KLM Under Fire For Offensive World Cup Tweet

Dutch airline KLM made a big social media no-no when it tweeted an image celebrating the Netherlands' World Cup win.

Minutes after the Dutch team beat Mexico, the airline posted the following:

The picture contained an cartoonish picture of a man wearing a sombrero and a poncho. Twitter users found the tweet to be racist and offensive.

Mexican actor Gael Garcia Bernal, who has nearly 2 million Twitter followers, called out the airline:

.@KLM I'm never flying your shitty airline again. Fuck you big time.

— Gael Garcia Bernal (@GaelGarciaB) June 29, 2014

The airline quickly deleted the post.

Stealing A Pen At Work Could Turn You On To Much Bigger Crimes

Steal a pen from your office and you could find yourself on a path toward becoming the next Bernie Madoff.

That's the warning of a new study, called "The Slippery Slope: How Small Ethical Transgressions Pave The Way For Larger Future Transgressions," by David Welsh of the University of Washington, Lisa Ordóñez of the University of Arizona, Deirdre Snyder of Providence College, and Michael Christian of the University of North Carolina at Chapel Hill. According to the study, which was published in the Journal of Applied Psychology, minor unethical behavior at work, if undetected, puts workers on a "slippery slope" that could lead to worse behavior over time.

Stealing a pen is basically a gateway to massive corporate fraud.

To most of us, fairly innocuous sins like taking a pen from work or neglecting to refill the office coffee pot are much easier to justify than, say, racking up $2 billion in trading losses. But over time, the researchers found, those minor misdeeds make it easier to justify more and bigger evils in the long run.

If you're considering taking home a ream of copy paper, just think: doing so could land you behind bars with this guy.

“People rationalize their behavior to justify it,” Ordóñez, one of the study's authors, said in a press release. "They might think ‘No one got hurt,’ or ‘Everyone does it.’ The next time, they feel fine about doing something a little bit worse the next time and then commit more severe unethical actions.”

The researchers tested this theory by watching subjects in a number of different situations. One interesting experiment found that subjects who were given 25 cents for doing a minor unethical thing were much more likely to take $2.50 to do something more egregious later on than those who were offered $2.50 to do a big no-no at the start. According to the researchers, this shows that people are less likely to commit what they call "abrupt and large dilemmas" when they haven't already committed gradual, small transgressions.

The study cites Madoff, who was sentenced to 150 years in prison for orchestrating the largest Ponzi scheme in history and spoke of this phenomenon to his longtime secretary, according to Vanity Fair:

“Well, you know what happens is, it starts out with you taking a little bit, maybe a few hundred, a few thousand. You get comfortable with that, and before you know it, it snowballs into something big.”

So what can you do to prevent yourself from becoming the next Jeff Skilling?

The researchers offer a number of tips to discourage the minor stuff, like putting in place a firm set of ethical guidelines and calling workers out for the small things, like taking home too many office supplies.

“The ideal is for employees to recognize when they’ve committed a minor transgression and check themselves," Michael S. Christian, one of the paper's co-authors, wrote.

Ikea To Raise Minimum Wage For U.S. Workers With Tie To Living Wage Calculator

WASHINGTON -- The Swedish furniture giant Ikea is raising the minimum wage in all of its U.S. stores, and it's doing so in a way that may raise the bar for American retailers.

The famous seller of ready-to-assemble home goods will base the wage floor for each of its stores on the MIT Living Wage Calculator, which estimates what salary a worker would need in order to get by in a particular geographic area.

According to Ikea, the move will boost the average store minimum wage to $10.76, a 17 percent increase, and bring raises to approximately half of the company's 13,650 U.S. employees. The new rates will go into effect on Jan. 1, according to Rob Olson, chief financial officer and acting president of Ikea U.S.

"It's all centered around the Ikea vision, which is to create a better everyday life for the many people," Olson told The Huffington Post. "The many people is, of course, our customers and consumers, but it's also our co-workers."

