.

  2. Another example of the failure of "limited government" provided by the Constitution.

    Article I, Section 9 prohibits Congress from passing "ex post facto" laws. The Constitution doesn't limit that to criminal law, it just says "No...ex post facto law shall be passed". That pretty much ended when the Supreme Court came to the conclusion that the clause only applied to criminal law, and even then there are exceptions. So, now we have Congressliars who pass laws to punish companies for doing things that are perfectly legal.

    What a joke.

    1. The federal government is not in the habit of adhering to the constitution, so the prohibition against ex post facto laws is unlikely to matter to in this case.

      Furthermore, the Supreme Court is not to be trusted as the sole and final word on interpreting the constitution. The highly expansive interpretation of the commerce clause and the taxing power (for example) do not prove drug prohibition and Obamacare to be constitutional so much as they demonstrate the near-hopeless illegitmacy of the Supreme Court and perhaps the entire federal government by extension.

      If the Supreme Court ruled that the prohibition against ex post facto laws does not apply to civil law, that would be further proof (in my opinion) of the Supreme Court's illegitimacy.

  3. Meanwhile in Britain, Pfizer's CEO is in front of parliamentary committees to defend the takeover against the politicians who are worried they'll gut AstraZeneca and hire fewer brits. It's all part of the pantomime.

  4. Whole-heartedly agree. Great article Simon.