A trio of liberal Senate Democrats want President Barack Obama to make use of his "pen and phone" to cut down on corporate "inversions."
In a new letter, Sens. Richard J. Durbin of Illinois, Jack Reed of Rhode Island and Elizabeth Warren of Massachusetts seek executive action to reduce or eliminate tax preferences that come along with the business practice, in which a U.S. company will acquire an overseas company and then be based in the foreign country, at least on paper. The practice has increased in popularity as a tax-avoidance strategy.
"We have introduced ... the Stop Corporate Inversions Act, and are working with our colleagues in Congress to pass legislation as soon as possible to eliminate tax breaks for inverted corporations, including closing the inversion-acquisition loophole," the senators wrote. "However, our efforts should not preclude executive action to prevent corporate inversions. The coming flood of corporate inversions justifies immediate executive action."
With lawmakers having departed for August recess, there's no chance for legislative activity to address inversions in the near future, and beyond that, there's no indication of agreement on how to address the situation. However, the three senators signing Tuesday's letter dismissed the idea that an overhaul of corporate tax law would address the problem.
"Some have argued that comprehensive tax reform and lower U.S. corporate tax rates are the solution to this urgent problem. While we support efforts to restore fairness to the tax code and encourage domestic economic growth and job creation, this ignores the fact that even if tax reform successfully reduces the U.S. corporate tax rate to 28 percent as outlined in your proposal for business tax reform, companies will still chase lower tax rates in jurisdictions like Ireland where the corporate tax rate is 12.5 percent," the letter said. "This is a race to the bottom the United States simply can’t win and should not be lured into entering."