The company's move will likely become a talking point in the national debate over increasing the federal minimum wage, currently $7.25 per hour, which hasn't been raised since 2009. Democrats in Congress want to gradually raise it to $10.10 per hour and tie it to an inflation index. Republicans have opposed that plan, saying businesses can't afford it.

Ikea said it does not plan to raise prices for customers in order to pay for the wage increases.

Using a living wage calculator to determine area salaries appears to be without precedence among major retailers. The new minimum wage will vary at each of Ikea's 38 stores -- as well as its five distribution centers, two service centers and one manufacturing plant in the U.S. -- depending on the cost of living in each location. Olson said none of the minimum wages will be set below $9 per hour, and those in the priciest markets will top $13.

The company will use MIT's living wage rate for a single adult without children. It's the lowest category in the calculator, but almost invariably higher than the federal or state minimum wage rates. In many cases, it also would be higher than the starting wages workers could expect at other retailers.

For instance, according to the calculator, the minimum wage at the Ikea store in College Park, Maryland -- in the pricey Washington metro area -- would be at least $13.20 per hour. That's more than a dollar above what the U.S. Bureau of Labor Statistics lists as the average wage for a Washington-area retail salesperson as of May, and more than $2 above the average wage for a cashier. (The minimum wage at the company's store in Merriam, Kansas, by contrast, would be at least $9.36 per hour, though the cost of living is significantly lower there.)

According to Olson, the new minimum wage structure is part of a broader Ikea effort to make its pay and benefits package more attractive. In the past year, the company increased the employer match on its 401(k) and began auto-enrollment to incorporate more workers, he said. It also launched a separate retirement account for employees who are with the company for at least five years.

The move to the living wage calculator required a new way of thinking, Olson said. Instead of setting wages according to what other retailers pay in particular markets, the company decided to evaluate what workers would reasonably need in order to support themselves. Setting a single baseline minimum wage for all its U.S. stores didn't make sense, he added.

"What we decided to do was stop looking at the competition and focus solely on the co-worker," Olson said. "A co-worker in one market isn't concerned with what it costs to live in another market. That's the way we've looked at it."

The MIT Living Wage Calculator is a popular online tool developed in the early-2000s by Amy Glasmeier, currently a professor of economic geography and regional planning at the school. The calculator uses geographic data on the costs of food, housing, transportation and health care to project the minimum a worker needs to live.

Glasmeier said the calculator is used about 50,000 times a month on average. She's heard from labor unions, local office holders and even business owners about how it might be used to set baseline wages. Not surprisingly, she also hears often from people who are struggling to get by.

"I get emails from people all over, asking for help or asking where [the calculator] came from," Glasmeier said.

As evidenced by Glasmeier's inbox, plenty of people believe the calculator's projected living wages are too low. ("I get a ration of hot air from people every day," she said.) In turn, some will argue that the new minimum wages offered by Ikea are unrealistic living wages. But Glasmeier said the calculator's projections are for the very bare minimum that someone would need in order to eke by, not to save or get ahead.

"I feel we're looking at the minimum living wage," she said.

As Ikea noted, the new average minimum wage for its U.S. locations will be $3.51 above the current federal minimum wage. Olson said the company will periodically reevaluate its wage structure and adjust it for the rising cost of living.

Though it's long enjoyed a reputation as a good employer, Ikea has taken heat over the years from workers and unions in the U.S., who say the company isn't as generous here as in Europe. Workers at the company's plant in Virginia voted overwhelmingly to join the International Association of Machinists and Aerospace Workers union in 2011, citing low wages and unpredictable work schedules.

Ikea isn't the first company to institute an across-the-board minimum wage hike in recent months. Earlier this year, Gap Inc. announced that it would raise its wage floor throughout the U.S. to $9 per hour this year and $10 next year. The company said the raise would benefit more than two-thirds of its 90,000 workers. President Barack Obama, among others, praised the retailer for the move.

