Oregon Sen. Ron Wyden has come out in favor of reform in the corporate tax, too:
In pursuit of lower tax rates, American multinationals are merging with smaller foreign companies and moving their headquarters overseas. About 50 U.S. companies have leveraged this “inversion” tactic in the past 30 years—and more than 20 have done so in the past two years. And just recently we have seen Pfizer make a bid for AstraZeneca that would move its tax domicile to the United Kingdom.
While they may not be breaking U.S. laws, many of these companies are navigating a loophole in America’s broken and dysfunctional tax code. And while their shareholders may secure a temporary win, workers, taxpayers and this country all lose. America’s tax base erodes at a cost of hundreds of millions of dollars in revenue, increasing the burden on other companies and individuals. America also loses good jobs, talent, investment, and the ability to compete on a global stage.
Legal or not, this loophole must be plugged. Current law requires that U.S. companies reincorporating overseas must ensure that at least 20% of their stock is owned by their new, foreign partner. As chairman of the Senate Finance Committee, I am committed to raising this floor to at least 50% for all inversions taking place from May 8, 2014, on. I don’t approach retroactivity in legislation lightly, but corporations must understand that they won’t profit from abandoning the U.S.
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. An uncompetitive tax code strains our economy, and we should not be surprised when corporations fight to get out from under antiquated tax rules.
Congress has a responsibility to reverse the tide—now.
Sen. Wyden is chairman of the Senate Finance Committee.
Our corporate tax rate is the highest among OECD countries (our effective rate is the highest as well). Since it’s the highest, if we reduce our tax rate from 35% to 24%, the average rate among OECD countries, the average would fall, too. To be competitive we’d need to reduce our rate considerably below 24%.
As I’ve mentioned before tax reform is something that’s long overdue, at least a decade overdue. While Sen. Wyden’s support for reform is welcome, the idea won’t make any progress without support from the Senate leadership and the White House.