By Bernie Becker - 05/09/14 01:47 PM EDT
Senate Finance Committee Chairman Ron Wyden (D-Ore.) is plugging new legislation he plans to make it harder for companies to reap tax benefits by moving their address abroad.
Pfizer, the U.S. drug company, is the latest corporation to seek an inversion, as it tries to buy its British counterpart AstraZeneca.
But the Oregon Democrat also made clear that he wasn’t willing to wait for a broader overhaul of the tax code that could be years away to deal with the matter.
The legislation Wyden is preparing is similar to a proposal from President Obama, and would increase the relative size of the foreign companies that a U.S. business would have to buy or merge with to get the tax benefits from inversion.
Right now, companies reincorporating offshore must ensure that at least 20 percent of the shareholders in the merged business are from the foreign partner. Obama and Wyden’s proposal would bump that up to 50 percent.
“It would be easy to point a finger at these runaway corporations alone and simply question their morality or patriotism, but that would be ignoring our own failure to bring the tax code into the 21st century,” Wyden wrote in the Journal.
“An uncompetitive tax code strains our economy, and we should not be surprised when corporations fight to get out from under antiquated tax rules.”
Sen. Carl Levin (D-Mich.) and Rep. Sandy Levin (Mich.), the top Democrat on the House Ways and Means Committee, have said they’re eyeing similar legislation.
Republican tax writers haven’t embraced the Democratic proposal, essentially saying that corporations would continue to find ways to find offshore tax benefits as long as U.S. tax rates are so high.
The top U.S. corporate rate is 35 percent, the highest in the industrialized world. Both Wyden and House Ways and Means Chairman Dave Camp (R-Mich.) have proposed bringing that rate down, but all sides acknowledge that getting a tax reform deal through Congress could be years away.
Rep. Charles Boustany (R-La.), a senior Ways and Means member, also took issue with Wyden’s idea of making the inversion legislation retroactive to May 8.
“I think this statement about retro-activity seems to be targeted at the Pfizer deal,” Boustany told reporters Friday. “I think any targeting to a specific company is not appropriate.”