Although it may become part of the political discussion, Olson said Ikea's decision should not be read as an endorsement of any legislative proposals on the minimum wage, in Congress or elsewhere.

"We're not advocating for a federal or state movement," Olson said. "We're more focused on our co-workers and doing the right thing for them."

If Women Want Better Pay, They Should Support Unions

The decline of unions has been bad for all workers hoping to join the middle class, but it has been especially terrible for women trying to keep up with men in any class.

Unions can be a useful tool for narrowing the gap between women and men at work, according to a recent paper by the Center for Economic and Policy Research, a left-leaning think tank that studies economic and social issues.

Women in unions make 12.9 percent more, on average, than their non-union counterparts, according to the study. For women with just a high school diploma, that difference is 15 percent. Women in unions with a college degree make 13.4 percent more than their non-union colleagues, the study found.

While being in a union also boosts pay for men, the effect of unionization is about 1.4 times larger for women, on average, according to an analysis earlier this year by the National Women’s Law Center.

Why do women benefit so much more from union membership? The CEPR paper has theories:

For one, unions tend to do the most for workers at the lower ends of the spectrum, and women are much more likely to be low-wage workers. Women make up about two-thirds of minimum-wage earners in the U.S., for example. They also entered low-wage jobs at a faster clip than their male counterparts between 2009 and 2013.

And collective-bargaining agreements typically make pay policies more transparent and less dependent on the whims of managers. Women often get paid more when their compensation system is more standardized, which keeps unconscious bias from seeping in. They also benefit from transparency because it’s easier to spot an obvious inequity when co-workers know how much their colleagues are getting paid.

In 2013, women working full-time earned about 82 percent of what their male colleagues made, according to a March study from the Institute for Women’s Policy Research. Unions could help close that gap; unfortunately, unionization rates for both women and men have plunged since the 1980s, as the CEPR notes.

Among the other possible consequences of the decline of unions are a shrinking middle class and companies that have boosted profits at the expense of workers.

Juicy Couture, All But Dead, Is Plotting A Comeback

Juicy Couture, all but dead as its last U.S. stores close this month, is planning a comeback.

The label, best known in the early-2000s for rhinestone-bedazzled tracksuits, is shifting from shopping malls to high-end fashion districts with a new product line. The first of its planned new boutiques –- tentatively named the World of Juicy -– will open in New York City next spring, according to Jamie Salter, chairman and CEO of Authentic Brands Group, which owns the label.

By the time Fifth and Pacific Companies –- now Kate Spade & Co. -– sold Juicy to licensing giant Authentic Brands in September for $195 million, its tracksuits were passé. It got even less trendy with the announcement of a deal two months later to sell Juicy clothes at retailer Kohl’s.

“The beach, the whole relaxed lifestyle that Juicy Couture created -- as time went on, they sort of forgot about that,” Salter, 51, told The Huffington Post in an exclusive interview.

Now under the stewardship of the same company that owns the rights to the brands of dead celebrities such as Marilyn Monroe and Elvis Presley, an international push to revive Juicy is underway. Next fall, Salter plans to open new concept stores -– one for intimates and sleepwear, another for young girls’ clothes -- in Asia, Europe and the Middle East.

Above: A rendering of the concept store that will sell lingerie and pajamas. Below: A rending of the store geared toward young girls.

“We want to put the coolness back into the brand and put it where the cool people shop,” Salter said.

Besides investing in a brand with too much focus on outmoded clothes -– the new Juicy will focus more on accessories, handbags and footwear, though it still sells velour tracksuits –- Salter said the U.S. business was “broken.”

The switchover from Kate Spade to Authentic Brands Group has been slow. Juicy's website, which relaunched on Monday, only recently changed hands.

The old stores were often located in shopping malls –- now as out of fashion as terrycloth tracksuits with rear-end logos -- and were owned and operated at the expense of the parent company. The property for the stores closing this month belongs to Kate Spade.

