Medical biz prof Stephen Parente on Medtronic move: "It's kinda hard to see this occur"

Categories: Business
640px-2009-0610-001-Fridley-MedtronicHQ.JPG
Medtronic's world headquarters (pictured) is currently in Fridley, but the company plans to pack up and move to a more tax-friendly country.
Governor Dayton characterized the news that Medronic is buying Ireland-based Covidien for $42.9 billion and moving its headquarters to Dublin as "tremendous for Minnesota," citing company executives' promise that no local jobs would be lost due to the transaction. (Read the backstory here.)

But Carlson School professor Stephen Parente, director of the Medical Industry Leadership Institute, says that when he heard about the move, "I didn't shout for joy."

See also:
Republicans sound the trumpet as Obamacare contributes to St. Jude's Minnesota layoffs

"The medical device industry is one of the things that really did grow up in Minnesota, and the story about Medtronic is that it has a U of M tie-in that's so strong and authentic that it's kinda hard to see this occur, even with 1,000 [new] jobs promised," Parente says. "I think what's a little disconcerting is that there are many entrepreneurs in the medical device industry where the goal of their first invention is to sell it to Medtronic. There's a cycle here that's been very beneficial for the community, for the small business entrepreneurial aspect of it, so to the extent that now you've taken serious decision making away to a different location, that [cycle] could be changed."

That said, Parente, who supported John McCain in 2008 but has backed politicians on both sides of the aisle, says he doesn't follow Republican gubernatorial candidate Marty Seifert in blaming Dayton for Medtronic's relocation.

"I put what the governor says in a neutral context, and Marty probably went too far," Parente says. "But it's political season and I can understand why he would say that."

Some, including the New York Times, view Medtronic's move to Ireland as an effort "to change its tax domicile through a so-called inversion... Such deals are attractive to American companies seeking a lower corporate tax rate." Medtronic officials, on the other hand, emphasize what the deal means for the company in terms of access to European markets.

But Parente doesn't buy that.

"Half [Medtronic's] sales are overseas already," Parente says. "It's hard to ignore the tax question."

But while he doesn't pin all the blame on Democrats, Parente says, "In terms of health policy, the medical device tax was never something I espoused on either side of the aisle."

"I honestly think [the tax] may have had an impact [on Medtronic's purchase of Covidien]," Parente says. "My guess is that this will increase the heat to not have something like this happen again... the Democratic caucus in the Senate from Minnesota, Klobuchar and Franken, are already more or less saying, 'Get rid of the tax.'"

"The device tax has been seen as something that has been pretty punitive to the industry," Parente continues. "Both major and small companies resent it and it may have, at the margins, made people think outside the box."

But beyond the politics and business implications of the Affordable Care Act's medical device tax, Parente says it's never good for a homegrown Minnesota company to relocate, regardless of the reasons for doing so.

(For more, click to page two.)



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53 comments
Chris Early
Chris Early

Kirk, I understand that certain tax implications do obtain in this case. And maybe I'm not as widely read on this topic as apparently you or others are. However, I do not see this move as some kind of international tax shelter. Maybe I am naive. Maybe I am ignorant. Or maybe I happen to see the vast European healthcare markets as low-hanging fruit ripe for the plucking and Medtronic as harvester. However, none of that was my point. My point was that it is ridiculous for people to start throwing stones and burning effigies when, as it seems, the whole story has yet to be told here. Also, I did read in at least 2 articles that Medtronic's HQ shall remain here and bring 1000 new jobs. And no way will they save billions annually by jumping the pond. Thanks for edifying me though.

Kirk Burback
Kirk Burback

Chris, perhaps you should check your sources. The corporate HQ is gone. It's moving to Ireland. The "manufacturing HQ will remain in Minnesota. . Here is the thing; in the U.S. the corporate tax rate is 35%. Ireland's is 12.5% Now, please explain to us all how they will not save a boat load of money? Were Medtronic’s "corporate tax subsidies" that large to subsidize that difference in tax rates? I don't know about the guy's claims of "billions" but I also don't know what their annual taxable revenue is. Do you? You will see more of this as we globalize, multinational companies maneuvering to keep profits outside the United States to avoid our tax laws. I personally do not fault them. Sort of, like how you would switch to shopping at Target exclusively if your preferred store of Walmart decided to double their prices, even if the commute was longer. You would have no issue in telling Walmart goodbye.

Peter Gamache
Peter Gamache

I wonder if they intend to pay back all the tax breaks they've received from Minnesota and Anoka County?

Matt Schieffer
Matt Schieffer

C-C-C-Clickbait!!! You gettin 2 cents over tick brah?!

Jason Micks
Jason Micks

This is bad reporting. Just moving domicile. Operations will still be based in Twin Cities.

