The corporate thieves running U.S.-based corporations are just counting the days until Carl Levin heads off to retirement at the end of this term. It was Levin, you may recall, who looked at Goldman Sachs and saw “a financial snake pit rife with greed, conflicts of interest, and wrongdoing”. And he isn’t letting go: he’s now moving to try to close a loophole that will put billions of dollars in taxable corporate profits into offshore accounts, a scam that robs the people of revenue.
He calls it the Stop Corporate Inversions Act. I dub it the “Stop Corporate Thievery Act” in line with my own view that when corporations willfully evade taxes, those corporations are effectively stealing from the taxpayers here by exploiting society’s broad resources–education, infrastructure, public safety and other taxpayer-financed public goods–which make profits possible and, then, discarding the entire country by the roadside.
As Levin put it yesterday:
This legislation is designed to address a loophole which, unless we close it, will unleash a flood of corporate tax avoidance that threatens to shove billions of dollars in tax burden from profitable multinationals onto the backs of their American competitors and other American taxpayers.
And he explains the issue:
The issue we seek to address is known technically as “corporate inversion.” The details of inversions sound complex, but the principle is not. Inversion means avoiding potentially billions of dollars in U. S. taxes by changing a corporation’s address, for tax purposes, to an offshore location. What we have here is a tax avoidance scheme, an enormous loophole that allows companies to avoid billions in taxes without any significant change in where they operate, where their profits are generated, or the location of the executives who manage and control these corporations.A recent prominent example involves Pfizer, a U.S. drug company, and AstraZeneca, a U.K.-based competitor. This proposed corporate takeover – which Pfizer makes abundantly clear is largely about avoiding U.S. taxes – has gotten a lot of attention the attention, and for good reason. It would cost the United States about $1 billion a year in tax revenue. But this is not about just two companies. This is not about just one merger – even a merger that could shove billions of dollars in tax burden onto U.S. taxpayers. The Pfizer-AstraZeneca deal is just the latest example of abusive inversion deals. You cannot pick up a newspaper’s business section these days without reading about what Reuters has called “a wave of tax-driven overseas deal-making.” Some companies that believe in meeting their tax obligations are under competitive pressure to invert. It is clear that dozens, perhaps scores of companies are preparing to file their change-of-address cards, and in doing so, avoid billions in U.S. taxes. That burden doesn’t just go away. Either our remaining constituents must pick up the tab, or the loss of Treasury revenue adds to the federal deficit.[emphasis added]
Under current law companies can pull off an inversion if just a fraction of their stock – just over 20 percent – is in the hands of new stockholders. Our bill would raise that threshold to 50 percent or more. In addition, it would stop tax avoiding inversions in cases where management and control remain in the United States. President Obama’s 2015 budget included a similar proposal, which one expert told The New York Times would “essentially eliminate inversions as we know them.”
And he makes the point I made yesterday:
These multinational companies benefits from the safety and security that the U.S. government provides. Our troops protect them. Our intellectual property rights protections allow them to profit from their innovations. They benefit from federally funded research, and claim tax subsidies for their own research and development. They raise capital in U.S. securities markets that are the envy of the world thanks to the rule of law that this government protects. In the last four years, one of the companies at the center of this debate, Pfizer, received more than $4.4 billion in taxpayer money for federal contracts. Just last month, the Centers for Disease Control and Prevention awarded Pfizer a $1.1 billion contract.
The prospects for this legislation are slim, because there is no broad tax legislation likely to pass in this Congress–and Levin won’t be here in 2015.
But, it’s a worthy effort.