“The brand wasn’t broken, the business model was broken,” Salter said.

So Salter, whose company is backed by private equity giant Leonard Green & Partners, is reproducing Juicy’s international business plan at home. Just as Juicy in Asia is run by ImagineX, and in Europe by Folli Follie, the new World of Juicy boutiques will be joint ventures between Authentic Brands Group and a partner that Salter said he expects to contract next week.

Juicy’s product line, featuring footwear, handbags and accessories, will be divided into two tiers. Premium “black label” –- including everything from tech accessories to a new line of Steve Madden-designed shoes –- will only be available online and abroad until the new U.S. boutiques begin popping up in New York, Los Angeles and other urban hubs.

“It’s going to be built like a miniature department store,” Salter said. “It’ll be like going into a Gucci store or a Louis Vuitton store.”

Mid-tier “pink label” Juicy goods will remain on the racks at Kohl’s in the U.S.

Still, it may not be enough to rally Juicy back to its heyday of 2003, when founders Pamela Skaist-Levy and Gela Nash-Taylor sold it to its previous owner, then known as Liz Claiborne Inc.

Reality television star and hotel heiress Paris Hilton was often photographed by paparazzi wearing Juicy tracksuits.

Back then, The New York Times reported the company had been “built from a $200 start-up to a $51 million concern” in just six years and quoted Nash-Taylor touting Juicy’s “weirdly large demographic.”

“They were meteoric in terms of their rise,” Harriet Greenberg, a partner at business consultancy Friedman LLP, told HuffPost. “But since they didn’t evolve, the customer base became narrower and narrower.”

Greenberg said the brand’s strong appeal abroad makes the international push smart, but its future in the U.S. seems uncertain.

“Do I think it’ll be successful domestically?” Greenberg said. “I don’t know that.”

Olive Garden Is Evidence Of A Huge Problem In The Economy

One restaurant operator has just given us a small window into a huge problem with the American economy.

Darden Restaurants, the Orlando-based purveyor of sit-down food chains, announced its fourth-quarter earnings on Friday, revealing that some of its restaurants have done much better than others in the past few months.

What was the major difference between success and failure at its restaurants? The diners. Restaurants that serve the well-off are thriving, while those that serve the rest of us are struggling, in a microcosm of the broader economy.

Struggling are Olive Garden and Red Lobster, which are largely geared toward middle-class customers, who have been squeezed during the recession and slow recovery. Families with young children cut back on restaurant spending during the downturn, and they haven’t come back, according to a recent survey by restaurant research firm NPD Group.

Same-store sales, a measure of performance at restaurants open a year or more, dropped 3.5 percent at Olive Garden and 5.6 percent at Red Lobster over the quarter. At Long Horn Steak House, Darden’s middle-of-the-road steak chain, same-store sales rose 2.4 percent, but traffic -- the measure of how many people are actually coming through the door -- dropped over the quarter.

On the other hand, at Darden’s Capital Grille, where most dinner entrees fetch more than $40 each, same-store sales increased 4 percent over the quarter. That makes sense, too: Over the past few years, the kinds of people who can afford a fancy dinner have seen their incomes grow, even as everybody else's incomes have stayed flat.

Still, Darden is hoping it can convince pinched diners to spend again at Olive Garden by re-making the chain in the image of other trendy restaurants. They’re offering convenience through online and tablet ordering, more choice and customization options for their various combo meals, faster lunch service and even tapas -- all while still emphasizing the value of a meal that comes with unlimited salad, soup and breadsticks.

The hope is that they’ll attract the all-important “millennials” and “multi-cultural households” who are doing all their eating at Chipotle and Panera right now, Darden chief operating officer Eugene Lee said on the company’s earnings call.

Seafood chain Red Lobster has struggled for years, thanks to a suffering middle-class, along with changing dining habits and fluctuating seafood prices.

