Corporate Inversions Politics DA 7wJ
GHJPP
Notes
The story of this politics disad is that in the status quo, corporate inversions (see definition
below) are increasing rapidly and will continue to multiply in the future due to the high
corporate income-tax rate here in the U.S. This is undermining the economic recovery and our
ability to compete with the rest of the world (and that results in great power wars… you
know the drill). Congress could do a total overhaul of our corporate tax policies and lower the
corporate income-tax rate here in the U.S. but that is unlikely to happen anytime soon
because it’s controversial. However, Obama/Congressional Democrats are pushing for a more
targeted, short-term fix to stop inversions; they just have to get Republicans on board.
So, here is a run-down of what you’ll want to know to understand this politics scenario –
Definition of corporate inversion (Investopedia)
Re-incorporating a company overseas in order to reduce the tax burden on income earned
abroad. Corporate inversion as a strategy is used by companies that receive a significant portion
of their income from foreign sources, since that income is taxed both abroad and in the country
of incorporation. Companies undertaking this strategy are likely to select a country that has
lower tax rates and less stringent corporate governance requirements.
The short definition – When a company moves its legal address outside of the country for tax
purposes
Why do companies do it? The U.S. has one of the highest corporate income-tax rate in the
developed world and they want to pay less in taxes.
Why does it matter? Because of the economic impact. Some figures:
 The Treasury could lose as much as $20 billion in corporate income taxes over the next
ten years because of this practice (CNBC). That means less revenue for the government.
 The corporate tax revenue as a share of U.S. GDP has decreased from about 6% in the
1950s to about 2% today (Center on Budget and Policy Priorities).
 Because inversion results in companies keeping their assets and earnings outside of the
country, by some estimates, as much as $2 trillion in corporate cash is sitting outside of
the U.S. This money could be being reinvested domestically to expand business here and
create jobs.
 Inversions have increased dramatically recently so it is becoming particularly
concerning. Thus far this year 8 major U.S. companies have announced plans to move
their headquarters overseas (USA Today) and many more are considering it, including
Walgreens (the largest drug retail chain in the U.S.) and Pfizer (one of the world’s largest
pharmaceutical companies, currently American based).
What can be done? Congress could comprehensively reform corporate tax policies – and lower
the corporate income-tax rate in the process - but that’s pretty controversial and a large
overhaul probably isn’t going to happen anytime soon. Because of this, the White House and
Congressional Democrats are proposing a short-term fix: require companies that claim they’re
no longer American to be more than 50 percent owned by foreigners. This would make
inversions much more difficult.
Strategy tips
 Note that we didn’t include links or much internal link stuff in this file so be sure to pull
from other politics files for that stuff.
 AFF uniqueness cards are pretty good, especially the most recent ones, so if going for
this on the NEG you will need to invest time there.
 We wish we’d had more time to do more diverse impact work but we didn’t. The stuff
we did include is pretty decent though. #SorryNotSorry
Questions? Email johnsonmegan@gmail.com
1NC
There is Congressional momentum for blocking corporate inversions now but Obama’s
political capital is key
Litan 7/18 [Robert, 7/18/2014, Fortune, Are U.S. corporate tax inversions a necessary crisis?,
fortune.com/2014/07/18/are-u-s-corporate-tax-inversions-a-necessary-crisis/] MJ
The problem is if Congress does nothing to bring down corporate tax rates, in return for narrowing or eliminating deductions and credits,
inversions will continue, eventually eroding conceivably up to half the revenue from the corporate tax
(that’s the latest share of all corporate tax revenue derived from multinational companies).¶ Obviously alarmed at this possible end
game, Treasury Secretary Jack Lew asked Congress in a letter this week to take immediate action to
prevent inversions, if necessary then retroactively to May (hold that latter thought until the end of this essay).¶ There is much
sympathy in both political parties for clamping down on inversions . The best known proposal to do this has been
drafted by the “Levin brothers” (Sen. Carl Levin and Rep. Sander Levin) and would allow inversions only if the shareholders of the acquiring
foreign firm hold a higher share, at least 50%, of the U.S. company after the transaction (the current threshold is just 20%). In addition, the
proposal would require management to change, a feature that would probably do most to stop inversions in their tracks.¶ But even
sympathetic Congressional members will consider anything like the Levins’ proposal only as part of comprehensive corporate tax overhaul,
which is all but dead now, especially heading into the mid-term elections.¶ As they say, when one gets lemons and doesn’t want them, turn
them into lemonade. Think of inversions as the big lemon that just landed in Washington, and lemonade being real comprehensive corporate
tax reform.¶ This is because Washington has gotten into the unfortunate habit of legislating only in response to a crisis. Up to now, the
best
argument for corporate tax reform is that it would boost growth over the long-run – a conclusion widely
shared across the political aisle, but one that has no immediacy to it. Inversions are a game changer and
may be just the sort of crisis that next year could really put corporate tax reform high on the political
agenda , regardless of the outcome of the November elections.¶ If this is true, then it will sure help the effort if the
Administration walks the talk and really backs Congressional efforts to do this . A tax reform package that really
lowers “corporate tax expenditures” in return for a markedly lower statutory rate (25 percent may be too ambitious, 28 percent may be more
realistic) would be the one bipartisan legislative accomplishment that the President could tout as he leaves office in 2016.
<Insert link>
Without targeted Congressional action inversions will continue to multiply – this
undermines economic recovery and our economic competitiveness
Schneider 7/25 [Bradley, US House of Rep from Illinois’ 10th district – B.A. in Industrial
Engineering from Northwestern University & M.B.A from Northwestern’s Kellogg
Graduate School of Management – worked for PWC as a management consultant,
Chicago Sun-Times, 7/25/2014, Blame tax code if Walgreens exits,
www.suntimes.com/news/otherviews/28862258-452/blame-tax-code-if-walgreensexits.html#.U9c_Y_ldX7w] MJ
In the coming weeks, Deerfield-based Walgreens will decide if it will reincorporate overseas to lower its overall tax rate and remain competitive
in the increasingly global economy. Walgreens isn’t alone. More
and more companies are considering what is called
“inversion,” a process of reincorporating their corporate headquarters outside the United States to take
advantage of lower corporate tax rates.¶ Companies are seeking inversions because the U.S. tax code is woefully outdated,
unnecessarily complex and riddled with short-term patches and uncertainty. Most important, our rate is too high and our code has not changed
to address the realities of a global economy. At
35 percent, the U.S. corporate tax rate is among the highest in the
world and has a negative impact on our global competitiveness . The high rate, complexity and
uncertainty, combined with the unwillingness of Congress to have a serious debate about reforming our
tax code, is putting American businesses at a disadvantage at a time when it is becoming increasingly
important to be able to compete internationally.¶ Put simply, our outdated tax code is straining our economic
recovery, restricting job growth and hurting communities. We should be pursuing policies that help companies succeed
and grow here at home, not forcing them to look abroad to take advantage of more modern tax policies. As long as Congress continues to
neglect the urgent need for comprehensive tax reform,
our country is going to lose not just American-based
companies, but also the quality jobs, ingenuity and investment that they bring. It is also going to result in
undue pressure on middle-class taxpayers and small businesses as they’re forced to carry more of the
tax burden.¶ It is estimated that these inversions will cost the federal government billions in lost
revenue . When deciding where to invest and expand operations, businesses need more than just
financial certainty, they need to know there will be roads, train tracks and ports to transfer their goods.
They need to know there will be reliable communications infrastructure to stay connected with global
partners. They need to know there will be world-class schools to teach and train the next generation of
workers. Unfortunately, if we don’t address the perverse incentives contributing to inversions, our
country will have fewer resources for critical investments, further driving companies to move abroad.¶
Since 2013, nearly 20 companies have used inversions, and many more have recently announced efforts.
Congress must work to curb inversions through targeted legislation, but such success will be short-lived if Congress
fails to work on comprehensive tax reform that addresses the root of the problem. Unfortunately, Washington has found itself in a pattern of
acting in a bipartisan way only when faced with a crisis, making any comprehensive legislation seemingly impossible. However, this is now a
crisis that should sound the alarms for reform.¶ Modernizing the tax code will not be easy, but it is imperative to our future success. It is going
to require tough decisions. Both sides of the aisle, as well as all stakeholders, will have to compromise and make difficult
choices — concepts that we sadly see far too little of in Congress. Still, Congress has achieved comprehensive tax reform in the past, and there
is no reason it can’t again happen in a way that incorporates sound principles and constructive compromises from across the ideological
spectrum. Congress has the ability to fix this problem and prevent this crisis from worsening. It’s time Congress gets to work.
The impact is global power wars
Khalilzad 11 Zalay was the United States ambassador to Afghanistan, Iraq, and the United Nations during the presidency
of George W. Bush and the director of policy planning at the Defense Department from 1990 to 1992, “ The Economy and
National Security”, 2-8-11, http://www.nationalreview.com/articles/print/259024
Today, economic and fiscal trends pose the most severe long-term threat to the United States’ position
as global leader. While the United States suffers from fiscal imbalances and low economic growth, the
economies of rival powers are developing rapidly. The continuation of these two trends could lead to a
shift from American primacy toward a multi-polar global system, leading in turn to increased geopolitical
rivalry and even war among the great powers. The current recession is the result of a deep financial crisis, not a mere
fluctuation in the business cycle. Recovery is likely to be protracted. The crisis was preceded by the buildup over two decades of enormous
amounts of debt throughout the U.S. economy — ultimately totaling almost 350 percent of GDP — and the development of credit-fueled asset
bubbles, particularly in the housing sector. When the bubbles burst, huge amounts of wealth were destroyed, and unemployment rose to over
10 percent. The decline of tax revenues and massive countercyclical spending put the U.S. government on an unsustainable fiscal path. Publicly
held national debt rose from 38 to over 60 percent of GDP in three years. Without faster economic growth and actions to reduce deficits,
publicly held national debt is projected to reach dangerous proportions. If interest rates were to rise significantly, annual interest payments —
which already are larger than the defense budget — would crowd out other spending or require substantial tax increases that would undercut
economic growth. Even worse, if unanticipated events trigger what economists call a “sudden stop” in credit markets for U.S. debt, the United
States would be unable to roll over its outstanding obligations, precipitating a sovereign-debt crisis that would almost certainly compel a radical
retrenchment of the United States internationally. Such scenarios would reshape the international order. It
was the economic
devastation of Britain and France during World War II, as well as the rise of other powers, that led both
countries to relinquish their empires. In the late 1960s, British leaders concluded that they lacked the
economic capacity to maintain a presence “east of Suez.” Soviet economic weakness, which crystallized
under Gorbachev, contributed to their decisions to withdraw from Afghanistan, abandon Communist
regimes in Eastern Europe, and allow the Soviet Union to fragment. If the U.S. debt problem goes critical, the United
States would be compelled to retrench, reducing its military spending and shedding international commitments. We face this domestic
challenge while other major powers are experiencing rapid economic growth. Even though countries such as China, India, and Brazil have
profound political, social, demographic, and economic problems, their economies are growing faster than ours, and this could alter the global
distribution of power. These trends could in the long term produce a multi-polar world. If U.S. policymakers fail to act and other powers
continue to grow,
it is not a question of whether but when a new international order will emerge. The closing
of the gap between the United States and its rivals could intensify geopolitical competition among major
powers, increase incentives for local powers to play major powers against one another, and undercut
our will to preclude or respond to international crises because of the higher risk of escalation. The stakes are
high. In modern history, the longest period of peace among the great powers has been the era of U.S. leadership. By contrast, multi-polar
systems have been unstable, with their competitive dynamics resulting in frequent crises and major wars among the great powers.
Failures of multi-polar international systems produced both world wars. American retrenchment could
have devastating consequences. Without an American security blanket, regional powers could rearm in an attempt to balance
against emerging threats. Under this scenario, there would be a heightened possibility of arms races, miscalculation,
or other crises spiraling into all-out conflict. Alternatively, in seeking to accommodate the stronger powers, weaker powers may
shift their geopolitical posture away from the United States. Either way, hostile states would be emboldened to make aggressive moves in their
regions.
Uniqueness
Framing Issue?