Mel UgoFurst
Mel UgoFurst

Keep voting in the tax hungry dems, this is what you get. And to offer tax incentives to keep businesses here is just crony capitalism. We shouldn't have to engage in that to encourage a healthy environment for job creation.

Mel UgoFurst
Mel UgoFurst

If the dem legislators didn't continue to wreck havoc on businesses via high taxation, we wouldn't be seeing the steady loss. And they shouldn't be in bed with business either, that's crony capitalism

Dave Holzer
Dave Holzer

I hope they don't move for the sake of the employees.

Tiffannie Marie
Tiffannie Marie

With all the loopholes in the corporate tax system...do they really end up paying taxes at all?

Shawn Taylor
Shawn Taylor

Except it isn't really packing up and moving. Its buying another house somewhere with better taxation rules.

Ryan O'Malley
Ryan O'Malley

Breaking news the patent office has just canceled Medtronics patents and now any company can make the Medtronic devices.

digitalprotocol
digitalprotocol topcommenter

i like the commenter that believed the medtronic exec in earnest. That tax benefits would be negligible. negligible thievery maybe. 


Chris Early
Chris Early

It is almost as if some people predetermine how the narrative should go, then fudge any facts that appear in order to suit this narrative. For the life of me, I can see no wrongdoing on the part of ANYONE here. Haha. Well, perhaps the old bugaboo "globalization" or maybe the yahoo who comments in the post below mine that Medtronic admits it will save "billions in taxes annually" by relocating to Ireland. Lol! Now that's pure horseshit.

T.J. Barber
T.J. Barber

I agree, not every story has a political tie in. This seems like the definition of an a-political story that has meaning forcefully added to it and implied.

Kirk Burback
Kirk Burback

No, liberal politicians tell us all the time that taxes do not suppress business or their production. Well, unless it is their obacco taxes. When ya vote in a bunch of high taxing twits, you get what you get.

Tim Stang
Tim Stang

South Dakota isn't a country

Chris Early
Chris Early

Tom Pint, Medtronic says the move will "save billions" in taxes? Source of this quote, please?

Tina Michalski
Tina Michalski

Can't the city or state give the same tax rate as Ireland? Compromise.

Holly Fields
Holly Fields

City Pages is just quick to jump on any news story that it can, to rev our engines and get people railing against corporate greed, big business, "conservatives", etc. Nevermind the facts behind the story, those are irrelevant.

Holly Fields
Holly Fields

Not sure if Pang is trying to be funny, or if truly an idiot.

Matt Petruska
Matt Petruska

Pang; Do you struggle with people that speak with an Irish accent?

Larry Czarnecki
Larry Czarnecki

Lets not get all worked up till all the details are known. OK!

Mary King
Mary King

And part of the agreement is a $10 billion investment in Minnesota.... Trade the taxes for investment... Pretty smart people there... Don't poo-poo this move, this may create more jobs in Minnesota. They will be better positioned on a global basis.

LeAnn Aakre
LeAnn Aakre

I think it was on the BBC news page, will see if I can find it...

digitalprotocol
digitalprotocol topcommenter

Really, Dayton sees this as beneficial for minnesota?  


he is either clinically retarded or receiving kickbacks, or BOTH

Roger Her
Roger Her

It's not the company.. it's the our government..they want morer if you make more..

Paul Gerst
Paul Gerst

Wow, I am not sure what repulses me more, corporate greed or govt waste. I suppose it's a tie...and we, the people keep getting screwed.

LeAnn Aakre
LeAnn Aakre

Ireland is not apparently a very good place to work according to a survey I just saw on worker's rights...

Max Robinson
Max Robinson

I just read an article the other day that Medtronic is moving due to the acquisition of a large company based in that country, and some Medtronic exec involved in the move said that the tax-benefits are negligible as a factor for the move. I don't think this decision has much to do with Minnesota as it does with the nature of the acquisition and the future positioning of the company.

LOLSON1211
LOLSON1211

I think you mean Carlson - not Carlton. 

Chris Early
Chris Early

The move to Ireland will actually save Medtronic very little in taxes. But it will open them up to new European markets and bring 1000 new jobs to MN, as the corporate HQ will remain here. Maybe check your sources for spin before resorting to name-calling.

Mary Karius
Mary Karius

What, not making enough money? Greedy pigs

Jeff55414
Jeff55414

It has nothing to do with the city or state. It has to do with the federal corporate tax rate. This is the reason why U.S. companies move overseas. 

digitalprotocol
digitalprotocol topcommenter

ya corporate greed should be ignored and big business too. let it be let it be

thoughts
thoughts

I bet corp. will move in about 10 yrs., just watch. 

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