Let’s Call ‘Corporate Inversion’ for What It Is: A Gaping, Unpatriotic Tax Loophole

This post originally appeared on Huffington Post

In 2004, Congress enacted a law to prevent “corporate inversions” in which corporations reincorporate in a foreign country to avoid paying U.S. taxes, but a gaping loophole allows corporations to get around this law by merging with a foreign company.

Simply put, it allows corporations to avoid paying taxes when they “renounce their U.S. citizenship” and change their corporate address to a foreign country.

In recent months, several large corporations have announced plans to exploit this loophole, with minimal change in their business operations, to avoid paying taxes. This wave of “corporate inversions” threatens to hollow out the U.S. corporate income tax base.

One striking example is Walgreens, the nation’s largest drugstore chain, which may use an upcoming acquisition to become a foreign company in order to dodge more than $4 billion in taxes over five years. Walgreens is talking about abandoning America despite its reliance on the U.S. government — and U.S. taxpayers — for a quarter of its revenue paid for by the Medicare and Medicaid programs.

It’s time for Congress to close the loophole and end this outrageous practice.

Last week, I was encouraged to see Congress finally begin to hold hearings and to hear President Barack Obama double down on his support. Under the president’s leadership, the administration is taking the right approach and has proposed solutions to the problem.

This week, Treasury Secretary Jacob Lew in the Washington Post was right to suggest Congress make this legislation retroactive to May 2014, so corporations have notice that any transactions taking place after that date will not allow them to dodge taxes.

“This inversion loophole must be plugged,” Sen. Ron Wyden (D-Ore.) recently said, and Sen. Carl Levin (D-Mich.) and Rep. Sandy Levin (D-Mich.) have both proposed legislation to plug it.

This is exactly the momentum we need to close the loophole once and for all.

The real problem is that many of these so-called “U.S.” corporations want to keep dictating our economic policies and dominating our politics, yet they have less and less loyalty to the people who actually live and work in America. They want to keep benefiting from all the things our government does for them so they can make profits — our legal system to protect their investments and patents, our education and training system to train their workers, our transportation system to get their products to market, our federally sponsored research, our military — but they want the rest of us to front their share of the bill.
Sixty years ago corporations paid one-third of federal revenues, but today they pay only one-tenth. Now they say even that’s too much. Corporate profits are at their highest ever and wage growth is near its lowest in half a century, but still these corporations are not satisfied. They want more. They want Congress to cut their income tax rate, even though many of the largest corporations get away with paying little or no taxes for years. They want Congress to eliminate taxes on the factories they ship overseas, even though an existing loophole already allows them to lower their tax bill when they outsource jobs. And if we don’t give these corporations what they want, they threaten to renounce their citizenship and stop paying U.S. taxes altogether.
We need to start demanding a little more patriotism from these corporations. If they want to keep benefiting from everything our great country has to offer, they need to start showing a little more loyalty to the people who live and work in America. And they need to stop threatening to desert the United States and stop paying their taxes altogether unless America gives in to their demands.

Follow Richard Trumka on Twitter: www.twitter.com/RichardTrumka

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Want to Create 5.8 Million New Jobs? Here’s How

If the United States acted forcefully to end currency manipulation by China and other nations—and there is legislation to provide the government the tools to do so—it could create as many as 5.8 million jobs (40% in manufacturing) and reduce the nation’s trade deficit by as much as 72.5%, according to a new report from the Economic Policy Institute (EPI).

Currency manipulation is the largest single cause of the U.S. trade deficit, and the Chinese government is the world’s biggest currency manipulator. It deliberately keeps the value of its currency artificially low and that artificially raises the price of U.S. exports to China and suppresses the price of Chinese imports into the United States. This artificial price advantage is one of many pull factors that encourages U.S. businesses to shut down operations here and manufacture in China instead. Says AFL-CIO President Richard Trumka:

U.S. workers can compete with anyone in the world, but they cannot compete successfully on a lopsided playing field. [Currency manipulation] is a major contributing factor in our lopsided trade relationship with China. Meanwhile, U.S. manufacturing companies and workers bear the brunt of these unfair policies.

The EPI report finds that:

  • Eliminating currency manipulation would reduce the U.S. trade deficit by $200 billion in three years under a “low-impact” scenario and $500 billion under a “high-impact scenario.” This would increase annual U.S. GDP by between $288 billion and $720 billion (between 2.0% and 4.9%).
  • The reduction of U.S. trade deficits and expansion of U.S. GDP would create 2.3 million to 5.8 million jobs, reducing the U.S. jobs deficit by between 28.8% and 72.5%.
  • About 40% of the jobs gained would be in manufacturing, which would gain between 891,500 and 2,337,300 jobs. Agriculture also would gain 246,800 to 486,100 jobs, heavily affecting some rural areas.

Read the full EPI report here.

Bipartisan legislation in Congress (H.R. 1267 and S. 1114) would crack down on currency exchange rate manipulation and hold countries that manipulate their currencies accountable. Trumka says:

We call on Congress to fight on the side of American workers and domestic manufacturers and farmers to put an end to currency manipulation now.

While China is the largest currency manipulator, other nations do so, too. Japan, which is one the 12 TPP nations, (China is not involved) has been accused of weakening the value of the yen to benefit its auto industry.

Currently Japan exports some 130 cars to the United States for every car that U.S. automakers export to Japan. One of the major reason for that imbalance is currency manipulation says the UAW.

As a consequence of Japanese government currency intervention, in a market such as the United States, Japanese imports have seen several thousand dollars in effective subsidies while, at the same time, exports from the United States to Japan have seen several thousand dollars in added costs….The impact of these policies undermines American auto exports and American jobs and the investment they support.

Yesterday, Sens. Sherrod Brown (D-Ohio) and Sandy Levin (D-Mich.), both sponsors of S. 1114, said that without currency manipulation rules as part of the Trans-Pacific Partnership (TPP) trade and investment agreement and other pending trade agreements, Congress is unlikely to approve the trade bills. Says Brown:

The trade agenda is not moving until currency is part of it.

The Obama administration’s is pushing to have the TPP agreement considered under Fast Track rules in Congress.

Under the Fast Track process, Congress can only vote yes or no on the full agreement. It cannot amend or improve the bill.

Sign the petition to Congress to stop bad Fast Track trade deals over the next four years, including the TPP.

Also, if you haven’t signed a letter for a better TPP, do it here.

Reposted from AFL-CIO NOW

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