Darden plans on selling Red Lobster to boost performance. “We don’t believe that Red Lobster is as well-positioned as our other brands for the future that we see,” Darden’s CEO Clarence Otis Jr. said on the company’s earnings call.

Darden's performance over the past few years, with and without Red Lobster.

Diagnosis: Headaches For Obamacare Enrollees At The Doctor's Office

Obamacare's enrollment glitches might have been fixed long ago, but they're still causing headaches at doctors' offices and clinics around the country.

Patients and health care providers, in a series of interviews with The Huffington Post, complained that they are having trouble confirming that patients are insured, working out what their plans cover and figuring out which plans doctors will accept.

These complaints are signs that the Affordable Care Act, President Barack Obama's signature health care reform law, is suffering growing pains more than six months since its insurance policies took effect.

The law has provided low-cost, subsidized health insurance to millions of working families and no-cost Medicaid coverage to millions more. It has opened the market to people with pre-existing conditions who were shut out before. And these new plans come with a slew of guaranteed benefits and consumer protections.

But the technical and bureaucratic failures of the six-month open enrollment period that officially ended March 31, the millions of new customers on insurance rolls and a poor understanding among the previously uninsured about how insurance works are combining to create extra burdens for some doctors and their patients.

Such problems serve to highlight the fragmented, complex nature of the existing health care system and the shortcomings the law failed to fix: the hassle of negotiating with insurance companies, the struggle to understand how benefits work, and the difficulty of finding doctors.

Maureen Mandel of North Bellmore, New York, has endured a gauntlet of troubles to get and use her new insurance since October, when she first tried to sign up through New York State of Health, her state's insurance exchange. Mandel, 47, spent countless hours on the phone with the exchange and her insurer, until her plan was finally confirmed in April.

Mandel thought she had it sorted out.

Then she went to the doctor. The front-desk attendant said some other physician was listed in the insurer's system as her primary care provider -- a doctor in Waco, Texas. According to Mandel, an insurance company representative told the attendant their internal records listed this physician, but when Mandel signed into the account herself, it listed her real primary care provider's name. The attendant was still arguing with the insurer about the discrepancy when Mandel's visit with the doctor was over, she said.

"I sympathized with the doctor's office," Mandel said. "I honestly would've understood if they'd said, 'Maureen, I'm sorry. We just can't take you.'"

These experiences soured Mandel, who described herself as politically liberal, on Obamacare, despite her appreciation for the coverage it provides and the tax credits that cut her insurance costs. "I haven't seen any improvement," she said, "and that's what scares me."

Physicians' offices are feeling the pain, too. Seeing patients whose insurance coverage is in doubt risks leaving doctors with unpaid bills. Staff has to spend precious time helping patients resolve issues with insurers, said David Taylor, the vice president of regional services for CoxHealth, a chain of clinics and hospitals based in Springfield, Missouri.

In an April survey by the Medical Group Management Association, which represents large physician practices, 63 percent of doctors' offices said verifying a patient's insurance was more difficult with plans bought through Obamacare exchanges. The same percentage reported greater difficulty getting information from insurers about how much patients had to pay for services, and 59 percent said it was harder to get accurate information about what specialty physicians were in patients' insurance networks.

"The front desk is probably our toughest position," Taylor said. "In some instances, they may be able to help, but in others they may be too busy," he said. When there's uncertainty, the office may demand payment upfront, he said. "We're not turning people away, but we are asking for money," he said.

When Paige Bayer of San Jose, California, took her 9-year-old son to his pediatrician for an ear infection, she ended up paying $125 in cash after learning the doctor wasn't in her new plan's network, contrary to information listed on her insurer's website, she said. "I wanted to get my son seen quickly," she said.

"I didn't get the idea that you don't get to go out of network anymore. If you go out of network, you are paying every red cent," said Bayer, 40. "That was kind of shocking to me."

