Medtronic, Taxes and Paulsen’s Trip to Ireland

Did you hear the news ? ? ?

Medtronic’s board approved a 9% increase in its cash dividend, raising the quarterly amount to approximately $0.31 per share of the company’s common stock, which would result in an annual amount of $1.22 per share. The decision reflects the company’s commitment to return 50% of its free cash flow to shareholders and underscores the confidence of top-level management.

Wow … a company so committed to shareholder value … even though Erik Paulsen fears the “onerous” 2.3% Medical Device Excise Tax is killing the industry.

That news may have been overshadowed by the announcement that has put Medtronic in the headlines.

Medtronic and Covidien are riding high on their recently announced $42.9 billion merger–a deal which will pay dividends further down the line and expand the companies’ hospital access.
Through the deal, the combined company will make a $10 billion technology investment in the U.S. over the next 10 years, funneling money into early stage venture capital, acquisitions and R&D. The purchase also holds positive implications for Medtronic abroad, as the company will benefit from Covidien’s considerably lower Irish tax rate.
Covidien had a 14.7% effective tax rate in 2012 while Medtronic had an 18.4% tax rate in 2013, according to The Wall Street Journal.

Representative Paulsen issued a press release reacting to the merger :

“As co-chair of the Medical Technology Caucus, I am saddened that a homegrown business, started in a Minnesota garage, will be moving its headquarters overseas. This clearly highlights the need to fix our broken tax code so American companies can be more competitive.
“U.S. companies currently not only face the highest tax rate in the industrialized world, but they also have to pay what amounts to a toll to bring their foreign earnings back to America. These tax burdens mean fewer American jobs, less American innovation, and fewer companies headquartered in the United States. In 1985, 17 of the top 20 businesses in the world were American – that number now stands at 6. Clearly, the tax code has not kept pace with the modern economy.
“Without comprehensive tax reform we will continue to see companies choosing to relocate overseas. We should strive to make the U.S. the best place to start and operate a business.”

Representative Paulsen’s press release is really “Gosh, I hope the taxpayers don’t remember that I have been talking about tax reform for years … and that the House Republicans have failed to fully embrace Dave Camp’s (R-MI-04) Tax Reform Act of 2014 … leading to a Politico report :

Republican elites on Wall Street and elsewhere in corporate America are now actually cheering inaction in Congress as preferable to ideas such as Camp’s. “The Camp draft catalyzed most of the business community around the notion that it was so bad, and it’s not just private equity and financial services — there were so many other punitive measures in there — that people just decided, the whole system’s broken here, nothing’s going to get done,” another senior Republican business leader said. “And that’s what we need to work toward. We need to work toward gridlock.”

Yet, Representative Paulsen knows all about Ireland and its taxes.

Did you know that he and his daughter (according to the filing with House Committee on Ethics) went to Ireland on an expense-paid trip courtesy of The Ripon Society starting August 10, 2013.

SIDENOTE : The form states : “This form does not eliminate the need to report privately-funded travel on the Member or officer’s annual Financial Disclosure Statement.
Yet, Representative Paulsen’s Disclosure Statement fails to list this “gift”.”

Representative Paulsen was scheduled to participate in two panels :

Health Care and Pharmaceuticals : With nine of the top ten global pharmaceutical companies located in Ireland and seven out of ten pharmaceutical blockbusters being produced in Ireland, this panel seeks to create a dialogue on the role of government in health care innovation.

Tax Reform and Financial Services : Since 2003, Ireland’s corporate tax rate has been 12.5%, which is among the lowest in the industrialized world. And when compared to the U.S. rate of 39.1%, the difference for a company making business decisions in our increasingly interconnected world is stark. And talk of comprehensive tax reform is currently at the forefront of U.S. policy debate, this panel seeks to explore what the U.S Congress can learn from Ireland about their tax reform efforts.

Hmmm … the corporate tax rate is supposedly 39.1% yet because of tax credits, Medtronic only paid 18.4% … yep, we gotta close them loopholes !

Gosh … so Representative Paulsen goes to Ireland on a “free trip” to lead a panel on tax reform, and he expresses amazement that Medtronic is going to Ireland … why did he not see this coming and promote a solution ?

How long do we wait for House Republicans to vote on Dave Camp’s complete plan … instead they are passing permanent tax cuts and no reform … driving America fiscal future off the cliff !

The talk of Medtronic is important … but so is the fact that Representative Paulsen omission on his Personal Financial Disclosure form.
The funding for this trip to Ireland was handled by the Franklin Center for Global Policy Exchange, which the New York Times describes as an organization that “seems to exist largely to sponsor Congressional travel.”
The filing pegs the cost of the “gift” at $5,480.73.

It has been noted before that Representative Paulsen (and his daughter) also traveled to Africa last year on another gift … how many more trips has Representative Paulsen taken … and why are they not listed on the Personal Financial Disclosure form ?

The public should be concerned.
No one will ever know the exact nature of the discussions Representative Paulsen had in private on this trip.
We remember the good old days of lobbyist Jack Abramoff when congressional perks became expected for certain Republican Congressmen.
Sadly, this is just another opportunity for wealthy interests to further their agendas through close proximity to lawmakers and the promise of future all-expense-paid getaways.

In the meantime, better plunk down a few investment dollars in Medtronic … after all, John Boehner did.

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