Republican lawmakers said the United States needs to simplify its tax code and lower rates if it wants to prevent American-based companies from moving abroad.
In the wake of several major businesses leaving – including Pfizer’s $160 billion merger with Ireland’s Allergan, forging the world’s largest drug company in November – lawmakers on both sides of the aisle agreed something needs to be done to prevent the loss of more American jobs during a Ways and Means Committee hearing on international tax reform Wednesday.
“The first step we can take toward overall pro-growth tax reform is to permanently lower the tax gates to allow our U.S. companies to bring their profits back home to invest in our communities, in our jobs, in our research and development, in growth.” Chairman [crscore]Kevin Brady[/crscore] of Texas said.
The tax-writing panel questioned witnesses at the hearing on how to prevent the loss of opportunity and economic growth, asking about the repercussions companies leaving the country have on communities.
“Michigan was an unbelievable state. It had more recreation and more tool and dye companies and more suppliers than anybody,” Raymond Wiacek, a partner at international law firm Jones Day, said. “And those places are all gone. We can’t lose another round of companies. Maybe we’re not going to be big in the auto industry anymore, but we’re big in tech now, and we’re big in pharma now, and we’re big in branded products like Starbucks, and we can’t lose those companies too. And they’re all under threat.”
The United States currently has one of the highest corporate tax rates in the western world, standing at 35 percent compared to Ireland’s 12.5 percent – giving businesses a major incentive to leave.
“Instead of attacking American companies, tweaking the tax code or publicly wringing its hands, Congress should fix our broken tax code and stand strong against global developments that hurt our workers,” Brady said in his opening statement.. “On this side of the aisle we are committed to delivering pro-growth tax reform that includes real, pro-growth changes to our international tax system.
Democrats, including President Barack Obama, have argued organizations fleeing the country to slash their tax rates through corporate inversions are being “unpatriotic” for not paying the high levies.
“More and more of the horses are galloping out of the barn, using a huge loophole. Failure to close the barn door is bad for the American economy and unfair to the typical American taxpayer who can’t lower their taxes by simply changing their address to another country with a lower tax rate,” Ranking Member [crscore]Sander Levin[/crscore] said in his opening remarks. “The JCT score of more than $40 billion on the legislation we introduced to stop inversions shows how abused this tax dodge is.”
The Michigan Democrat and Budget Committee Ranking Member [crscore]Chris Van Hollen[/crscore] introduced legislation Tuesday aimed at stopping earnings stripping, a tactic used by corporations to lower their tax burden through interest deduction to offshore headquarters.
“We need to shut the barn door before more and more horses run off from the U.S. and race overseas to lower the taxes they pay to the U.S,” Levin said.