Bayer is more optimistic than Mandel that such problems will smooth out over time, and her family is benefitting from the law's guaranteed coverage for people with pre-existing conditions. Her 40-year-old husband's chronic back problems made it impossible for him to get private insurance before Obamacare, she said. "That kept me up at night. I started thinking, 'My God, what if he ended up getting cancer or something?'" Bayer said. "We'd lose everything -- and we have a lot of money. But we live in Silicon Valley, and a lot of money doesn't go very far if you end up with cancer."

At her small practice in Wilmington, Delaware, physician Rebecca Jaffe has experienced her share of administrative issues with Obamacare plans. Jaffee worries she won't get paid if a patient's insurance isn't in effect, but tries to accommodate them as much as possible, she said.

Jaffe's staff also spends a lot of time helping patients answer tricky questions about how their benefits work, like whether a service is "preventive" -- and therefore has no out-of-pocket charges -- or a treatment, for which they must pay.

"Patients really, really don't understand that," she said. "We're seeing confusion, because people don't know what's covered and what's not covered." Patients who were previously uninsured and don't understand complex insurance plans need the most help, she said.

Still, Jaffe said, these kinds of problems aren't so different from what happens when insurance plans change every year, and they represent the early struggles of reforming the health care system.

"The ACA was a huge step. I mean, it took 50 years for some sort of substantive change," she said. "We need to fix what we find doesn't work well."

America Is Globally Shamed For Its Pathetic Minimum Wage

America is treating its low-wage workers so badly that it's starting to get shamed by the rest of the world.

The International Monetary Fund on Monday cut its forecast for U.S. economic growth this year, warned of sluggish growth for years to come, and made a bunch of suggestions for getting America's economic house in order -- including raising the abysmally low federal minimum wage of $7.25 an hour.

"[G]iven its current low level (compared both to U.S. history and international standards), the minimum wage should be increased," the global financial-stability group wrote in its annual assessment of state of the U.S. economy. "This would help raise incomes for millions of working poor and (help) ensure a meaningful increase in after-tax earnings for the nation’s poorest households."

The IMF didn't say how much it thought the minimum wage should be, exactly. President Barack Obama has proposed an increase to $10.10 an hour. If the minimum wage had been adjusted for inflation regularly, it would be at least $10.68, according to the National Employment Law Project. Many fast-food workers would prefer $15 an hour. If wage floors had been raised to keep up with productivity, then they would be closer to $22 an hour.

However you figure it, the wage is too low, and one of the lowest among the world's developed economies.

The point is moot at the moment, because Republicans in Congress want nothing to do with a higher minimum wage. States and cities are starting to take matters into their own hands, led by Seattle, which recently raised its minimum wage to a highest-in-the-nation $15.

In fact, Republicans in Congress oppose many of the suggestions the IMF made for getting U.S. economic growth moving again, including infrastructure investment and immigration reform. Without such things, the IMF said, it expects U.S. gross domestic product growth to average 2 percent a year for "the next several years," below its historic average of more than 3 percent. The IMF also cut its forecast for growth this year to 2 percent from an earlier estimate of 2.8 percent.

Then again, the IMF also called for the U.S. to "fundamentally reform" Social Security, so there's stuff in this report for Americans on the left to hate, too.

Homophobia Is Hurting The Economy

Homophobia could be costing the Indian economy as much as $30.8 billion every year, according to an upcoming study for the World Bank. And it's not just India that is losing as a result of LGBT discrimination.

According to economist and study author M.V. Lee Badgett of the Williams Institute at the University of California, Los Angeles, the economic impact of discrimination against LGBT individuals is threefold:

1. Workplace and education discrimination lead to lower wages for LGBT individuals, which results in less tax revenue reaped by the government.
2. A higher poverty rate due to low income means more government spending on social programs.
3. And poor health, in the form of higher rates of depression, suicide and HIV/AIDS, means higher government health care costs and decreased participation in the workforce.

In an interview with The Wall Street Journal, Badgett said her preliminary findings represent a case study that could be applied to any nation that discriminates against LGBT individuals. The study focuses on India because of the availability of certain economic data provided by health research and LGBT organizations within the country.