Evaluate the uniqueness debate according to momentum, not certainty – we don’t
have to win that passage is guaranteed, just that legislation is in the works – the
perception that something will be done and applied retroactively is empirically
enough to dissuade companies from going forward with inversions
Rubin 14 [Richard, 4/30/14, IRS Chief Says Us Can't End Companies' Offshore Tax Deals,
www.bloomberg.com/news/2014-04-30/treasury-said-to-favor-crackdown-on-tax-lowering-moves.html] MJ
The spate of inversion deals mirrors what happened in 2001 and 2002, when companies including
Ingersoll-Rand Plc (IR) and Cooper Industries Plc moved abroad.¶ Effective Moratorium¶ Then,
Congress effectively imposed a moratorium as the top members of the Senate Finance Committee
announced plans to advance legislation and said any bill would be retroactive to that date.¶ Two years
later, the ensuing law prevented companies from receiving the tax benefit of an overseas merger if their
existing shareholders still owned 80 percent or more of the company’s stock after the deal.
Will Pass
Congressional momentum to block corporate inversions now – key Republicans
signaling they will get on board
Newmeyer 7/22 [Tory, 7/22/2014, Fortune, Corporate tax dodgers might make Congress actually do
something, fortune.com/2014/07/22/corporate-tax-dodge-inversions-congress/] MJ
If there’s an epicenter for the new rash of corporate inversions, surely it’s Chicago’s North Shore. Just this year, the wealthy suburban cluster of
corporate headquarters has seen several of its own relocate abroad at least in part to dodge their American tax burdens: Walgreen Co., Horizon
Pharmaceuticals, and, in a deal announced Friday, AbbVie Pharmaceuticals.¶ Next door to AbbVie, Abbott Laboratories is selling its generic drug
line to Mylan Inc. as part of a deal by the Pennsylvania-based company to move its headquarters to the Netherlands. Actient Pharmaceuticals,
another company based in the neighborhood, is seeing its parent Auxilium decamp for Canada under a tie-up it announced last month.¶ That’s
a staggering number of moves, considering nationwide there are only roughly a dozen such deals in the pipeline. With
the pace of
inversions picking up, there’s fresh momentum in Washington for policymakers to do something
about it. Last week, Treasury Secretary Jack Lew wrote Congress calling for a “new sense of economic
patriotism,” asking lawmakers to pass legislation immediately that would block inversions hatched since May.
The Senate Finance Committee will examine the issue in a hearing Tuesday—with Fortune senior editor at large Allan Sloan, author of a cover
story blasting corporate self-deportees, among the expert witnesses. And while
Sen. Orrin Hatch (R-Utah), the top
Republican on the tax-writing panel , has stopped short of endorsing a specific fix, he’s signaled he’s
ready to talk about a targeted measure to bar the exits.¶ The North Shore offers a clue why such change is in the offing.¶
Falling within a seven-mile radius of each other, all three corporate headquarters eyeing a transatlantic move share a congressman, freshman
Democrat Brad Schneider. He belongs to the New Democrats, the moneyed subdivision of the broader House Democratic caucus that defines
itself by its friendliness with corporate interests. And for the group, Schneider is prototypical—a management consultant who won his election
as a pragmatic moderate (after fighting off a spirited primary challenge from a well-funded lefty candidate). The district itself—wealthy,
suburban, socially progressive but open to pitches from both sides—represents the sort of swing terrain that handed Democrats control of the
House eight years ago and remains a weathervane for the party’s efforts to rebuild a governing coalition. Seizing the House remains out of
reach for Democrats this election cycle, but capturing the chamber in 2016 or beyond will hinge on the party’s ability to compete in a district
like this one, drawn by a Democratic state legislature. Back home, Schneider is fighting for his political life in a nip-and-tuck rematch against Bob
Dold, the Republican incumbent he ousted two years ago.¶ No surprise, then, that in Washington, Schneider has played it safe. He teamed up
with a South Carolina Republican in May to launch the Middle Market Growth Caucus. Its mission: to help mid-size companies that are too small
to individually wield clout in Washington cut through federal red tape. A Chicago Sun-Times write-up of the effort focused on Horizon Pharma,
a company with no lobbyists, as a model beneficiary of this effort. CEO Tim Walbert praised Schneider’s initiative, citing headaches at the SEC
and FDA: “We are held to the same standards with the SEC as any other company. We need to have our voice heard.” The story did not
mention Horizon’s tax-avoidance maneuver though, in the larger scheme, the company’s $660 million reverse merger with Dublin-based Vidara
Therapeutics International ranks as relatively small potatoes.¶ AbbVie, by contrast, is a very large potato. Its $53.7 billion acquisition of Irish
drug maker Shire would make it the priciest inversion deal ever, with the company expecting its effective tax rate to drop from 22% to 13%.
Since spinning out of Abbott Laboratories to become a separate, publicly traded company at the start of 2013, AbbVie has quickly built a potent
political machine in Washington. It opened its own Washington office inside Abbott’s space, in a building less than a block away from the U.S.
Treasury, staffing it with a few veteran Abbott lobbyists and some poached from the D.C. teams of other pharmaceutical giants. The drug maker
spent $3.2 million last year rapidly building out an operation with top-flight contract lobbyists. All told, the team now numbers some 30
lobbyists, including a senior advisor to then-Treasury Secretary Robert Rubin, a former top Justice Department official, and many more former
Hill staffers from key committees. The company’s political action committee, formed at the end of 2012, has already handed out more than $1
million, with the biggest checks, for $10,000 each, going to Schneider, recently deposed House Majority Leader Eric Cantor, and Pete Roskam, a
Republican representing a suburban Chicago district that neighbors Schneider’s.¶ The company has used its hastily assembled muscle to dive
into debates on Obamacare implementation, patent reform, and trade deals, according to disclosure reports. But for the near-term at least, its
proposed acquisition will be front and center. With
scrutiny over the tax-avoidance scheme heating up in
Washington just as the Shire deal goes public, the company is now in “absolute crisis mode,” one source close to AbbVie says. Company
brass flew into Washington on AbbVie’s jet two weeks ago for a one-day visit. And AbbVie is now hiring even more outside lobbyists to mount a
Capitol Hill offensive on the merits of the deal.¶ What does Schneider have to say about representing the American inversion capital? Prior to
the AbbVie deal, he blamed our messy, antiquated tax code. Since comprehensive tax reform stands no chance of happening any time soon,
that argument—embraced by most Republicans, including Schneider’s challenger—amounts to a defense of doing nothing.¶ When I followed
up with Schneider’s office late last week to see if the AbbVie news changed his thinking, Schneider, in a statement, had this to say:
“Inversions are a threat to our economic growth and need to be addressed quickly and broadly so that we
aren’t forcing American companies to look overseas just because Congress can’t break through the gridlock to modernize our tax system.” No
word yet on what, precisely, he has in mind.¶ The only proposal so far in the House, from Michigan Democrat Sandy Levin, seeks to cork
inversion deals by upping the minimum required foreign shareholder ownership from 20% to 50%—and forcing a management change.
Schneider is not among the 67 Democrats who have formally added their support to that plan. In fact, out of 55 New Democrats, only five
have.¶ But in the combustible politics of an election year, the instinct among endangered lawmakers to simply keep their heads down can,
sometimes, be overwhelmed by a cause that stokes public outrage. This issue isn’t there yet. But it could be soon if more companies join the
scramble to relocate, perhaps out of fear that the door is slowly closing.¶ The House Republican majority would seem to be a solid line of
defense for companies seeking inversions against whatever might emerge from the Senate, though the AbbVie source said key
House
Republicans are “giving themselves just a little wiggle room to realize that this thing could catch fire.
Remember, this is not your father’s Republican party. The knee-jerk defense of Fortune 500 companies is
not what it was 20 years ago. If this becomes an economic populism issue, in some respects, defending
these transactions is a first cousin to defending bailouts.”
Congressional support building for corporate tax legislation to stop inversions
Rocco 7/18 [Matthew, 7/18/2014, Will Congress Scuttle the AbbVie-Shire Merger?,
www.foxbusiness.com/industries/2014/07/18/abbvie-shire-deal-highlights-fight-over-corporate-taxes/]
MJ
After months of courtship and four offers, AbbVie sealed the deal on Friday to buy Shire and pave the way for the Chicago-based drug firm to
become domiciled in the U.K., Shire’s current tax home. But American companies
seeking friendlier tax policies are
attracting more scrutiny from the Obama administration and Capitol Hill of late, given the industry’s
string of inversion deals this year.¶ Just this week, Mylan (MYL) agreed to pay $5.3 billion for Abbott Laboratories’ (ABT) generic
drug business. The new company will be incorporated in the Netherlands.¶ In June, medical device maker Medtronic (MDT) announced a deal
tobuy rival Covidien (COV) for $42.9 billion. The transaction sets up a tax move to Ireland, which is often the center of tax inversions thanks
to the country’s comparatively low corporate tax rate of 12.5%.¶ Pfizer (PFE) made an unsuccessful attempt to secure a tax inversion through a
$118 billion buyout of U.K.-based AstraZeneca (AZN). The bid, which was dropped in May, would have created the world’s largest
pharmaceutical company.¶ The
U.S. has a federal corporate tax rate of 35%, while the U.K.’s main corporate
rate is 21%.¶ Treasury Secretary Jack Lew recently sent a letter to congressional tax-writing committees
to request legislation that prevents companies from leaving U.S. tax bills behind, retroactive to May 2014.¶ “We
should prevent companies from effectively renouncing their citizenship to get out of paying taxes,” Lew
wrote.¶ Lew endorsed legislation proposed by congressional Democrats . The Joint Committee on
Taxation, a non-partisan congressional panel, estimates the bill will allow the Treasury to maintain $19.5
billion in tax revenue over the next 10 years.¶ Republicans have also voiced concern over the trend, but
lawmakers on the GOP side believe the deals signal a bigger issue with the nation’s tax code. Sen. Orrin
Hatch (R-Utah), the top Republican on the Senate Finance Committee, responded with his own letter to Lew, saying the administration’s
method of addressing tax inversions would amount to “constructing a wall” around American businesses.¶ However,
Hatch left the
door open to short-term steps that Congress can take “to address corporate inversions and related
issues” until an agreement on comprehensive tax reform can be reached.
Momentum for passage – key players have recently gotten on board
Sargent 7/28 [Greg, Washington Post, 7/28/2014, Dems may force GOP to vote on corporate tax
'deserters', www.washingtonpost.com/blogs/plum-line/wp/2014/07/28/dems-may-force-gop-to-voteon-corporate-tax-deserters/] MJ
Dem Rep. Chris Van Hollen, a top party strategist who has worked on this issue, is urging Senate Democrats to
hold this vote. “We should all be pushing on this issue,” Van Hollen told me. “The Senate should move quickly to vote on it. This is the
perfect symbol of what’s broken with our tax system. Republicans are trying to protect these multinational corporations that are deserting the
U.S. in order to evade their tax responsibilities to the American public and to our country.”¶ “It’s time to bring this up, and House and Senate
Republicans will have to let the American public know where they stand on this issue,” Van Hollen continued. “It helps crystallize some of the
differences between the parties in Washington today.Ӧ The Wall Street Journal had a good piece the other day laying out the state of play in
Congress. Dems want to
act immediately to close this loophole. Senator Carl Levin is pushing a proposal
that would require a foreign company’s shareholders to own 50 percent of the company in question (it’s
currently 20 percent) to avoid paying taxes here. And Senator Chuck Schumer wants to add a measure that
would stop companies that have already done this from enjoying other tax loopholes, adding a further
deterrent. Obama hit the issue in a speech the other day and he may do so again this week.¶ But some
Republicans see that approach as “punitive,” as Senator Orrin Hatch has put it. And other Republicans
who want to address this problem only seem willing to do so as part of broader tax reform , which of course
isn’t going to happen at all under this Congress. Some
Democrats, such as Finance Committee chairman Ron Wyden,
had initially echoed that argument, but he’s since come around to quicker action, boosting the chances
something might happen.¶ Democrats hold out slim hopes that Republicans might be willing to act to address the
immediate problem, pointing out that Senators such as Chuck Grassley have acknowledged the potential
need to act on it independent of broader tax reform.
