By Bernie Becker - 07/22/14 10:48 AM EDT
The Senate’s top GOP tax writer said any legislation to battle offshore corporate tax deals should not be retroactive, underscoring the divisions on the matter on Capitol Hill.
Hatch had said last week that he’d be open to a more targeted, short-term solution to the so-called inversions that have become increasingly prominent in recent months, signaling that there could be growing GOP interest in that sort of measure.
On Tuesday, Hatch also said that any such proposal should help spur momentum for a broader rewrite of the tax code and move the U.S. toward a system that exempts most offshore corporate income from American taxation.
Congressional Democrats and the White House are pressing for legislation that would limit U.S. companies’ ability to merge with a smaller foreign counterpart and avoid U.S. taxation.
That proposal would be retroactive to May, when the pharmaceutical giant Pfizer’s attempt to take over AstraZeneca sparked congressional interest. It also fits in with the Democrats' broader election-year message that they are more interested in helping the middle-class than Republicans are.
But Hatch made clear on Tuesday that he has no interest in that idea. Other top Republicans haven’t been as open as Hatch to a targeted solution for inversions, illustrating the long odds in getting a short-term deal this year.
“I think there’s a growing chorus out there among some of my friends on the other side of the aisle to use corporate inversions as a political wedge issue in an election year,” Hatch said. “I hope that’s not the direction we take.”
House Ways and Means Committee Chairman Dave Camp (R-Mich.) and other GOP lawmakers have said the Democrats’ preferred approach to battling inversions would ignore the underlying problem of the U.S.’s 35 percent corporate tax rate.
Companies that have moved toward inversion in recent months, like the drug maker AbbVie, have said the lack of progress on overhauling the tax code played a role in their decision.
Still, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Robert Stack, Treasury’s deputy assistant secretary for international tax affairs, said Congress should act immediately on a short-term fix, even as they continued to make a plug for tax reform. Wyden added that none of the companies that have moved toward shifting their addresses abroad accepted invitations to Tuesday’s hearing.
“First, let’s work together to immediately cool down the inversion fever,” Wyden said. “The inversion loophole needs to be plugged now. Second, let’s use the space created by these immediate steps to apply the indisputable, ultimate cure: comprehensive tax reform.”