"Even in countries where the laws are very equal, you can still have discrimination and health disparities," Badgett told The Huffington Post. "For me, the takeaway is, every country has some cost associated with homophobia and transphobia."

In January, India's Supreme Court ruled to uphold a colonial-era ban on gay sex, outraging LGBT rights activists and the nation's own ruling party. Violation of the ban can be punished by up to 10 years in jail. The government, along with seven human rights groups, had petitioned the court to overturn the ban.

Based on available data, Badgett estimated that LGBT individuals in India make an average of 10 percent less in wages than heterosexuals in comparable positions:

The second part of Badgett's analysis looks at health disparities between the LGBT community and the rest of the population. Based on the higher rates of depression, suicidal thoughts and HIV/AIDS among LGBT individuals, Badgett was able to calculate the years of life or quality of life lost, and thus the loss of economic productivity caused by these health problems.

The true costs to India's GDP are likely far greater than these estimates, Badgett told HuffPost. That's because of a dearth of data on how discrimination against LGBT individuals may contribute to "brain drain" -- mass emigration -- as well as the economic and social costs to family members of LGBT individuals, who may also face discrimination.

"This is just the tip of the iceberg," Badgett said during a presentation of her preliminary findings to a World Bank panel in March.

In the United States, there's plenty of evidence to suggest that acceptance of the LGBT community makes for a healthier economy. Legalizing gay marriage, for instance, has already been proven to add hundreds of millions of dollars to a state's coffers. One year after New York passed the Marriage Equality Act, New York City alone had generated an extra $259 million in revenue, mainly from a boom in the wedding industry.

Badgett told HuffPost that discrimination against the LGBT community is undoubtedly costing the U.S. in a number of ways.

She suggested a few federal policy changes that would likely increase the economic contributions of LGBT individuals. Enacting federal non-discrimination laws, for example -- particularly governing the way LGBT individuals are treated in schools -- would likely promote more positive economic outcomes in the workplace, she said.

But, she cautioned, "Even if you have the best policies in the world, there's still likely to be some underlying homophobia in these institutions, or present in the attitudes [of a community]. These things get embedded deeply in our culture, and it doesn't get immediately dislodged by a policy change."

Walgreen Ponders $4 Billion Tax Dodge

Walgreen, the biggest U.S. retail drugstore chain, is considering decamping to Switzerland in a quest for bigger tax breaks, just two years after reaping a hefty package of Illinois tax credits in exchange for keeping corporate jobs in the state.

Such a move, through a maneuver called an inversion, would cost the U.S. treasury $4 billion in tax revenue over the next five years, according to a new report by Americans For Tax Fairness, a tax reform advocacy group. It also may prompt other U.S. retailers, which typically pay high tax rates compared with large multinationals like Apple and General Electric, to seek foreign acquisitions in order to dramatically lower their bills.

Americans For Tax Fairness calculated Walgreen's possible tax savings based on determinations by outside analysts, who figured the company could lower its rate to about 20 percent from the current 35 percent if it were to incorporate in Switzerland. (Reincorporating abroad would not necessarily mean substantive changes in where company personnel and operations are housed.)

Because Walgreen's bottom line is significantly bolstered by taxpayer-funded Medicare and Medicaid drug benefits, accounting for one-third of all pharmacy sales, relocating offshore would represent an especially egregious exploitation of the leaky U.S. tax code, Americans for Tax Fairness concludes in the new report.

"Our research shows that Walgreens relies heavily on the U.S. taxpayer for its profits, and that an inversion would deprive our country of significant resources while giving the company an unfair advantage over its competitors," the report says.

A Walgreen inversion may be possible next year, should shareholders approve the purchase of the the Swiss company Alliance Boots, Europe's largest pharmaceutical wholesaler and retailer. In 2012, Walgreen bought a 45 percent stake in the company. At a meeting in April in Paris, some Walgreen shareholders pushed for an inversion, touting the potential tax savings, according to the new report. This seemed to prompt a shift in tone from company executives, who had previously downplayed the possibility of an inversion.