Will pass - momentum
Marr 7/17(Chuck, Director, Federal Tax Policy, Center on Budget and Policy Priorities, “Finally, Signs of
Momentum on Corporate Inversions,” 7/17/14, http://www.huffingtonpost.com/chuck-marr/finallysigns-of-momentum_b_5596850.html)//KJZ
First it was Pfizer. Now it's Walgreens. These and a growing list of companies have made headlines as they consider shifting their headquarters overseas -- so-called
corporate "inversions" -- so they can avoid paying taxes on past and future profits. In reality, these companies are not going anywhere. They will still rely on U.S.
infrastructure and scientific research and our educated workforce. They just don't want to help pay for it. These headlines beg for a swift policy response.
Reps.
Levin (D-MI), the top Democrat on the House Ways and Means Committee, and Chris Van Hollen (D-MD), the top Democrat on the House Budget
advanced a House proposal that would make it harder for U.S. companies to expatriate to
avoid U.S tax and, consequently, save $19.5 billion over ten years. There are now fresh signs of
Sander
Committee, have
momentum as key players hint that they want to try to act quickly . Specifically, Treasury Secretary Jacob
Lew, in a letter to Senate Finance Committee Chairman Ron Wyden (D-OR), called for a "new sense of
economic patriotism" and said "we should not be providing support for corporations that seek to shift
their profits overseas to avoid paying their fair share of taxes." He called on Chairman Wyden to pursue anti-inversion legislation.
Chairman Wyden quickly signaled support for near-term action , as did Senate Majority Leader Harry Reid
(D-NV).
Will pass – Senate Finance Committee working on legislation
Cohn 7/22 [Michael, 7/22/2014, Congress Casts Aspersions on Corporate Inversions,
www.accountingtoday.com/blogs/debits-credits/congress-casts-aspersions-on-corporate-inversions71432-1.html] MJ
The battle over corporate inversion deals is heating up, as more U.S. multinational corporations find merger partners abroad that will allow
them to move their tax domiciles to countries with lower tax rates.¶ The Senate Finance Committee held a hearing Tuesday to find out more
about the practice, which has been spreading across the pharmaceutical industry and is beginning to hit the retail industry along with others.¶
“The
inversion virus now seems to be multiplying every few days,” said Senate Finance Committee
chairman Ron Wyden, D-Ore., in his opening statement. “Medtronic, Mylan, Mallinckrodt and many more deals have either occurred
recently or are currently in the works. Medtronic’s proposed $42 billion merger with Covidien was record-breaking when it was announced in
June. But the ink in the record books had barely dried when AbbVie announced its intention on Friday to acquire Shire for almost $55 billion.Ӧ
It’s not only the large multinationals that are able to find merger candidates. Even a retailer like Walgreens, with local stores across the country,
would be able to lower its tax bill considerably if it ends up moving its tax home to Switzerland by acquiring the European drug retailer Alliance
Boots, as it has been contemplating .Democratic lawmakers
are not the only ones who are troubled by the
inversion wave. Wyden’s counterpart on the Finance Committee, ranking Republican member Orrin
Hatch, R-Utah, sees the need for legislation, although like most of his fellow Republicans on the committee, he feels the best
way to address the problem is through comprehensive corporate tax reform, including an overall lowering of the rates to make the U.S. more
competitive with other countries (seeHatch’s Conditions on Inversion Law Spotlight Partisan Gap).¶ “Once again, the
ultimate
answer to this problem—and the only way to completely address the issue of inversions—is to reform our tax code,” he said.
“However, as I’ve also said publicly, there may be steps that Congress can take to at least partially address this
issue in the interim. While I don’t support the anti-inversion bills we’ve seen thus far, I personally am open to considering
alternative approaches, though I do have a few stipulations as to what proposals I’ll consider. For example, whatever approach we
take, it should not be retroactive or punitive, and it should be revenue neutral. Our approach should move us towards, or at least not away
from, a territorial tax system and should not enhance the bias to foreign acquisitions. Most importantly, it should not impede our overall
progress toward comprehensive tax reform. Toward that end, it should not be inconsistent with our House colleagues’ approach.”¶ Hatch
warned Democrats against using corporate inversions as a “political wedge issue,” as it seems to be developing into a campaign issue with the
midterm elections approaching in the fall. He pointed to a recent letter from Treasury Secretary Jacob Lew, which he called “politically toned”
(see Treasury Secretary Lew Hopes to Prevent Further Corporate Inversion Tax Deals).¶ Another
Republican
lawmaker, Sen. Charles Grassley, R-Iowa, used to chair the Senate Finance Committee and talked about
some of the reforms the committee carried out in 2004 to stem a tide of inversions to offshore tax havens like
the Cayman Islands and Bermuda in the early 2000s.¶ “The 2004 reforms were never intended to establish a ‘Berlin Wall’ that forever trapped
companies in the United States regardless of business needs,” he said. “These reforms were targeted at, and put an end to, egregious abuses
epitomized by the Ugland House, which serves as the mailbox headquarters of thousands of corporations. The inversions currently in the news
mainly involve a large U.S. multinational merging with a significant, though smaller, foreign company located in a European country. These are
not the traditional tax haven countries with little or no corporate tax, but major U.S. trading partners with competitive tax systems and rates.Ӧ
A Treasury Department official, Robert Stack, Deputy Assistant Secretary for International Tax Affairs, testified at the hearing, describing how
the effort to crack down on corporate inversions ties in with the work that the U.S. is doing in conjunction with the international Organization
for Economic Cooperation and Development on base erosion and profit shifting, also known as BEPS.¶ The OECD is working in conjunction with
G-20 finance leaders to stem the tide of multinational corporations using tax strategies to shift their profits to countries where they will have to
pay little to no taxes.
Obama Pushing/Top Priority
Quick, retroactive anti-inversion legislation is top priority for Obama – he’s pushing
hard
Dow Jones Business News 7/24 (Dow Jones Business, Carol E. Lee contributed. “Obama to Urge Quick Action to Stop
'Inversions'” http://www.nasdaq.com/article/obama-to-urge-quick-action-to-stop-inversions-20140724-01753#ixzz38zC1E3yg; 7/24/14) Jessi
President Barack Obama
on Thursday threw himself into the politically charged effort to block U.S. firms
from reincorporating overseas for tax reasons, calling the relocations "wrong" and urging Congress to
stop them immediately through quick-fix legislation. The president's remarks--his most prominent on
the issue to date--draw new attention to an emerging trend that has caught the notice of lawmakers in
both parties. Such corporate relocations, known as inversions, could become a wild card in Washington in coming
weeks, particularly if more big companies announce plans to move, and could emerge as a powerful political issue in the fall
campaign. Quick-fix legislation appears unlikely to pass before the November elections. Republicans view the idea skeptically, believing it could
worsen U.S. firms' competitive position and encourage more foreign takeovers. For lawmakers of both parties, it also could steal momentum
from the push for a broad tax rewrite. Republicans who hope to take over the Senate in November have seen little incentive so far to reach a
deal before the election. But a
senior administration official said this week that allowing a recent wave of
corporate relocations to go on undeterred for another three to four months could allow as many as 30
of the transactions to move through the deal- making pipeline. That would be bad for jobs and the
economy and could contribute to significant--and irreparable-- erosion of the U.S. tax base, administration
officials believe. In a speech at Los Angeles Trade-Technical College, Mr. Obama sharply criticized the practice, accusing the
firms involved of "cherry-picking the rules" and damaging the country's finances and the economy. "My
attitude is I don't care if it's legal, it's wrong," Mr. Obama said. He and other Democrats increasingly have cast the issue in
terms of economic patriotism, questioning the loyalty of firms that take advantage of American infrastructure and services, then
take their profits elsewhere. He also blamed Republicans, accusing them of "directly blocking policies that would
help millions of Americans," including his own ideas for overhauling the tax code, and instead focusing on preserving tax breaks for the
wealthy and big businesses. He said Republicans and Democrats should work together to change the rule where companies are "declaring
they're based someplace else, even though most of their operations are here." In a prepared response to the president's speech, a spokesman
for House Speaker John Boehner (R., Ohio) sought to focus responsibility for the problem on Democrats, saying they have been slow to move
on more-specific GOP plans for a tax-code overhaul. "Under President Obama, the United States has the highest corporate tax rate in the
developed world," Boehner spokesman Michael Steel said in a prepared statement. "It doesn't have to be that way: Comprehensive tax reform
would reduce deductions and lower tax rates for everyone. But until the White House endorses our tax-reform plan or convinces Senate
Democrats to act, every pink slip from companies moving overseas may as well be signed, "President Barack H. Obama." " Corporate inversions
have been on the upswing. About 50 have occurred during the past decade, but the pace has accelerated in recent years. Most involve U.S.
corporations merging with smaller foreign firms. Lawmakers from
both parties have sought to address the problem
unsuccessfully through a broad tax overhaul over the past couple of years. Now some Democrats are
calling for tightening existing restrictions on the moves quickly, worried that the trickle of departures
could turn into a steady stream. Mr. Obama advocates a legislative proposal that would say--in essence-that if more than half of the new firm is owned by the old U.S. firm's shareholders, the inversion won't
be recognized for tax purposes. The administration proposed such curbs on inversions in its budget
earlier this year. The Obama administration waded into the growing debate again this month when
Treasury Secretary Jacob Lew urged Congress to pass similar restrictions immediately. But Thursday's
remarks were Mr. Obama's highest-profile public push to date on the issue.
Obama pushing for tax reform to limit inversions – there is momentum
Prial 7/24 [Dunstin, 7/24/2014, Obama Takes Aim at 'Unpatriotic' Corporate Inversions,
www.foxbusiness.com/economy-policy/2014/07/24/obama-takes-aim-at-unpatriotic-corporateinversions/] MJ
President Barack Obama is taking direct aim at the rising number of U.S. companies using international
mergers to relocate their headquarters overseas in an effort to avoid paying U.S. corporate taxes.¶ In
prepared remarks in a speech scheduled for today at a technical college in Los Angeles, the president urged Congress to
pass tax reforms that would eliminate loopholes that allow U.S. companies to shield large portions of their profits overseas.¶ Obama’s
public remarks significantly raise the profile of an effort that gained momentum last week with a letter from
Treasury Secretary Jacob Lew sent to Congressional leaders in which Lew said such international mergers, called “inversions,” “hollow out the
U.S. corporate income tax base.”¶ The president was expected to make a broad call for “economic patriotism,”
suggesting that companies that pursue inversions are essentially renouncing their U.S. citizenship in an effort to reduce their corporate tax
burdens.¶ Administration officials said ahead of the president’s speech that inversions hurt middle-class Americans who have to pick up the
slack when corporations use sophisticated loopholes to shirk their tax responsibilities. ¶ Inversions -- and the U.S. corporate tax code -- have
come under a higher level of scrutiny since giant U.S. drug maker Pfizer (PFE) announced earlier this year that it planned to merge with
London-based AstraZeneca, a move that would have saved it billions in U.S. taxes.¶ The deal fell apart but the issues it raised haven’t gone
away.¶
Obama pushing to close loophole that allows inversions
Biancuzzo 7/28 (Marty, reporter for the Wall Street Journal, Chief technology analyst, “Two Stocks to Profit as Corporate America
Rushes Abroad” http://www.wallstreetdaily.com/2014/07/28/corporate-inversion/ 7/28/14) Jessi
These days, much of the sparks between Corporate America and Washington concern Uncle Sam sticking his grubby hands in the corporate
cookie jar, and making off with obscene amounts of tax revenue. Stifled by America’s excessive taxation policies, a slew of companies have
essentially expatriated from the United States in a process known as “corporate inversion.” It’s a technique where companies restructure their
businesses abroad, in hopes of reducing their tax burden. This includes re-incorporating under a wholly owned international subsidiary, or
simply buying a foreign company outright. With their tax domicile then based in that country, the Internal Revenue Service can’t touch their
earnings. The technique itself is nothing new. The first
inversion deal was done in 1982, but the trend has set a
record pace recently, as U.S. companies – particularly healthcare and biotechs – divert overseas, as they
battle for any competitive advantage they can get. Those who’ve done so are already reaping rewards. For example, Ireland
has proved particularly popular… New Jersey-based Actavis (ACT) acquired Dublin’s Warner Chilcott (WCRX) in an $8.5-billion deal… and
promptly “inverted” its business to tax-friendly Ireland. Chicago’s AbbVie Inc. (ABBV) recently just closed a deal with another Dublin-based firm,
Shire plc (SHPG). Global medical device leader, Medtronic (MDT), shelled out $42.9 billion to buy Covidien plc (COV), which is based in
Massachusetts, but incorporated in Ireland. This
year alone, we’ve seen nine inversion deals finalized. Take that,
as you’d expect, politicians are eager to stop this practice. In fact, just last week, President
Obama outlined his intention to close a loophole that allows companies to avoid U.S. taxes by basing
themselves abroad. More specifically, Obama is supporting Democrat-led anti-inversion bills that would
see companies with half their business in the United States be considered U.S.-domiciled for tax
purposes. Quoted on Reuters, a White House official stated, “We can’t afford to wait to reform our tax
code to deal with inversion,” while claiming that inversion deals would cost the United States an estimated $17 billion in lost tax
Washington! But
revenue over the next decade. Of course, there’s no guarantee that a bill will pass. But while the loophole still exists – and even amid
Washington’s attempts to close it – there’s little sign of the trend slowing. U.S. companies still want to get deals done to reap tax benefits while
they still can. (And naturally, they hope that a bill doesn’t pass.
