The top Democrat on the tax-writing House Ways and Means Committee defended his party’s push to deal with corporate tax inversions like Burger King’s recent decision to buy a Canadian donut chain and move its headquarters to Canada.
At a Monitor-hosted breakfast for reporters, Rep. Sander Levin (D) of Michigan, the ranking member of the Ways and Means Committee, was asked about a lengthy story in Friday’s issue of Politico that called the Democrats’ efforts to use corporate tax inversions to fire up their base and bash Republicans “a strategy flop” and “a massive dud.”
The story noted that corporate inversions have not become a major issue in contested Senate races and that there is little likelihood that Congress will act on the issue before the election.
That criticism “assumes that the main impetus for attention to this is political, and its origins I think essentially refute that,” Congressman Levin said. “The inversion issue is a real issue. I don’t think you can duck it,” he said.
“It is unavoidable that tax inversions will have to be addressed, unavoidable. Because you can’t have a system where a structure is easy to evade and to essentially turn it on its head,” Levin argued.
Since January 2013, some 19 companies have announced plans to reincorporate overseas for tax purposes – 14 of them this year alone, according to data from The Wall Street Journal. A corporate tax inversion often involves the US company buying a smaller firm overseas. The former US headquarters becomes a subsidiary of the foreign firm and the enterprise pays a lower tax rate in the new corporate home than it did in the US. The Obama administration says corporate inversions will cost the Treasury at least $17 billion in revenue over the next decade.
Republicans argue that the inversion issue should be dealt with as part of an overall reform of the tax code. Treasury Secretary Jack Lew told Bloomberg Television this week that he had talked to unidentified Republicans about revamping the tax code, an activity where Republicans would have greater influence should they take control of the Senate in November’s elections.
Levin concedes that Congress will not tackle the inversion issue before it leaves later this month to focus on the 2014 congressional elections. He said that next week Congress will pass a continuing resolution, or CR in Washington-speak, to fund the government. “It will include some provision relating to equipping people within Syria to be able to fight for what makes sense there, and we will pass the CR and leave town.”
Secretary Lew has called for speedy Congressional action on corporate inversions and has said his department would issue regulations in the “very near future” to curb the practice. But in a speech this week at the Urban Institute, Lew said “only a change in the law can shut the door.”
And at Friday’s breakfast, Levin said Treasury’s forthcoming regulations on corporate inversions “may more than nibble around the edges. Still it won’t take away the need for there to be a key addressing of this” by Congress.
Levin said that one function of the focus he and the Treasury Secretary are devoting to inversions is to make companies think twice about engaging in the practice. “One reason we are pushing our legislation is we are serving notice [to companies]. And I think one of the motivations of the Treasury Secretary … is to serve notice.”