Corporate taxes become an issue in Pennsylvania’s special election

National Democrats are attacking Republican House candidate Tim Burns because he was an executive for a healthcare company that deferred taxes on income earned overseas.
 
The Obama administration wants to repeal deferral, which has long been criticized by some Democrats as a tax loophole that allows companies to shelter income abroad. Critics believe it leads to the out-sourcing of U.S. jobs. Research has shown the practice costs the federal government from $12 billion to $28 billion annually in lost tax revenue because the money is often reinvested abroad and never repatriated.

Burns is running against Democrat Mark Critz in the special election for the late Rep. John Murtha's (D-Pa.) seat. The Republicans consider the race a pick-up opportunity, and the fight over taxes and jobs could be a key issue given the economy.

U.S. business groups say that without deferral they couldn't compete internationally with companies that are not taxed on their income earned overseas. They also argue tax deferral actually helps U.S. employment by keeping corporations competitive.

Burns was an executive at NDCHealth Corp. from January to June 2003 after the company bought his start-up business, TechRx.

NDCHealth coordinates the flow of information between pharmacies, insurance companies, doctors and hospitals, according to a company release. It does business internationally and during the time Burns worked there the profit it made overseas was classifies as a "deferred tax liability."

In 2003, the company took in close to $407 million in revenue in the United States and $21 million abroad, according to its Securities and Exchange Commission filing. It paid a total of $1.55 million in taxes -- 40 percent of which was at the foreign tax rate of 1.2 percent as opposed to the 35 percent federal statutory rate.

Democrats argue that this means Burns was condoning the use of a tax "loophole."

"By taking advantage of these loopholes for companies to create jobs overseas Tim Burns is reinforcing what we already knew: he’ll do anything to line his own pockets to get rich, regardless of the consequences for Western Pennsylvania," Shripal Shah, a spokesman for the Democratic Congressional Campaign Committee, said in a statement.

"Tim Burns' self-serving, out of touch agenda that puts corporate profits ahead of hardworking Pennsylvanians represents exactly what Western Pennsylvania can’t afford right now."

Job creation is a major issue in district where unemployment hovers around 10 percent. Critz and Burns have fought to portray themselves as best capable to boost economic development.

Burns responded to questions about the tax deferral by touting the "400 new jobs" his business created.

"TechRx was sold to NDC with the goal of expanding operations and increasing employment in the process. I am proud to have assisted them in the transition and ensuring that NDC continued to grow," he said in a statement. "NDC followed existing laws to maximize revenues for job creation."

Regarding the congressional debate over tax reform, Burns said he would take a wait-and-see approach.

"In Congress, my focus will be to cut taxes for job creators and reduce government barriers for job growth," he said. "Before I make a decision on any bill, I will first evaluate the legislation by this priority."