Lashing out at what he called “corporate deserters,” President Obama on Thursday increased the pressure on Congress to approve legislation targeting companies that change their address to slash their U.S. tax bill.
Obama, speaking at a technical college in Los Angeles, said corporations were taking advantage of a loophole not available to average workers — and in the process, forcing the middle class to take up more of the tab for infrastructure and job-training programs.
“I don’t care if it’s legal. It’s wrong,” Obama told the California crowd. “You don’t get to choose the tax rate you pay. These companies shouldn’t either.”
Obama pressed Congress to enact a measure making it impossible for a U.S. corporation to swallow up a smaller foreign company in order to avoid paying U.S. taxes.
In the process, Obama echoed his Treasury secretary, Jack LewJacob (Jack) Joseph LewThe Hill's Morning Report - Biden argues for legislative patience, urgent action amid crisis On The Money: Senate confirms Yellen as first female Treasury secretary | Biden says he's open to tighter income limits for stimulus checks | Administration will look to expedite getting Tubman on bill Sorry Mr. Jackson, Tubman on the is real MORE, who last week called for a “new sense of economic patriotism.”
Obama’s comments put an even larger spotlight on the practice known as inversions, an issue that meshes well with the economic populist tone that Democrats are taking this election year.
The White House is echoing the push from congressional Democrats to enact anti-inversion legislation retroactive to May, and has brushed aside Republicans who say the cross-border deals should be dealt with in tax reform.
Tax reform, Obama said, is “going to take some time,” while the recent rash of inversions illustrates that Congress needs to act to stop those deals now.
“You shouldn’t get to call yourself an American company only when you want a handout from American taxpayers,” Obama said.
Congressional Democrats have been pounding the inversion issue since May, when the pharmaceutical giant Pfizer attempted to merge with AstraZeneca, a British competitor.
Since then, a string of other prominent companies, including the pharmacy chain Walgreen Co., have openly discussed shifting their legal address abroad, on top of the close to 50 companies that have inverted in the last decade or so.
Less than a week ago, the pharmaceutical company AbbVie closed the largest inversion yet — an almost $55 billion deal to merge with an Irish competitor.
But although Democrats clearly see inversions as a political winner, top lawmakers in the party also acknowledge they face an uphill climb in getting legislation passed this year.
Senate Finance Committee Chairman Ron WydenRonald (Ron) Lee WydenDemocrats narrow scope of IRS proposal amid GOP attacks Democrats scramble for climate alternatives Overnight Energy & Environment — Presented by the American Petroleum Institute — Democrats address reports that clean energy program will be axed MORE (D-Ore.) said Thursday that he was working with fellow tax writers, including his panel’s top Republican, Sen. Orrin HatchOrrin Grant HatchLobbying world Congress, stop holding 'Dreamers' hostage Drug prices are declining amid inflation fears MORE (Utah), to try to clinch a bipartisan inversion deal.
But Sen. Charles SchumerChuck SchumerFixing Congress requires fixing how it legislates Beware the tea party of the left Bottom line MORE (N.Y.), a member of that committee and of the Democratic leadership, said that sort of legislation was “a little too complicated” to clear the panel before the upcoming recess.
“I would hope right after,” said Schumer, who has also stressed that he doesn’t think the leading Democratic proposals on inversion go far enough.
Congressional Democrats have largely embraced a proposal from Obama’s budget, that the government would continue to consider a merged company American for tax purposes if at least half of the shareholders come from the original U.S. business. Sen. Carl LevinCarl Milton LevinOvernight Defense: First group of Afghan evacuees arrives in Virginia | Biden signs Capitol security funding bill, reimbursing Guard | Pentagon raises health protection level weeks after lowering it Biden pays tribute to late Sen. Levin: 'Embodied the best of who we are' Former Colorado Gov. Richard Lamm dead at 85 MORE (D-Mich.) and Rep. Sandy Levin (D-Mich.) have both introduced legislation along those lines.
The current threshold, set by anti-inversion legislation in 2004, is 80 percent. Hatch has said he’s open to a more targeted measure but won’t back retroactive legislation. Even some Democrats have also noted they think the problem would be better dealt with in tax reform.
“I don’t know that there’s going to be anything passed even this year,” Senate Majority Whip Dick DurbinDick DurbinEmanuel to take hot seat in Senate confirmation hearing Manchin, Tester voice opposition to carbon tax Democrats feel high anxiety in Biden spending conflict MORE (D-Ill.) told reporters after Lew briefed Democrats at a Thursday lunch. “There’s a need for it.”
Most congressional Republicans have stood firm against any targeted inversion legislation, instead saying the problem illustrates how badly the entire tax code needs to be rewritten. The real issue, they say, is the U.S.’s 35 percent corporate tax rate.
“I don’t think trying to do something that might be patchwork or put together haphazardly is the way to deal with this,” Rep. Charles BoustanyCharles William BoustanyFormer lawmakers call on leadership to focus on unity Partial disengagement based on democratic characteristics: A new era of US-China economic relations Lobbying world MORE (La.), a senior Republican on the House Ways and Means Committee, told reporters this week. “The fact of the matter is that our tax code has made U.S. companies relatively less competitive.”
On Thursday, senior White House officials said Congress enacted retroactive legislation the last time they dealt with inversions a decade ago.
They added that companies that reincorporate abroad for tax reasons often change little about how they do business and remain heavily reliant on other U.S. resources, like education and infrastructure.
A White House official noted that, given that some smaller nations have slashed their tax code for corporations to basically zero, any overhaul of the tax code would need to contain a tough inversion proposal.
With that in mind, the White House official noted, Washington might as well start taking on inversions now — a step, the official said, which would also stop any “bandwagon effect” caused by the recent rush of inversions.
“There’s more safety in numbers,” the official said. “We should be acting as quickly as we can. That will buy us more time and space.”
— This story was first posted at 3:52 p.m. and has been updated.