Surprise, surprise. President Trump’s “tax reform” only privileged the wealthy and well-connected—Big Pharma chief among them. What went wrong and how Oxfam is teaming up with investors to flip the script.
ICYMI, President Trump’s signature achievement—the 2017 Tax Cuts and Jobs Act—has been a flop. One year since passage of the most sweeping tax changes since the Reagan administration, the promised benefits of the bill as a boon to all—higher wages, a simpler tax code, more long-term investment in the economy—are looking more and more like a pipe dream.
As many feared, the new law is instead super-charging our inequality crisis. The top 1 percent of US households will get a $50,000 tax cut this year, the top 0.1 percent an almost $200,000 windfall, and the bottom 40 percent of households will receive an average tax cut of, wait for it….$440. What’s more, early indications suggest the 2017 tax overhaul could prevent countries around the world—including many low-income ones—from raising on average 13 percent of tax revenues previously received from multinational companies.
Big Pharma’s Early Christmas
For corporate America, the Trump tax cuts have been about as healthy as a sugar high after too much holiday cake—momentarily boosting company earnings in the form of stock buybacks, where companies buy their own shares to increase their value. At a time when investments in infrastructure, public health, climate adaptation, and development aid are desperately needed, US companies are on track to spend $1 trillion on buybacks this year alone.
Take Big Pharma. One of the biggest winners of Trump’s tax cuts, the sector could have spent its payouts on decreasing drug costs, developing life-saving medicines, boosting their workers’ wages, or even backing efforts for universal health coverage. Instead, the 10 biggest US drug companies took what was taxpayer money and purchased $52 billion of their own stock in the first three quarters of 2018.
Imagine what that kind of money could do for public health systems in the US and around the world. Fifty-two billion dollars. That could pay for the US Children’s Health Insurance Program almost three times over. That sum could close the financing gap to meet universal health coverage in 67 developing countries—saving 97 million lives.
These actions are symptomatic of a larger auto-immune disease afflicting corporate America. Instead of investing in long-term productive investments by supporting a strong tax base, its leaders seem fixated on the quick buck, using all the cheapest tricks in the book to eat away at the value bundled in their own companies.
A Prescription for Poverty and Inequality at Home and Abroad
Taxpayer money shouldn’t be a cash cow for investors and company execs. That’s why we recently published an exposé illustrating just how much some of the largest US drug companies systematically avoid taxes, artificially inflate prices, and rig the rules in their favor—with deeply disproportionate effects on women and girls here in the US and around the world.
After combing through the balance sheets of Johnson & Johnson, Pfizer, Merck, and Abbott in 20 countries, we found that these four companies alone appear to have dodged $3.7 billion in taxes in nine countries in 2015, including an estimated $2.3 billion in the US. This is particularly galling for Johnson & Johnson that claims in its company credo to “bear our fair share of taxes.”
When pressed, execs at many companies argue their primary duty is not to society, but to their shareholders. But the truth is many of corporate America’s shareholders care deeply about investing in companies that act in the public interest over the long-term—Oxfam included.
Flipping the Script
We at Oxfam are teaming up with responsible investors to push Big Pharma to pay its fair share of taxes, reduce inflated drug costs, damper bloated CEO pay, and push back on its super-sized lobbying influence.
Yep, you heard that right. We’re flipping the script.
We recently filed shareholder resolutions with these four companies on each of these issues. We’re calling on investors to shine a spotlight on company executives who are personally benefitting from the 2017 US tax bill by juicing stock prices through buybacks while selling their own shares. We’re pushing for details about their political lobbying. And we’ll be working with shareholders to better assess the extent to which executive compensation appropriately measures risks relating to drug pricing and its contribution to long-term value creation.
All together, we’re questioning a business model that is not only fundamentally unjust, it’s also risky. In the aftermath of the 2018 US election—which saw key proponents of the GOP tax bill voted out of office—Democrats are poised to place renewed scrutiny to the way US drug companies use their influence in Washington. And as evidence mounts of Big Pharma’s tax trickery, tax authorities worldwide could force companies to pay millions of dollars in back taxes if their audits reveal the worst.
This might be the kind of material, financial risk that Big Pharma’s shareholders just can’t stomach.
Stay tuned and stay active to support this movement to force US drug companies to take the high road when it comes to tax justice, access to essential medicines, and undue influence over our democratic process.