Obama pushing quick-fix anti-inversion legislation
Bramwell 7/25 (Jason, Reporter for accounting.com, “Bramwell’s Lunch Beat: Obama on Inversions: ‘I Don’t Care If It’s Legal, It’s
Wrong” http://www.accountingweb.com/article/bramwell%E2%80%99s-lunch-beat-obama-inversions-%E2%80%98i-don%E2%80%99t-care-ifit%E2%80%99s-legal-it%E2%80%99s-wrong%E2%80%99/223661 7/25/14) Jessi
John D. McKinnon and Siobhan Hughes of the Wall Street Journal wrote on Thursday that President
Obama threw himself into
the politically charged effort to block US firms from reincorporating overseas for tax reasons, calling the
relocations “wrong” and urging Congress to stop them through quick-fix legislation. Speaking Thursday at Los
Angeles Trade-Technical College, Obama accused the firms involved of “cherry-picking the rules” and damaging
the country's finances and the economy. “My attitude is I don't care if it's legal, it's wrong,” Obama said, according to the article.
He and other Democrats increasingly have cast the issue in terms of economic patriotism, questioning
the loyalty of firms that take advantage of American infrastructure and services, then take their profits
elsewhere. He also blamed Republicans, accusing them of “directly blocking policies that would help millions of Americans,” including his
own ideas for overhauling the tax code, and instead focusing on preserving tax breaks for the wealthy and big businesses, McKinnon and
Hughes wrote. On a conference call with reporters Thursday, senior
administration officials said the president continues
to support a long-term rewrite of the tax code to make the United States a more attractive place to
locate businesses, jobs, and investment, according to the article. But they said it is important to move
quickly with separate anti-inversion legislation, in part to keep the US corporate tax base from eroding.
Administration officials said they are particularly worried about what they termed “a bandwagon effect,” in which one firm in a sector inverts,
raising pressure on other companies in the sector to invert as well.
AT Uniqueness Overwhelms
Bipartisan support for anti-inversion legislation but still disagreement on the details
Gelles 7/24 [David, NYT, 7/24/2014, Obama Administration Presses for Retroactive
Legislation on Tax Inversions, dealbook.nytimes.com/2014/07/24/obamaadministration-presses-for-retroactive-inversionlegislation/?_php=true&_type=blogs&_r=0] MJ
The Obama administration is continuing to make its case for¶ legislation that would retroactively strip
the tax advantages away from¶ many of the year’s biggest mergers and acquisitions.¶ On Thursday, Mark J. Mazur, the Treasury
Department’s assistant¶ secretary for tax policy, made the case that any new laws targeting¶ inversions – transactions that allow American companies to reincorporate¶ abroad – should be backdated to May 2014, potentially
Whether or any legislation against inversions is retroactive has quickly¶ emerged
as a potential sticking point between Democrats, who favor¶ retroactivity, and Republicans, who have
concerns about backdating any¶ new laws.¶ In a blog post, Mr. Mazur made the case that there was ample¶ precedent for retroactive tax legislation, and signaled that the¶
affecting a¶ number of multibillion-dollar deals.¶
administration would push for it.¶ “Congress has frequently imposed retroactive effective dates for¶ provisions that shut down egregious tax loopholes,” he wrote. “In these¶ cases, backdated implementation is often important
There is growing
consensus on Capitol Hill that the rush of inversions¶ should be stopped. Lawmakers from both parties
worry that the more¶ companies move their headquarters to countries like Ireland and the¶ Netherlands,
the more the American tax base is being compromised.¶ And given the unlikelihood of comprehensive
tax reform getting¶ passed anytime soon, both Democrats and Republicans seem to agree that¶ a shortterm fix is needed.¶ But already, there is partisan disagreement about what anti-inversion¶ legislation
should look like.¶ The Obama administration has proposed effectively banning¶ inversions, and making any legislation retroactive until May of this year.¶ Such a move would affect several big deals, including
to ensure that¶ companies do not take advantage of the lengthy legislative process to rush¶ through transactions exploiting the loopholes they know they are about to¶ lose.”¶
AbbVie‘s $54 billion¶ acquisition of Shire, and Medtronic‘s $43 billion takeover of Covidien. ¶ Last week, Treasury Secretary Jacob J. Lew sent letters to senior¶ members of Congress pressing the case for retroactive legislation. ¶
But at a Senate Finance Committee hearing this week, Senator Orrin¶ Hatch, Republican of Utah, signaled he would not support backdating a¶ new law.¶ Retroactive tax legislation, he and others contend, is extremely rare¶ and
would effectively change the rules after companies have signed on to¶ multibillion-dollar deals that are difficult and costly to unwind.
AT August Recess
Fiat means plan passes when Congress reconvenes. This interpretation is best:
 Most real world and predictable –
Special sessions are incredibly rare and wouldn’t happen for ocean policy – only 4
special sessions since 1933
Ritchie 06 [Donald, October 12, The Congress of the United States: A Student Companion (Oxford
Student Companions to American Government), p. 211, Oxford University Press]
If an emergency occurs when Congress is not in session, the Constitution empowers the President to call Congress back into special, or
extraordinary, session. Prior to the passage of the 20th Amendment in 1933, Congress met for only a limited number of months each year. Up
to that date Presidents called the Senate into special session on 46 occasions, usually to confirm nominations to the cabinet or to deal with
important treaties. On 27 other occasions, Presidents called both the House and Senate into special session. These special sessions responded
to wars, economic crises, and important legislative proposals. For instance, Abraham Lincoln called Congress into special session on July 4,
1861, to deal with the outbreak of the Civil War. Franklin D. Roosevelt called Congress into special session in March 1933 to pass emergency
banking and relief legislation during the Great Depression. This session became known as the “first hundred days of the New Deal.” After
the 20th Amendment changed the opening date of Congress to January 3, and after Congress began
meeting for most of the year, the need for special sessions diminished. Since 1933 Presidents have
called Congress back only four times . Franklin Roosevelt called a special session in October 1937 to enact legislation that would
establish minimum wages and maximum hours of work. In September 1939 Roosevelt called Congress into special session when Germany
invaded Poland and triggered World War II. During the 80th Congress, when Republicans held the majority in Congress, Democratic President
Harry S. Truman called Congress back in October 1947 and July 1948 to deal with unfinished domestic legislation. President Truman planned to
campaign for reelection against the “Do-Nothing 80th Congress,” so he called these sessions to embarrass the Republican majorities by
accusing them of not acting on important social matters. In recent years when Congress has adjourned, it has also authorized the leaders of the
Senate and House to call the Congress back in case of emergency.
 Ground – Politics is a core NEG generic that the AFF shouldn’t get to avoid for
weeks at a time because Congress is on recess – make them defend the political
ramifications of plan passage
And, even if fiat is immediate, we still just have to win a link – plan still drains
Obama’s PC, the backlash just happens in September when Congress reconvenes –
probably magnifies the link because plan will be even more controversial given that
members of Congress will be forced to return from their summer vacations to DC to
vote on the plan
Internal Link
AT Obama Doesn’t Push
Doesn’t matter - Obama gets blamed for everything
Teitelman 11 (Robert, Editor in Chief for The Deal, “Why Our Politics Are So Bad,” The Deal, 8/1/11,
http://www.thedeal.com/thedealeconomy/why-our-politics-are-so-bad.php)
Generally, as the media emerges in full-throated roar, Obama is being declared the big loser from both
sides of the aisle; see Ross Douthat and Paul Krugman in today's New York Times. Perhaps. Obama's polls have been falling,
probably because the president these days gets blamed for everything from a bad economy to
Mississippi flooding to lousy student test scores, as if he's less a political leader and more a medicine
man. We elect shamans, not people. Perhaps he did play this all wrong; in politics, substance -- "reality" that we've heard
so much about these days -- means little. Obama's big mistake, at the end of the day, was his belief that
he could occupy a center in a viciously polarized arena.
AT PC Not Real
PC is real – best scholarship proves
Beckman and Kumar 11 [Matthew N. Beckmann and Vimal Kumar 11, Profs Department
of Political Science, @ University of California Irvine "How Presidents Push, When
Presidents Win" Journal of Theoretical Politics 2011 23: 3 SAGE]
Before developing presidents’ lobbying options for building winning coalitions on Capitol Hill, it
is instructive to consider cases
where the president has no political capital and no viable lobbying options. In such circumstances of imposed
passivity (beyond offering a proposal), a president’s fate is clear: his proposals are subject to pivotal voters’ preferences. So if
a president lacking political capital proposes to change some far-off status quo, that is, one on the opposite
side of the median or otherwise pivotal voter, a (Condorcet) winner always exists, and it coincides with the pivot’s
predisposition (Brady and Volden, 1998; Krehbiel, 1998) (see also Black (1948) and Downs (1957)). Considering that there
tends to be substantial ideological distance between presidents and pivotal voters, positive presidential
influence without lobbying, then, is not much influence at all.¶ As with all lobbyists, presidents looking to
push legislation must do so indirectly by pushing the lawmakers whom they need to pass it. Or, as Richard
Nesustadt artfully explained:¶ The essence of a President’s persuasive task, with congressmen and everybody
else, is to induce them to believe that what he wants of them is what their own appraisal of their
own responsibilities requires them to do in their interest, not his…Persuasion deals in the coin of self-interest with
men who have some freedom to reject what they find counterfeit. (Neustadt, 1990: 40) ¶ Fortunately for contemporary presidents,
today’s White House affords its occupants an unrivaled supply of persuasive carrots and sticks. Beyond
the office’s unique visibility and prestige, among both citizens and their representatives in Congress, presidents may also sway
lawmakers by using their discretion in budgeting and/or rulemaking, unique fundraising and campaigning capacity, control over
executive and judicial nominations, veto power, or numerous other options under the chief executive’s control. Plainly, when it
comes to the arm-twisting, brow-beating, and horse-trading that so often characterizes legislative
battles, modern presidents are uniquely well equipped for the fight. In the following we employ the omnibus concept
of ‘presidential political capital’ to capture this conception of presidents’ positive power as persuasive bargaining.¶ Specifi- cally, we
define presidents’ political capital as the class of tactics White House officials employ to induce
changes in lawmakers’ behavior.¶ Importantly, this conception of presidents’ positive power as persuasive bargaining
not only meshes with previous scholarship on lobbying (see, e.g., Austen-Smith and Wright (1994), Groseclose and
Snyder (1996), Krehbiel (1998: ch. 7), and Snyder (1991)), but
also presidential practice . For example, Goodwin recounts how
President Lyndon Johnson routinely allocated ‘rewards’ to ‘cooperative’ members:¶ The rewards themselves (and the withholding of
rewards) . . . might be something as unobtrusive as receiving an invitation to join the President in a walk around the White House grounds,
knowing that pictures of the event would be sent to hometown newspapers . . . [or something as pointed as] public works projects, military
bases, educational research grants, poverty projects, appointments of local men to national commissions, the granting of pardons, and
more. (Goodwin, 1991: 237) Of course, presidential
political capital is a scarce commodity with a floating
value . Even a favorably situated president enjoys only a finite supply of political capital ; he can only
promise or pressure so much . What is more, this capital ebbs and flows as realities and/or
perceptions change . So, similarly to Edwards (1989), we believe presidents’ bargaining resources cannot
fundamentally alter legislators’ predispositions, but rather operate ‘at the margins’ of US lawmaking,
however important those margins may be (see also Bond and Fleisher (1990), Peterson (1990), Kingdon (1989), Jones
(1994), and Rudalevige (2002)). Indeed, our aim is to explicate those margins and show how
influence them.
presidents may systematically
AT Winners Win
Winners win is wrong
Jackie Calmes, NYTimes, 11/12/12, In Debt Talks, Obama Is Ready to Go Beyond Beltway,
mobile.nytimes.com/2012/11/12/us/politics/legacy-at-stake-obama-plans-broader-push-for-budgetdeal.xml
That story line, stoked by Republicans but shared by some Democrats, holds that Mr. Obama is too passive and deferential to Congress, a
legislative naïf who does little to nurture personal relationships with potential allies - in short, not a particularly strong leader. Even as voters reelected Mr. Obama, those who said in surveys afterward that strong leadership was the most important quality for a president overwhelmingly
chose Mr. Romney.¶ George C. Edwards III, a leading scholar of the presidency at Texas A & M University who is currently teaching at Oxford
University, dismissed such criticisms as shallow and generally wrong. Yet Mr. Edwards, whose book on Mr. Obama's presidency is titled
"Overreach," said, "He didn't understand the limits of what he could do."¶ "They
thought they could continuously create
opportunities and they would succeed, and then there would be more success and more success, and
we'd build this advancing-tide theory of legislation," Mr. Edwards said. "And that was very naïve, very silly .
