They’re in the minority now, but Democrats aren’t letting up on companies moving their headquarters overseas for tax purposes.
Top Democratic lawmakers reintroduced legislation Tuesday to curb so-called tax “inversions,” in which U.S. businesses buy companies in low-tax countries and locate the new company’s headquarters there.
Corporate inversions accelerated last year, prompting concern in Congress. In the face of congressional inaction, the Treasury Department wrote new rules in the fall aimed at undercutting the tax benefits of inversions.
“This is clearly a problem that is not going away — it cannot wait for tax reform,” said Rep. Sander Levin, D-Mich., on Tuesday. “The Treasury Department’s proposal was an important step, but legislative action is necessary to stop the ongoing flood of inversions.”
Levin, the ranking Democrat on the House committee with jurisdiction over tax issues, introduced the Stop Corporate Inversions Act at the Capitol on Tuesday with other Democrat lawmakers, including Sen. Dick Durbin of Illinois, the assistant Democratic leader.
Although the Treasury’s new tax rules have successfully prompted at least one major U.S. business to stop an inversion deal, many analysts fear that U.S. business executives will seek inversions in the months ahead. Treasury Secretary Jack Lew has warned that legislation, and ultimately an overhaul of the country’s dated tax code, are necessary to address the issue.
In December, the Joint Committee on Taxation, the nonpartisan agency tasked with estimating the budgetary costs of tax legislation, estimated that the Democrats’ bill would save the Treasury $34 billion over 10 years by preventing inversions. That figure was an increase from the committee’s earlier estimate in May. The corporate tax code as a whole is expected to bring in roughly $4.5 trillion over that period, according to the Congressional Budget Office.
While the Democratic legislation is unlikely to go anywhere in the GOP-controlled Congress, it nevertheless will highlight one of the ongoing problems with the U.S. corporate tax code.
Republicans have faulted corporate tax law for imposing the highest statutory tax rate on businesses of any advanced country and for taxing U.S. companies for income earned in foreign countries at that same rate.
Both the Obama administration and leading Republicans have suggested that a deal may be possible on corporate tax reform to lower the rate and expand the tax base by eliminating breaks and preference. Most involved in the legislative process, however, believe that a legislative overhaul is not likely this year.
