Take the Medtronic merger with a grain of salt

Minnesotans should be wary of promises they have made.

Ronald Dixon

After receiving court approval last week, the iconic Minnesotan company, Medtronic, completed its merger with the Irish-based Covidien, a move that could save Medtronic billions in taxes.

I have written about this issue previously. Last summer, when the news originally broke that Medtronic was planning to leave the United States, I said that, in response, the federal government needed to pass a few reforms. First, it should close the corporate tax loophole that allows domestic companies to shift their headquarters overseas without paying higher taxes. Second, all income made in the U.S. should be taxed the same, as the lines between domestic and international companies have become so blurred that our current distinction is anachronistic.

In the six months since I called for action, nothing of this sort has been implemented. Instead, Medtronic is being praised for promising to bring 1,000 new jobs to Minnesota over the next five years, without shedding current Fridley-based employees. In fact, Gov. Mark Dayton, upon hearing these claims from Medtronic, openly said that the merger is a “good deal” for Minnesota.

Certainly we should hold in high regard large corporations that provide economic benefits to local communities. While the economy is doing better than it was during the recent recession, having an extra thousand jobs within the next five years will substantially add to our state’s job growth.

Nevertheless, concerns remain.

First, whenever large companies merge with each other, they restrict consumer choice. In fact, this is why anti-trust laws exist; whenever the government deems that the state’s free market economy would experience substantially reduced competition as the result of a corporate merger, it can delay, renegotiate or reject a deal originally established by two private entities. I am willing to entertain arguments regarding the positive global impact that Medtronic could have as the result of this merger. For example, holding its headquarters within the European Union would allow the company to offer its services to a wider, international audience.

Nevertheless, Medtronic was still able to become one of the largest medical device companies in the world while maintaining primary operations in Minnesota.

Second, the merger could have been performed without changing Medtronic’s legal address. Indeed, regardless of where its primary headquarters is located, Medtronic would have enjoyed the transnational economic benefits of acquiring Covidien. Therefore, it seems to me that the only reason the company ditched Minnesota is for the tax benefit.

Let’s not get swept away by the promise of more jobs. We should take these claims with a grain of salt, critique Medtronic’s financial ends and ultimately, disavow Medtronic’s status as a Minnesota-based company. After all, they are Irish now.