Well, they've learned a lot, I think."¶ "Effective leaders," he added, "exploit opportunities rather than create
them."¶ The budget showdown is an opportunity. But like many, it holds risks as well as potential rewards.¶ "This election is the second
chance to be what he promised in 2008, and that is to break the gridlock in Washington," said Kenneth M. Duberstein, a Reagan White House
chief of staff, who voted for Mr. Obama in 2008 and later expressed disappointment. "But it seems like this is a replay of 2009 and 2010, when
he had huge majorities in the House and Senate, rather than recognizing that 'we've got to figure out ways to work together and it's not just
what I want.' "¶ For now, at least, Republican lawmakers say they may be open to raising the tax bill for some earners. "We can increase
revenue without increasing the tax rates on anybody in this country," said Representative Tom Price, Republican of Georgia and a leader of
House conservatives, on "Fox News Sunday." "We can lower the rates, broaden the base, close the loopholes."¶ The challenge for Mr. Obama is
to use his postelection leverage to persuade Republicans - or to help Speaker John A. Boehner persuade Republicans - that a tax compromise is
in their party's political interest since most Americans favor compromise and higher taxes on the wealthy to reduce annual deficits.¶ Some of
the business leaders the president will meet with on Wednesday are members of the new Fix the Debt coalition, which has raised about $40
million to urge lawmakers and their constituents to support a plan that combines spending cuts with new revenue. That session will follow Mr.
Obama's meeting with labor leaders on Tuesday.¶ His first trip outside Washington to engage the public will come after Thanksgiving, since Mr.
Obama is scheduled to leave next weekend on a diplomatic trip to Asia. Travel plans are still sketchy, partly because his December calendar is
full of the traditional holiday parties.¶ Democrats said the White House's strategy of focusing both inside and outside of Washington was smart.
"You want to avoid getting sucked into the Beltway inside-baseball games," said Joel Johnson, a former adviser in the Clinton White House and
the Senate. "You can still work toward solutions, but make sure you get out of Washington while you are doing that."¶ The
president
must use his leverage soon, some Democrats added, because it could quickly wane as Republicans look to the 2014
midterm elections, when the opposition typically takes seats from the president's party in Congress.
AT Plan Popular w/ Public
PC is key – popularity doesn’t translate into support in Congress
Bouie 11 (Jamelle, Journalist and Graduate – University of Virginia, “Political Capital,” The American
Prospect, 55,http://prospect.org/csnc/blogs/tapped_archive?month=05&year=2011&base_name=political_capital)
Unfortunately, political capital isn't that straightforward. As we saw at the beginning of Obama's presidency, the
mere fact of popularity (or a large congressional majority) doesn't guarantee support from key members of
Congress. For Obama to actually sign legislation to reform the immigration system, provide money for jobs, or reform corporate
taxes, he needs unified support from his party and support from a non-trivial number of Republicans.
Unfortunately, Republicans (and plenty of Democrats) aren't interested in better immigration laws, fiscal stimulus, or liberal tax reform.
Absent substantive leverage -- and not just high approval ratings -- there isn't much Obama can do to
pressure these members (Democrats and Republicans) into supporting his agenda.¶ Indeed, for liberals who want to see
Obama use his political capital, it's worth noting that approval-spikes aren't necessarily related to policy success. George
H.W. Bush's major domestic initiatives came before his massive post-Gulf War approval bump, and his
final year in office saw little policy success. George W. Bush was able to secure No Child Left Behind, the Homeland Security Act,
and the Authorization to Use Military Force in the year following 9/11, but the former two either came with pre-9/11 Democratic support or
were Democratic initiatives to begin with.¶ To repeat an oft-made point, when
it comes to domestic policy, the presidency is
a limited office with limited resources. Popularity with the public is a necessary part of presidential success in
Congress, but it's
far from sufficient.
AT Thumpers
Hold thumpers to a very high threshold – issues don’t cost PC until they’re at the finish
line – we can cite legislation – if they can’t cite a bill, discount them
Drum 10 (Kevin, Political Blogger, Mother Jones, http://motherjones.com/kevin-drum/2010/03/immigration-coming-back-burner)
Not to pick on Ezra or anything, but this
attitude betrays a surprisingly common misconception about political
issues in general. The fact is that political dogs never bark until an issue becomes an active one.
Opposition to Social Security privatization was pretty mild until 2005, when George Bush turned it into an active issue. Opposition to
healthcare reform was mild until 2009, when Barack Obama turned it into an active issue. Etc. I only bring this up
because we often take a look at polls and think they tell us what the public thinks about something. But
for the most part, they don't.1 That is, they don't until the issue in question is squarely on the table and
both sides have spent a couple of months filling the airwaves with their best agitprop. Polling data about gays in the military, for example,
hasn't changed a lot over the past year or two, but once Congress takes up the issue in earnest and the Focus on the Family
newsletters go out, the push polling starts, Rush Limbaugh picks it up, and Fox News creates an incendiary graphic to go with its saturation
coverage — well, that's
when the polling will tell you something. And it will probably tell you something
different from what it tells you now. Immigration was bubbling along as sort of a background issue
during the Bush administration too until 2007, when he tried to move an actual bill . Then all hell broke
loose. The same thing will happen this time, and without even a John McCain to act as a conservative point man for a moderate solution. The
political environment is worse now than it was in 2007, and I'll be very surprised if it's possible to make any serious progress on immigration
reform. "Love 'em or hate 'em," says Ezra, illegal immigrants "aren't at the forefront of people's minds." Maybe not. But they will be soon.
Impact
Delay Impact Magnifier
A delay in closing the tax loophole results in more inversions, makes the impact worse
Day 7/18 [Dan, Dan is currently a graduate student at American University’s School of International Service (SIS) pursuing a Master’s
Degree in International Affairs. He graduated magna cum laude with a B.A. in Political Science from La Salle University and was a member of the
National Political Science Honors Society, Pi Sigma Alpha. His research focus is largely on issues in international economics and political
economy, transnational institutions including the World Trade Organization and the International Monetary Fund, and the role of sports in
public diplomacy. He has strong quantitative skills, including SPSS and STATA proficiency and ability to conduct statistical analysis. American
Security Project, 7/18/2014, Time to Close the Tax Inversion Loophole, www.americansecurityproject.org/time-to-close-the-tax-inversionloophole/] MJ
Recent estimates indicate that the
U.S. stands to lose around $20 billion in revenue over the next decade if
existing laws are not changed. Inversions are particularly popular among pharmaceutical companies who
make large profits overseas and are reluctant to bring the money back to the U.S. in order to avoid
double taxation. U.S. companies currently have a total of around $2 trillion in foreign earnings that are
unlikely to be repatriated unless existing tax laws are changed.¶ Bob Pozen of the Wall Street Journal has called for a
reduction in the corporate tax rate financed through an across-the-board 17% tax rate on foreign earnings. As the system is currently
structured, foreign profits are taxed at 35% but payment can be deferred indefinitely, resulting in trillions of dollars sitting overseas. The easiest
way to access this money without being subject to a 35% hit: reincorporate in a tax haven like Ireland.¶ The
longer Congress stalls on
closing the inversion loophole, the greater the incentive U.S. companies have to capitalize on the
opportunity while they can. Walgreen’s has indicated that it is heavily considering reincorporating in
Switzerland, where the corporate tax rate sits at just over 17%, a move that would save it around $4 billion over the next four years.
Other U.S. companies are sure to follow suit knowing the window of opportunity may soon be closing, illustrating the
importance for swift Congressional action.
Now is key to prevent band-wagon effect that multiples the impact
Dow Jones Business News 7/24 (Dow Jones Business, Carol E. Lee contributed. “Obama to Urge Quick Action to Stop
'Inversions'” http://www.nasdaq.com/article/obama-to-urge-quick-action-to-stop-inversions-20140724-01753#ixzz38zC1E3yg; 7/24/14) Jessi
On a conference call with reporters on Thursday, senior administration officials said the president continues to support a long-term rewrite of
the tax code to make the U.S. a more attractive place to locate businesses, jobs and investment. But they said it
is important to move
quickly with separate anti-inversion legislation, in part to keep the U.S. corporate tax base from eroding.
Administration officials said they are particularly worried about what they termed "a bandwagon
effect," in which one company in a sector inverts, raising pressure on other companies in the sector to
invert as well. Some lawmakers worry, for example, that a potential decision by Walgreen Co. to
reincorporate overseas could raise pressure on other drugstores--such as Rhode Island-based CVS
Caremark Corp.--to do the same. Walgreen is expected to decide by late July or early August what steps to take with regard to
Alliance Boots, a European drug retailer and wholesaler in which it owns a 45% stake. Walgreen has the option to buy the portion of Alliance
Boots that it doesn't already own as soon as February 2015--an option that opens up the possibility of reincorporating in Europe and benefiting
from a lower tax rate. At the same time, Democratic lawmakers and the administration are raising complaints about companies that want to
move offshore but continue to benefit from U.S. services, infrastructure and legal protections. When a company inverts, it can reduce or avoid
U.S. corporate taxes, "but they still generally take advantage of all the services and advantages" of being located in the U.S., a senior
administration official said. "They just won't be paying for it. Someone else will be."
The Obama administration also wants a
retroactive effective date for any quick-fix legislation, to minimize a rush to the exits by U.S.
corporations ahead of congressional action. Republicans also are concerned about the inversion trend.
However, they prefer to address the problem through a comprehensive rewrite of the tax code that would address the underlying problems
that are encouraging companies to reincorporate elsewhere for tax purposes--for example, the relatively high U.S. corporate tax rate of up to
35% and the U.S. system's unusual global reach. Republicans also generally don't like the idea of a retroactive provision to block inversions that
already have been announced. The mounting political pressure around inversions has some deal makers on edge, especially for transactions not
yet signed. Most experts say anti-inversion legislation is unlikely this year, but could be passed next year and potentially apply to deals that
close after Jan. 1, 2015, leaving buyers without the desired tax benefits. "There is a rush to try to get a deal done by year-end, because nobody
quite knows what's coming after that," said Gary Friedman, a tax partner with law firm Debevoise & Plimpton LLP. "There is clearly a risk."
Lately buyers have been protecting themselves by negotiating a "walkaway" right, should tax laws tighten. Medtronic Inc., for example, can
terminate its deal to buy Irish medical-device maker Covidien PLC if U.S. law changes in a way that would result in the combined company still
being treated as a U.S. company.
