Key Senate Democrats suggested Tuesday that they would like to pursue an overhaul of the taxation of businesses’ international earnings this year, reviving an effort that flagged late last year.
“If we could get it done this year, I’m game to do it,” said Sen. Chuck Schumer, D-N.Y., speaking at a hearing on business taxes.
The overhaul in question would not be a major tax reform of the kind that has eluded lawmakers in recent years. Instead, it would change the way companies are taxed on income earned overseas with the purpose of relieving the pressure that U.S. companies face to move their headquarters out of the country.
“I believe we’ve gotta do something about inversions,” said Schumer, referring to the tax maneuver by which companies have been moving their headquarters to low-tax jurisdictions in increasing numbers. “I believe we have to make our companies competitive, and international reform is a lot easier to bite off than broad corporate tax reform.”
“I intend to work with you,” responded Sen. Orrin Hatch, the Republican chairman of the Finance Committee.
Last year, Schumer and Sen. Rob Portman, R-Ohio, worked toward a bill that would have ended the unusual U.S. practice of taxing companies on all the income they earn worldwide. It also would have set up a special low tax rate on intellectual property income, a feature thought to provide an incentive to keep pharmaceutical and tech companies in the U.S. The legislation also would have taxed the earnings currently held by companies overseas, providing a one-time boost to the Treasury.
While the idea found favor in the House, it failed to advance, given a cool reception from Senate Majority Leader Mitch McConnell and the complicated politics of the reform.
Yet with the clock running down on President Obama’s tenure and major companies such as Johnson Controls seeking inversions, lawmakers are looking for a fix that could keep companies in the U.S. until time comes for a broad-based tax overhaul.
“I think it makes sense to begin the reform process by first tackling some of our most pressing international tax challenges,” said Sen. Tom Carper, D-Del., calling for a “rifle-shot” reform.
With Carper, Democratic Sens. Ron Wyden, the ranking member of the committee, Mark Warner and Sherrod Brown are also ready to work on international reform, Schumer suggested.
Earlier Tuesday, Wyden introduced his own plan for immediate relief for businesses. The Oregonian’s legislation would simplify the rules that companies follow in calculating the depreciation of assets for the purposes of deducting that depreciation from their taxes. Wyden argued that simplifying the rules would eliminate biases in the tax code and aid small businesses.