"We’ve never been a proponent of paying more taxes than we have to," said Rick Hans, a Walgreens vice president, at a later conference, according to the new report.

On Wednesday, in response to the report, Walgreens issued a statement. "As we’ve said before, we continue to analyze a number of issues as we move toward the window for exercising the second step of our transaction with Alliance Boots, and we will do what is in the best long-term interest of our company and its shareholders," spokesman James Graham said in an email.

Inversions are possible when U.S. companies incorporate in another country, so long as 20 percent of company stock is owned by a foreign entity. After the inversion, the original U.S. company becomes a subsidiary of the foreign parent company, yet the foreign company is controlled by the shareholders of the original U.S. corporation.

The tax savings of moving a corporate address abroad can be enormous. Companies are no longer on the hook for paying U.S. taxes on profits earned abroad, potentially a huge benefit for companies with big overseas sales. Walgreens, because its stores are located primarily in the U.S., would likely realize big tax savings in a different way: By shifting large amounts of debt from its foreign operation to its domestic operation in order to offset profit, said Frank Clemente, the executive director of Americans for Tax Justice.

Recently, the U.S. pharmaceutical giant Pfizer tried -- and failed -- to acquire the British drug company AstraZeneca, a deal at least partly motivated by tax savings that might be realized through an inversion.

Over the last decade, tax aversion has become a standard corporate business practice. A recent study found that Fortune 500 companies have created a whopping 7,827 offshore shell companies to stash nearly $2 trillion in places like Bermuda and the Cayman Islands in order to avoid paying U.S. taxes. One common way U.S. companies exploit such shell companies is by transferring patents or trademarks abroad, and then paying their subsidiary licensing fees for the right to use those patents, thus reducing domestic profit.

U.S. retailers, though, typically pay taxes at or close to the 35 percent corporate rate. That's because they book all or most of their revenue in the U.S. and have few options for making it seem as if that revenue was earned elsewhere.

Though it is likely that Walgreen will complete its purchase of Alliance Boots, it is difficult to evaluate the odds the company will attempt an inversion. The New York Times has reported that at least one shareholder, the CtW Investment Group, cited the risk of removal from the S&P 500 and other stock indices as an argument for why the company should remain headquartered in the U.S.

The CtW group owns less than 1 percent of Walgreen's shares.

Updated with response from Walgreens.

Uncle Sam Wants Coders To Leave Silicon Valley For D.C.

President Obama delivers remarks about the error-plagued launch of Healthcare.gov in the Rose Garden. (Photo: Mark Wilson/Getty Images)

Washington -- There may be no foosball tables or luxury buses ferrying employees to work, but a new startup in the nation’s capital is offering other incentives to lure tech talent away from Silicon Valley.

It is sharing its work on GitHub, a popular website for open-source software, to appeal to coders. It is opening another office in San Francisco for those who don’t want to live in Washington. And it is convincing civic-minded techies to build websites, apps and other digital tools that serve their country.

It’s all part of an effort to persuade computer wizards to reject the lure of Google or Facebook and work for someone who isn’t thought of as an innovator: Uncle Sam.

McDonald's CEO: 'We Will Support' A Minimum Wage Hike

McDonald's might finally have figured out that paying its low-wage workers more would actually be a good thing for McDonald's.

McDonald's CEO Don Thompson recently suggested his company would support a bill, proposed by President Barack Obama, raising the federal minimum wage to $10.10 an hour from $7.25. Such a wage hike likely wouldn't satisfy his workers, some of whom recently stormed the company's Oak Brook, Ill., headquarters demanding $15 an hour. But it would be a noticeable shift in attitude for the world's biggest restaurant chain, which has so far been neutral as the debate about higher wages has roiled around it.