Econ/Competitiveness Ext
Congressional action against inversions is key to economic growth and
competitiveness, must act now or the impact will be multiplied – several warrants
Wyden 7/22 [Ron, Senator from Oregon since 1996/Chairman of the Senate Finance Committee, 7/22/2014, Wyden
Statement on Corporate Inversions and the Need for Comprehensive Tax Reform,
www.finance.senate.gov/newsroom/chairman/release/?id=2a4fa93b-0e43-4987-b7da-c67066c7ccbf] MJ
The U.S. tax code is infected with the chronic diseases of loopholes and inefficiency. These infections are
hobbling America’s drive to create more good-wage, red, white and blue jobs here at home. They are a
significant drag on the economy and are harming U.S. competitiveness. The latest outbreak of this
contagion is the growing wave of corporate inversions, where American companies move their
headquarters out of the U.S. in pursuit of lower tax rates.¶ The inversion virus now seems to be
multiplying every few days. Medtronic, Mylan, Mallinckrodt and many more deals have either occurred recently or are currently in the
works. Medtronic’s proposed $42 billion merger with Covidien was record-breaking when it was announced in June. But the ink in the record
books had barely dried when AbbVie announced its intention on Friday to acquire Shire for almost $55 billion. According to the July 15th edition
of Marketplace, “What’s going on now is a feeding frenzy … Every investment banker now has a slide deck that they’re taking to any possible
company and saying, ‘you have to do a corporate inversion now, because if you don’t, your competitors will.’”¶ Congress
has been
aware of the inversion virus for a long time. In fact, it passed legislation purporting to solve the problem
a decade ago. But the underlying sickness continues to gnaw away at the American economy with
increasing intensity. The American tax code is an anti-competitive mess. Accountants, lawyers, and fast-buck artists looking for tax
shelters feed off it. This mess is driving American investment dollars overseas, and according to the Joint Committee on Taxation, it is costing
First, let’s work together to immediately cool
inversion loophole needs to be plugged now. Second, let’s use the space created
by these immediate steps to apply the indisputable, ultimate cure: comprehensive tax reform.¶ I’ve got nine long years
American taxpayers billions.¶ On a bipartisan basis, the Finance Committee must respond now.
down the inversion fever. The
of sweat equity in tax reform. With former Senator Gregg, and current Senators Begich and Coats, we have produced what still is the Senate’s
only bipartisan federal income tax overhaul in almost thirty years. Obviously Senators here have differing ideas about tax reform. Let’s
recognize that what really counts is that the Finance Committee isn’t back here once again discussing inversions a decade from now.¶
Comprehensive tax reform needs to happen soon. The outbreak of inversions shows that without curing the disease once and for all, the illness
will keep plaguing the American economy. It will get tougher to create those red, white and blue American jobs.
Our tax base will
keep eroding. Cash piles trapped overseas will grow. Investment will be driven elsewhere .¶ The Finance
Committee invited a number of CEOs from the inverting companies to join our discussion today. None accepted our invitation. I hope these
executives will soon change their minds and be willing to answer questions Finance Committee members have about this issue.¶ The fact is,
without immediate, comprehensive tax reform, an antidote to the inversion virus is needed now to
protect the American economy. This wave of inversions may be good for shareholders, investment bankers and private equity firms,
yet it is bad for America. America’s free enterprise system is at its best when there is a level playing field. And inversions bestow tax favors on
some parties and further distort the free market.¶ Absent tax reform being enacted immediately, what happens if the inversion virus leads to
20 more inversions over the summer? Many inversions to this point have happened in the medical field, but the Wall Street Journal just
there is evidence of inversions spreading to manufacturing and retail. How many more
infections can America’s economic body endure?¶ Global markets are expanding. Stockpiles of cash
sitting overseas are growing at record levels. Foreign competitors are getting more aggressive in
chomping at the bit to get a deal on the backs of the American taxpayer. The time for action is now. This
reported that
committee needs to move now, on a bipartisan basis, to close the loopholes that are fueling the growth of the inversion virus. Then the Finance
Committee needs to cure the disease once and for all with comprehensive tax reform. Let’s come together on a bipartisan basis to accomplish
both tasks, and I will work with each member of the committee every step of the way.
Corporate tax dodging undermines small business and is the biggest internal link to
slow growth
Rosenfeld 7/24 [Everett, 7/24/2014, US economy looks better, so we do we worry? nbr.com/2014/07/24/useconomy-looks-better-so-why-do-we-worry/]
inversions as a significant macroeconomic issue, Naroff said the practice could result in small
businesses facing an increased tax burden.¶ “There’s no such thing as a free tax break,” Naroff said,
explaining that these large corporations have exploited a loophole in the tax code to the same effect as
a legislature-granted break. “If someone doesn’t pay what their fair share of taxes should be, someone
else will have to.”¶ Read More Senate panel to debate wave of corporate tax-avoidance deals¶ Although Naroff said the country’s
tax policy remains one of the single largest problems plaguing its economy, Vitner said the U.S. continues to benefit
While Feroli said he did not see
from those hoping to enter its borders.
Budget Deficit IL/Impact
Failure to combat inversions undermines deficit reduction
AFP 7/29 [Agence France Presse, 7/29/2014, Treasury secretary: Corporate 'inversion' deals hurt US finances,
increase budget deficits, www.rawstory.com/rs/2014/07/29/treasury-secretary-corporate-inversion-deals-hu] MJ
US Treasury Secretary Jacob Lew warned Monday that the surge in companies moving offshore via
mergers to skirt US taxes could weaken the country’s finances.¶ Taking aim at “inversion” deals, Lew said
Congress needs to amend tax laws to eliminate takeovers of foreign companies by US firms with the
primary aim of seeking an address in a cheaper tax jurisdiction.¶ Lew said companies had touted up to $1
billion in annual tax savings by moving their address offshore, which could impact the annual budget,
$3.8 trillion in the current year.¶ “By allowing these transactions to continue, we run the risk of eroding
our corporate tax base and undoing the progress we have made to reduce our budget deficits,”
he said
in an opinion piece in the Washington Post.¶ Lew said Congress should not only raise the bar in the tax laws to make inversions harder, but do
so retroactively, so that the law would block the tax benefits of recent multibillion-dollar takeover deals like pharmaceutical giant AbbVie’s
acquisition of Dublin-based Shire Pharmaceuticals.¶ Companies launching inversion takeovers have advertised the tax benefits of giving the
target firm 20 percent of the parent, allowing the parent to relocate its head office from the United States to a low-tax haven offshore.¶ Lew
said new legislation should require that the foreign company own at least 50 percent of the US company
to allow it to establish a foreign address.
That causes long-term economic decline
Rob Nichols- 2013 -the president and chief operating officer of the Financial Services Forum- (Financial
Services Forum, American Banker, http://www.financialservicesforum.org/index.php)
Given current Congressional Budget Office projections, there is reason to conclude that, unless significant structural changes are
made to balance revenues with spending, the U.S. will probably approach a point where global market
sentiment regarding the nation's fiscal condition could change abruptly for the worse.¶ This would make
corrective action far more urgent and painful than if such steps were taken in the near term.¶ Failure to
meaningfully address the nation's fiscal circumstances raises the prospect of dangers that could hurt the
U.S. economy. Principal among these is the risk that investors could demand higher risk premiums when buying
U.S. government debt.¶ At the current elevated debt tally, rising interest rates could quickly compound an already challenging fiscal
situation. Moreover, given that Treasury bills and bonds are the basis for borrowing structures in private credit markets, the effect of
burgeoning government debt on the cost of capital, economic growth and job creation would be far-reaching and decidedly negative.¶ Given
the probable impact of higher rates on U.S. economic prospects, another risk associated with further deterioration in the nation's debt position
is that investors may sour on dollar-denominated assets.¶ The
dollar's relative value would fall, undermining Americans'
purchasing power and standard of living. A falling dollar also has dangerous implications for inflation.¶ Finally, further
deterioration in the nation's debt position would probably be associated with greater financial market instability.¶ The threshold beyond which
investors would demand higher real yields for holding U.S. debt, or flee from dollar-denominated assets, is not obvious. This inherent
uncertainty has tended to make fiscal discipline seem less urgent, or easier to postpone.¶ Research by Ken Rogoff of Harvard and Carmen
Reinhart of the University of Maryland reveals that, throughout history, in advanced and emerging nations alike,
debt-to-GDP levels
surpassing 90% are strongly associated with notably slower economic growth, more frequent and severe
financial crises, higher inflation and overall economic decline. America's debt-to-GDP ratio is expected to surpass 90%
this year.¶ Some analysts argue that the United States' position in the global economy is unique and, therefore, conventional debt metrics that
might signal trouble for other countries simply do not apply. It is true that the U.S.
still enjoys a favored position in the global
economy, but it is not immune to economic decline.¶ The trajectories of former historical powers make
clear that failure to achieve fiscal sustainability increases the risk of financial instability. Unless we as a nation
make a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy
economic growth.
AT Must Do Corporate Tax Reform
Short-term fix in the interim is key – can’t solve the impact without it because there
will be no corporate tax base left to reform
Kleinbard 7/21 [Edward, professor of law at University of Southern California, 7/21/2014, Tax
Inversions Must Be Stopped Now, online.wsj.com/articles/edward-d-kleinbard-tax-inversions-must-bestopped-now-1405984126] MJ
Companies argue that inversions are a reasonable response to an anticompetitive U.S. corporate tax system. But the hoary complaints about
competitiveness are simply not true, as a quick glance at the financial statements of many U.S. firms pursuing inversions reveals. Take AbbVie:
The drug maker reported a global effective tax rate for 2013 of 22.6%, a roughly one-third discount off the U.S. statutory rate of 35%, largely as
a result of its low-taxed foreign earnings. What's at stake for U.S. firms is their ability to goose their stock prices through dividends and
buybacks funded by low-taxed foreign cash, not international "competitiveness."¶ Yet inversions are symptomatic of a corporate tax system
that is highly distortionary, unstable and riddled with loopholes. The headline rate of 35% is well above world averages, effective rates imposed
on investments vary wildly, and the international rules in particular are an incoherent mess. Inverting firms try to justify corporate self-help as
the right response, but inversions both gut the domestic tax base and allow key players (those with international operations) to excuse
themselves from the debate, while domestic firms are left holding the bag.¶ Thus fundamental corporate
tax reform is
urgently needed, but the path forward has two prongs. First, Congress should enact a temporary law
to preserve the status quo , and thereby the corporate tax base, by treating inversions according to
their economic substance, and by foreclosing the "hopscotch" strategies described above. Without
this, there will be no corporate tax base left to reform .¶ Then both parties need to get serious about
substantive reform, lowering the rate to say, 25%, and imposing a stable international regime that works well with territorial systems in
other countries. The work Congress's tax-writing committees did last year shows that reform is possible. Now congressional leadership needs to
make it a priority.
Tax reform alone doesn’t solve inversions
Levin 7/17 [Sander, U.S. House of Rep from MI since 1983 - Ways and Means Committee Ranking Member,
7/17/2014, Levin on Bloomberg TV: Inversions Will Do Long-Term Damage to U.S. Economy,
democrats.waysandmeans.house.gov/press-release/levin-bloomberg-tv-inversions-will-do-long-term-damage-useconomy] MJ
ON THE NEED
TO TIGHTEN INVERSION RULES AND MAKE U.S. MORE ATTRACTIVE FOR COMPANIES
“I think you have to do both . You have to have tax reform. You also want to make it more attractive. But
you also don't want companies to leave the U.S. and simply change their domicile in order to pay lower
taxes. We could have a lower tax, but still Ireland would be lower. And companies would continue to
invert. And keep their operations -- their major operations -- in the U.S. you don't want to do things that will hurt the tax structure of this
country, and also hurt the effort of companies that are basically American companies to stay here. Remember, Medtronic uses the R&D tax
credit in this country, a rather significant one. We do not want companies to move their headquarters overseas, while retaining all of the
benefits they get from being an American company. R&D is just one of them. They get other benefits from being here. You should not simply
say to them, ok, change where you are located, pay much lower taxes, or you maintain the benefits of being essentially an American company.”
