A new battlefield is emerging in midterm House and Senate races — tax inversions, in which U.S. companies merge with smaller overseas corporations to avoid U.S. corporate tax bills, The Wall Street Journal reported.
Democrats and the Obama administration are opposed to the practice, and, backed up by U.S. Treasury Secretary Jack Lew, are launching legislative assaults to stop it, while House and Senate Republicans prefer more comprehensive tax reforms.
In a July 15 letter to Congress, Lew signaled a new push for control over tax inversions, which Democrats fear will weaken the U.S. corporate tax base.
Lew called for a "new sense of economic patriotism," according to the Journal. He urged immediate legislation and suggested it be retroactive to May, when Pfizer Inc. was trying, but failing, to put together a deal for AstraZeneca PLC in England.
According to Bloomberg News
, over 44 corporations have either re-incorporated, or re-domiciled, overseas, or are considering the move, leading to fears that impending legislation to block tax inversions may cause a sudden rush out of the reach of U.S. taxes.
Companies involved include Walgreen Co., the drugstore chain considering a move to Switzerland corporate citizenship, and Medtronic, a medical device maker flirting with a move to Ireland.
Sen. Carl Levin, a Michigan Democrat, has proposed
the Stop Corporate Inversions Act of 2014, which would mandate treating a U.S. re-domiciled corporation as a U.S. corporation for tax purposes, if less than 50 percent of the firm's stock is owned by foreigners, up from 20 percent under current tax law, and if 25 percent of the corporation's employees and management are located in the United States.
"It's become increasingly clear that a loophole in our tax laws allowing these inversions threatens to devastate federal tax receipts," Levin said in a statement
. "Companies that exploit this loophole benefit from the protections and services the federal government provides, including patent protection, research and development tax credits, national security and more; they shouldn't be allowed to shift their tax burden onto others."
Corporate tax inversions, such as Mylan Pharmaceutical's plan to move to the Netherlands after purchasing Abbott Laboratories' European arm, may cost U.S. coffers $20 billion, according a separate Journal story.
The Journal quoted Republican Sen. Orrin Hatch of Utah, responding to Lew's letter, as saying, "My hope is that your definition of 'economic patriotism' is not so narrow as to only include a particular business practice that happens to be the topic of the month in the political echo chamber."
Rep. Chris Van Hollen, a Maryland Democrat, told the Journal, "This is an issue that understandably gets people very angry. If Republicans are going to oppose our efforts in this area, they are going to have to explain why they are shielding American corporations that are deserting the U.S. in order to dodge their obligations to the country and American taxpayers."
© 2016 Newsmax. All rights reserved.