President Obama’s Treasury Department recently issued new rules aimed at punishing companies that seek out friendlier or saner corporate tax codes through so-called “corporate inversions.”
Read Politico’s Morning Money today, and you see the perverse consequences that could flow from these new rules. Ben White quotes an expert:
Guggenheim’s Chris Krueger: “The Treasury and IRS issued very targeted and more aggressive than anticipated anti-inversion rules … We anticipate a rigorous pushback for overly politicizing and overcomplicating an issue that is not resonating with voters, which likely means this regulation is probably the limit of Treasury unilateral action … The regulations mention nothing on income stripping, debt vs. equity characteristics, or retroactivity. Any company that has inverted can stay inverted — and companies can still invert provided they meet all the legal thresholds.
“It remains unclear if this regulation effectively grandfathers in a permanent class of companies (those that inverted before yesterday) that will have a permanent structural advantage to other companies …”
Regulations, you see, often act as barriers to entries — or moats. By making inversions more costly, or more legally tricky, the Treasury gives an advantage primarily to those companies that already re-headquartered overseas — the companies Democrats blast as “Benedict Arnold” companies, and secondarily to those companies that can afford to jump through Treasury Secretary Jack Lew’s hoops.