Immediate and retroactive anti-inversion legislation is key – gives Congress the
necessary time to get tax reform done
Lew 7/28 (Jacob, Secretary of the U.S Treasury, “Close the tax loophole on inversions” http://www.washingtonpost.com/opinions/jacoblew-close-the-tax-loophole-on-inversions/2014/07/27/2ea50966-141d-11e4-98ee-daea85133bc9_story.html 7/28/14) Jessi
To be clear, there is nothing wrong with cross-border merger activity; our economy is stronger for our investment overseas and for foreign
investment in the United States. But these activities should be based on economic efficiency, not tax savings. Many of these transactions have
been motivated by — and even expressly justified by — the tax savings. In touting these transactions, individual firms have projected saving as
much as $1 billion per year. On July 15, I wrote a letter to Congress and called on lawmakers to address this problem as soon as possible. Many
of these companies are for all intents and purposes still based in the United States, and they remain here to take advantage of everything that
makes the United States the best place in the world to do business: our rule of law, our universities, our research-and-development capabilities,
our innovative culture and our skilled workforce. By moving their tax homes overseas, these companies are making the decision to reduce their
taxes, forcing a greater share of the responsibility of maintaining core public functions on small businesses and hardworking Americans. That
by
allowing these transactions to continue, we run the risk of eroding our corporate tax base and undoing
the progress we have made to reduce our budget deficits. Enacting comprehensive business tax reform is clearly the best way to address the problems in our tax
includes paying for the things all of us, particularly U.S. businesses, depend on: our national defense, education, medical research, courts and vital infrastructure such as roads, bridges and airports. In addition,
code that trigger inversions, although even if we cut our tax rates and broaden the tax base, we would still need to enact anti-inversion provisions because companies always would find countries with near-zero rates to which they
could relocate. Moreover
, even the most optimistic know that the administration and Congress need more time to
complete bipartisan comprehensive business tax reform . While the business-tax-reform process moves steadily forward, the pace of inversions is increasing
at breakneck speed. We must confront this problem now, before our tax base is so eroded as to damage the
prospects of comprehensive reform. The president’s proposal applies a common-sense approach to
determine whether a corporation has truly switched its base of operations to another country — a company would
not be able to move outside the United States for tax purposes if it is still managed and controlled in the United States, does a significant amount of its business here and does not do a significant amount of its business in the
The president’s plan also would eliminate the incentives a U.S. corporation has to
acquire a foreign company and use its foreign address to claim tax status beyond our borders. To make sure the
country it claims as its new home.
merged company is not merely masquerading as a non-U.S. company, shareholders of the foreign company would have to own at least 50 percent of the newly merged company — the current legal standard requires only 20
, leaders in Congress have put forward
strong legislation that adopts elements of this plan. For legislation to be effective, it must be retroactive.
Current proposals in Congress would apply to any inversion deal after early May of this year. The alternative —
legislation taking effect after the president signs it into law — could have the perverse effect of encouraging corporations to act more quickly, negotiate new deals and rush to close those transactions before the bill is enacted. It
would be a mistake for Congress to pass anti-inversion legislation that creates a race against the clock
and encourages more, not fewer, inversions. Making legislation effective before the date that a bill is
enacted is not a new or novel approach; the Congressional Research Service referred to the practice as
“quite common” in a 2012 report. A good example of this is the 2004 anti-inversion legislation. Passed by a Republican-led Congress and signed into law by President George W. Bush in
October 2004, it had an effective date of March 2003. For all these reasons, I call on Congress to close this loophole and pass anti-inversion legislation
as soon as possible. Our tax system should not reward U.S. companies for giving up their U.S. citizenship, and unless we tackle this problem, these transactions will continue. Closing the
inversion loophole is no substitute for comprehensive business tax reform, but it is a necessary step
down the path toward a fair and more efficient tax system, and a step that needs to be in a place for tax reform to work.
percent. This approach is based on a bipartisan law enacted in 2004 and could serve as a basis for a bipartisan solution again. Right now
AT Executive Action Solves
Obama is out of options – Congressional action required to stop inversions
Rubin 14 [Richard, 4/30/14, IRS Chief Says Us Can't End Companies' Offshore Tax Deals,
www.bloomberg.com/news/2014-04-30/treasury-said-to-favor-crackdown-on-tax-loweringmoves.html] MJ
The U.S. government probably can’t take regulatory action to stop companies from lowering tax bills
through deals that put their legal addresses outside the country, John Koskinen, commissioner of the
Internal Revenue Service, said today.¶ Pfizer Inc. (PFE) this week proposed the biggest such deal yet, a $98.7 billion takeover
ofAstraZeneca Plc (AZN) that would move the largest U.S. drugmaker to the U.K. for tax purposes and lower its tax rate.¶ “ We’ve done , I
think, probably
all we can within the statute,” Koskinen, 74, told reporters inWashington today, saying the trend of corporate
moves point up the need to revise the U.S. tax code. “We try to make sure people are within the bounds, but if they’re within the bounds, if
they play according to the rules, then they have a right to do that.”¶ Koskinen’s
remarks show the limits of the
government’s ability to respond without Congress and suggest that the Obama administration won’t
make a regulatory move to stop or limit so-called corporate inversions.
Even if further regulatory action is legal, Obama won’t do it
Rubin 7/28 (Richard, Reporter for Bloomburg News, “Government can use rules to deter corporate tax evasion, ex-Treasury official
says” http://www.heraldnet.com/article/20140728/BIZ/140729211/1005/Government-can-use-rules-to-deter-corporate-tax-evasion-exTreasury-official-says 7/28/14) Jessi
The Treasury Department should use immediate stopgap regulations to make offshore transactions
known as corporate inversions less lucrative, said the department’s former top international tax lawyer.
The administration can unilaterally limit inverted companies from taking interest deductions in the U.S. or from accessing their foreign cash
without paying U.S. taxes, Stephen Shay said in an interview and in an article published Monday in Tax Notes. “If you take away the
incentives, a large portion of these deals would not happen because they are indeed tax-motivated,” said u Companies including Medtronic and
AbbVie have pending inversion transactions in which they purchase a smaller foreign company and then move the combined corporation’s legal
address outside the U.S. In most cases, companies barely change their operations and don’t move their executives. The
administration
has been pressing Congress for retroactive action to make it harder for companies to invert and
insisting that Treasury can’t act on its own . Congress is deadlocked on the issue and is set to leave Washington late this week
for a five-week recess. Treasury Secretary Jacob Lew has said the government can’t address inversions without
legislation. “
AFF Answers
Non-Unique
Won’t pass – Senate bill failed due to Republican opposition
Ohlemacher 7/31 (Stephen Ohlemacher, Reporter for the Associated Press, “Republicans stop
bill to limit corporate tax break”, 7/31/14,
http://www.bostonglobe.com/business/2014/07/30/gop-blocks-tax-hike-firms-movingoverseas/F3nppahkjKqPJ6ZfRAvyRL/story.html)//HZ
WASHINGTON — Republican
senators blocked an election-year bill Wednesday to limit tax breaks for US
companies that move operations overseas.¶ The bill would have prohibited companies from deducting expenses related to
moving their operations to a foreign country. It also would have offered tax credits to companies that move operations to the United States
from a foreign country.¶ The
Senate voted 54 to 42 to end debate on the bill, six short of the 60 votes needed
to advance it. The White House says President Obama supports the legislation.¶ ‘‘Today in the United States, any time an American
company closes a factory or plant in America and moves operations to another country, the American taxpayers pick up part of that moving
bill,’’ said Senate Majority Leader Harry Reid, a Nevada Democrat. ‘‘Frankly, a vote against this bill is a vote against American jobs.’’¶
Republicans called the bill an election-year stunt. They noted that Democrats tried to pass a similar bill
two years ago, right before the last congressional elections.¶ Senate GOP leader Mitch McConnell of
Kentucky said the bill is ‘‘designed for campaign rhetoric and failure, not to create jobs here in the US.’’¶
Republicans also complained that Reid would not allow any amendments. The legislation now joins a
growing number of bills that have stalled in the Senate this year because Democrats and Republicans
could not agree on amendments.¶ The bill would have cost US companies that move overseas $143 million in additional taxes
during the next decade, according to the Joint Committee on Taxation, which analyzes tax legislation for Congress. Companies moving into the
United States would have seen their tax bills drop by $357 million during the same period.¶ The difference — $214 million — would have been
added to the budget deficit.¶ The White House and some Democrats in Congress have been making the case that a growing number of US
corporations are using international tax loopholes to avoid paying US taxes.¶ On Wednesday, Obama criticized US firms that reincorporate
overseas as a way to lower their US tax bills. Many of these companies keep most of their operations in the United States, including their
headquarters.¶ The process, called an inversion, allows firms to shield more of their foreign earnings from being taxed in the United States.¶
‘‘You know, they are renouncing their citizenship even though they’re keeping most of their business here,’’ Obama said in a speech.¶ ‘‘They
shouldn’t turn their back on the country that made their success possible,’’ Obama added.¶ Some Democrats in Congress have been pushing
legislation to make it harder for US firms to reincorporate overseas mainly to avoid US taxes.¶ Republicans
say that instead of
punishing corporations for leaving the United States, Congress should make America’s tax laws more
inviting so more firms will want to come here.¶ At 35 percent, the United States has the highest corporate income tax rate in
the industrialized world. Many corporations, however, pay lower tax rates because the law is filled with many credits, deductions, and
exemptions.
Won’t pass – GOP rejected Senate bill
Rubin 7/30 (Richard Rubin, Reporter for Bloomberg, “Senate Republicans Block Narrow Bill on
Offshore Breaks”, 7/30/14, http://www.bloomberg.com/news/2014-07-30/senate-republicansblock-narrow-bill-on-offshore-breaks.html)//HZ
Senate Republicans halted a Democratic measure that would limit tax breaks for companies that
outsource jobs and operations from the U.S.¶ The plan would have denied U.S. companies a tax deduction for the costs of
moving out of the country and provided a tax credit for companies bringing operations home. It wouldn’t have affected the trend of companies
moving their legal addresses to other countries through transactions known as inversions.¶ Today’s
procedural vote was 54-42,
six votes short of the 60 needed to advance in the Senate.¶ “We Democrats are lined up against outsourcing,” Majority
Leader Harry Reid, a Nevada Democrat, said on the Senate floor before the vote. He said the bill would end the practice in which “a company
moves from America and the American taxpayers help pay for the move.Ӧ The tax increase in the bill would raise $143 million over the next
decade, according to the Joint Committee on Taxation. That’s 0.003 percent of the $4.5 trillion that the corporate income tax is scheduled to
raise over 10 years.¶ The bill doesn’t address the more politically contentious issue of corporate inversions, in which companies including
Medtronic Inc. (MDT) and AbbVie Inc. (ABBV) are using mergers to move their legal addresses outside the U.S. and cut their tax bills.¶ Through
inversions and transactions to create real estate investment trusts and master limited partnerships, companies such as Windstream Holdings
Inc. and Hess Corp. are looking for ways to shield profits from the corporate income tax.¶ Democrats have talked about addressing inversions
with a retroactive law. They haven’t attempted to advance legislation on those issues.¶ Instead,
with Congress scheduled to
leave for a five-week break and about three months left until a midterm election where Democratic
control of the Senate is in jeopardy, they returned to a populist issue they had voted on in 2012.¶
Democrats said the tax measure would remove an incentive for companies to shift operations and jobs out of the U.S.¶ The bill would deny
deductions for ordinary business expenses, such as the cost of shipping equipment. Business groups representing multinational companies
oppose the bill.¶ “Disallowing a deduction for a legitimate cost of doing business would inject even more uncertainty into business planning,
add additional complexity to the tax code and further increase costs for U.S. companies, making them less competitive in the global
marketplace,” the groups, including the National Association of Manufacturers and the Business Roundtable, wrote in a July 22 letter to
lawmakers.¶ Republicans
dismissed the bill as a political stunt and criticized Democratic leaders for not
allowing them to offer amendments.¶ The bill is S. 2569.
