Merlo to Senate committee: Lowering corporate tax rate can help reduce healthcare costs, bolster economy

WASHINGTON — Lowering the maximum corporate tax rate could allow CVS Caremark to accelerate investments in U.S. jobs, technology and infrastructure — all of which could ultimately help lower healthcare costs and bolster the economy. That was a key message that CVS Caremark president and CEO Larry Merlo had for the Senate Finance Committee during a recent hearing.

Merlo, who appeared July 27 before the Senate Finance Committee during a hearing, "How the Tax Code Affects Hiring, Businesses and Economic Growth," said that the current U.S. tax structure puts companies that heavily reinvest their earnings in core domestic operations, such as CVS Caremark, at a competitive disadvantage. Merlo suggested that changes to the U.S. tax structure are needed to make companies more competitive.

"In order to continue to be successful in an increasingly global marketplace, CVS Caremark must control costs, raise capital and efficiently reinvest its earnings. . . . Our high effective tax rate not only limits the amount of earnings available to us for reinvestment in our core business; it also makes CVS Caremark less attractive to global investors," Merlo testified. "We are committed to growing our business in the U.S. Without a consequential rate reduction, tax considerations will have to be an even more significant component of our overall investment analysis."

Merlo said CVS Caremark is committed to making significant future investments in service offerings, technology, employees and other improvements to the company's infrastructure and operations. Those investments are geared toward lowering the overall cost of health care and improving consumer health, he noted. He said that a reduction in the corporate tax rate would allow the company to address larger healthcare issues.

"Our company currently reinvests approximately $2 billion back into our business each year, and we are committed to making significant future investments in our service offerings, technology, training, drug adherence programs, retail clinics and other improvements. Our investments are geared toward lowering the overall cost of health care in this country and improving consumer health," Merlo testified.

The hearing was designed to solicit opinions regarding the nation's corporate tax structure from American business leaders. Also testifying at the hearing were Michael Duke, president and CEO of Walmart; Thomas Falk, chairman and CEO of Kimberly-Clark; and Gregory Lang, president and CEO of PMC-Sierra.


- 8:20 AM says

While lowering the corporate tax rate can reduce health care costs and bolster the economy through increasing jobs, it won't. At least not at CVS. Lower tax rates will increase profits, increase shareholder dividends, and increase stock portfolios. All of CVS's PBM subscribers have contracts, many of them with multi-year terms. Customer pharmacy purchases are usually predetermined co-pays set by PBMs, or designed to be a percentage of AWP, neither of which would change because of lowered tax rates. Labor costs would be the same, as a lower corporate tax rate does not effect Medicare or Social Security taxes, and the need for labor in the stores would neither increase or decrease based on a lower tax rate, eliminating the discussion of job creation. The current tax rate has not, in anyway, hindered CVS's growth through purchases like Peoples, Revco, Eckerd, SavOn, Osco, MinuteClinic, Long's, or Caremark. Lowered corporate tax rates would have the same effect lowered very high income tax rates have had, less industry and less jobs. Maybe the Senate should only hear 'testimony' from people who don't have millions of stock shares and options in the company begging for lower taxes.

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