Won’t pass - Democrats on the Senate Finance Committee are split
Rubin and Hunter 7/24 (Richard and Kathleen, reporters for Bloomberg News, “SOME SENATE
DEMOCRATS WARY AS OBAMA FIGHTS CORPORATE INVERSIONS,” 7/24/14,
http://www.columbusceo.com/content/stories/apexchange/2014/07/24/some-senate-democrats-waryas-obama-fights-corporate-inversions.html)//KJZ
WASHINGTON — At least four Democrats on the Senate Finance Committee say they're not ready to back the
push by President Barack Obama and party leaders for retroactive tax legislation to prevent companies
from moving their legal addresses out of the United States. In interviews and statements this week, Sens. Tom Carper of
Delaware, Michael Bennet of Colorado, Mark Warner of Virginia and Bob Casey of Pennsylvania all declined to back a stand-alone retroactive tax bill to limit
inversions. "Do we get something done on this now?" Casey asked in a brief interview this week. "Or do we make it part of tax reform overall, which I hope we can
begin to address as soon as the election is over." The
tactical split complicates already-stalled Democratic efforts to
penalize eight companies including Medtronic and AbbVie with pending mergers that would move their legal addresses
outside the U.S. to limit their tax bills. Obama planned to promote limiting such inversions in a speech in Los Angeles Thursday accusing
companies of renouncing their citizenship for tax benefits while taking advantage of American infrastructure, according to senior administration officials who spoke
on condition of anonymity in advance of the speech. U.S. companies are racing to complete tax-reducing offshore mergers before a credible threat to stop them
emerges from Congress. AbbVie, maker of the arthritis medicine Humira, announced the largest such inversion deal July 18 with a plan to move its tax home to
Britain in a $55 billion purchase of Shire. Republicans, who favor addressing the issue as part of revamp of the U.S. tax code, can block Senate legislation and stop
the Republican-led House from doing anything to limit inversions. The
Finance Committee, which has jurisdiction over taxes in
the Senate, has 13 Democrats and 11 Republicans, which means it can't advance a partisan bill if there
are any defections.
Won’t pass – momentum is temporary – Obama lacks the PC to get it done
Sullivan 7/16 [Ed, WSJ, 7/16/2014, White House to Congress: Stop Tax Inversions Now! blogs.wsj.com/pharmalot/2014/07/16/whitehouse-to-congress-stop-tax-inversions-now/] MJ
All those drug makers and investment banks chasing tax inversions now face opposition from the Obama administration. Yesterday, U.S.
Treasury Secretary Jacob Lew wrote the House Ways & Means Committee, which composes tax law, to
urge immediate legislation that would “shut down this abuse of our tax system.” And he suggests making any law retroactive to May
2014.¶ Whether Congress will heed this suggestion remains uncertain, but tax inversions, which have become
something of a rage in the pharmaceutical industry, clearly remain highly contentious. These deals allow a company to enjoy a lower corporate
tax rate by purchasing a rival that is based in certain foreign countries, and then shift headquarters there.¶ As this story notes, more tax
inversions seem to have appeared recently, since Congress failed to pass a comprehensive tax code that would address concerns U.S. corporate
tax rates are not competitive enough. Still, some companies are scrambling to get deals done and adding details that allow them to walk away
without a penalty if the window closes and the tax advantage disappears.¶ The maneuver is not new. In fact, there were two deals involving
drug makers last year – Actavis bought Warner-Chilcott and Perrigo purchased Elan – that spotlighted the issue. But inversions gained
tremendous attention earlier this year when Pfizer PFE -1.23%attempted to acquire AstraZeneca AZN.LN -0.88%, which is based in the U.K.,
and the lower tax rate was a prominent feature of policy debate on both sides of the pond.¶ Since then, one of the largest device makers,
Medtronic, agreed to purchase Covidien, which his based in Ireland. Meanwhile, AbbVie has offered to buy Shire, which is also based in Ireland.
Mylan Laboratories has agreed to purchase an Abbott Laboratories drug business that is based in Europe and plans to shift headquarters there.
And Walgreen may also shift headquarters out of the U.S. as part of a plan to buy the rest of Alliance Boots, a U.K. drug store chain based in
Switzerland.¶ For
the moment, the Lew letter may succeed in generating more political noise, but not much
more, according to Capitol Hill watchers. The letter “attempts to raise the temperature further, but will
have little effect,” writes Terry Haines, an analyst at ISI Group. “It changes no votes, and the [Obama ]
administration has little political capital that can be used to change the result.”¶ “…It continues to be
very difficult for congressional Democrats to succeed on inversions legislation, which is why it has gotten
no traction over the past three months.” And inversions announced between now and the 2014 mid-term elections will “have
to contend” with the noise and risk, he adds, but
legislation this year “remains very unlikely.”
No deal – partisan differences
Rubin 7/22 [Richard, 7/22/14, Hatch's Conditions on Inversion Law Show Partisan Split,
www.bloomberg.com/news/2014-07-22/hatch-s-conditions-on-inversion-law-show-partisan-split.html]
MJ
Legislation to deter U.S. companies from moving their addresses overseas should avoid retroactive
taxes, prevent a net tax increase and move toward a revamp of the tax code, Senator Orrin Hatch of Utah
said today.¶ The comments by Hatch, the top Republican on the Senate Finance Committee, offered a
slim prospect that Congress might find a path to a bipartisan agreement addressing the growing
number of corporate inversion deals.¶ “Whatever approach we take, it should not be retroactive or punitive,” Hatch said at a
hearing today on international taxes. “If we actually want to accomplish something on this issue, we’re going to have to work together.”¶
Hatch’s opposition to a retroactive bill benefits the eight U.S. companies with pending deals to purchase foreign businesses, change addresses
and reduce U.S. taxes. Democrats, including Finance Chairman Ron Wyden of Oregon, support legislation retroactive to May
that would make it impossible for U.S. companies to escape the country’s tax system by purchasing smaller foreign businesses.¶ “The inversion
virus now seems to be multiplying every few days,” Wyden said today. “The time for action is now.”¶ Wyden said after the hearing that he
didn’t want to negotiate in public and that he and the committee were exploring a “variety of possibilities.”¶ He wouldn’t
answer
directly when asked whether the Finance panel may act before Congress is set to leave Washington in
early August for a month-long break.¶ AbbVie, Medtronic¶ The eight companies are: AbbVie Inc. (ABBV), Medtronic Inc. (MDT),
Mylan Inc. (MYL), Auxilium Pharmaceuticals Inc. (AUXL), Chiquita Brands International Inc. (CQB), Horizon Pharma Inc. (HZNP), Applied
Materials Inc. and Salix Pharmaceuticals Ltd. (SLXP) Wyden said the committee invited chief executives from inverted companies to testify;
none would.¶ Under the Democratic plan, their deals would be unwound, renegotiated or penalized.¶ The Treasury Department is “aware of
many more inversions in the works right now” that are part of a race to the bottom on corporate taxes, said Robert Stack, deputy assistant
secretary for international tax affairs.¶ Hatch’s
willingness to consider a near-term bill sets him apart from other
Republicans on the issue. Still, his conditions put a significant amount of distance between him and
Democrats and show the hurdles to any inversion-related legislation in a congressional election year.¶
Democratic Push¶ The Democratic push, aided by the White House, has run into resistance from Republicans
including Hatch, who call the plan punitive and porous. Republicans control the U.S. House and can
block legislation in the Senate. Because the Treasury Department has said it has no more regulatory
authority, Republicans can block any action.¶ Most Republicans have insisted that any action occur
only in the context of broader changes to the U.S. tax code that are unlikely until at least 2015.¶ The main
Senate Democratic bill, from Carl Levin of Michigan, would impose limits for two years and raises $791 million. The House Democratic version
and President Barack Obama’s budget each raise at least $17 billion over a decade.¶ Senator Charles Schumer, a New York Democrat, said he
supports Levin’s two-year bill though he has concerns about a portion that would apply domestic tax rules to companies that are managed and
controlled in the U.S.
Won’t pass – GOP will reject quick-fix in favor of a broad tax rewrite after the election
Mckinnon & Hughes 7/24 [John D. & Siobhan, WSJ, 7/24/2014, Obama Urges Quick Action to Stop
Inversions, online.wsj.com/articles/obama-to-urge-quick-action-on-inversions-1406220197] MJ
President Barack Obama threw himself into the politically charged effort to block U.S. firms from
reincorporating overseas for tax reasons, calling the relocations "wrong" and urging Congress to stop them
through quick-fix legislation.¶ Such corporate relocations, known as inversions, could become a wild card in Washington in the
coming weeks, particularly if more big companies announce plans to move before the midterm elections in November.¶ A senior administration
official said this week that as many as 30 inversion transactions could be moving through the deal-making pipeline.¶ But
despite the
president's call for action, legislation appears unlikely to pass soon. Republicans view a short-term fix
skeptically, believing it could worsen U.S. firms' competitive position and encourage more foreign
takeovers.¶ For lawmakers of both parties, it also could steal momentum from the push for a broad tax
rewrite. Republicans who hope to take over the Senate in November have seen little incentive so far to
reach a deal before the election.
No legislation before midterm elections
Skiba 7/29 [Katherine, 7/29/2014, Chicago Tribune, Durbin bill to target corporate inversions,
www.chicagotribune.com/news/local/breaking/chi-durbin-bill-today-targets-corporate-inversions20140729,0,2379413.story] MJ
WASHINGTON—¶ Sen. Dick Durbin today decried U.S. firms that renounce their corporate citizenship to avoid taxes and said he was
introducing a measure to put them at a disadvantage for federal contracts.¶ “When it comes to a competition between companies, if
we have, on one hand, an American company paying its fair share of American taxes, competing with an inverted corporation that has decided
to go overseas, we believe, advantage America,” the Illinois Democrat said. ¶ He said the measure would send a message to companies seeking
to invert: “Think twice.”¶ The measure is called
the No Federal Contracts for Corporate Deserters Act.¶ It would
mean federal contracts would not go to businesses that incorporate overseas unless they are at least 50
percent owned by U.S. shareholders and do not have substantial business opportunities in the foreign
country in which they are incorporating¶ The law now defines a company as being “inverted” if it is at least 80 percent owned by
U.S. shareholders after it reincorporates overseas, according to Durbin.¶ Drugmaker AbbVie of North Chicago is among the corporations that
recently have announced they are “moving their mailbox overseas to avoid paying their fair share of taxes,” according to a Durbin statement.¶
Deerfield-based Walgreen Co. also is considering such a move.¶ Durbin appeared at a press conference today in the Capitol with four
Democratic lawmakers who support his measure: Sen. Carl Levin of Michigan and Reps. Rosa DeLauro of Connecticut, Sander Levin of Michigan
and Lloyd Doggett of Texas.¶ During the last 10 years, nearly 50 American companies have tried to “evade their basic tax obligation through
what is known as inversion,” DeLauro said.¶ She described the process this way: An American company buys a foreign company overseas, then
pretends that it is its new headquarters. They don’t move their executives or operations, but “they do move their mail box,” she said.¶ “And in
effect, they renounce their American citizenship in order to dodge paying taxes in the U.S,” she said.¶ In the past, companies have most often
tried the tax-avoidance scheme by pretending to reside in Bermuda and the Cayman Islands, but now Switzerland, the Netherlands, the U.K.
and Ireland “are also destinations of choice,” DeLauro said.¶ “And the abuse of this loophole is growing,” she said.¶ She said 14 major inversions
have been announced or completed this year.¶ Companies that invert take advantage of the U.S. education system, infrastructure, researchand-development incentives and a skilled work force, she said.¶ “But when tax bill comes due they hide overseas,” she said.¶ And when it
comes to applying for federal contracts, “they all are as American as Uncle Sam once again,” she said.¶ In response to Durbin's statement, a
Walgreen spokesman said the company "hasn't announced any decision on whether to do a tax inversion."¶ "We expect to announce a decision
on that and other issues related to our acquisition of (Switzerland-based) Alliance Boots in the coming weeks, but nothing has been announced
at this point," spokesman Michael Polzin said.¶ The White House estimates that nearly $20 billion in corporate taxes could be lost over the next
10 years because of inversions.¶ The
Democratic lawmakers, when asked the prospects of the bill’s passage, it
was problematic getting any legislation passed with few planned legislative days remaining before
November’s mid-term elections .¶ They noted, though, that some House Republicans had supported amendments to
appropriations bills to curb the practice.¶ Durbin is running for re-election against Republican State Sen. Jim Oberweis on Nov. 4. Oberweis,
in response, issued a statement today saying:¶ "Dick Durbin and his job-killing policies have produced the worst
economic recovery in U.S. history and this is just more of the same. It is a poor excuse for tax reform and not a serious attempt to
fix our country's anemic economy."
Won’t pass — GOP is anti-IRS, wants comprehensive reform, undervalues revenue
Vinik 7/29 (Danny, reporter for the New Republic, “House Republicans Are Helping People (and Corporations) Cheat on Their Taxes”
http://www.newrepublic.com/article/118878/house-republicans-are-obstructing-irs-and-costing-government-money 7/29/14) Jessi
Doctors who owe back taxes, homeowners who overstate their mortgage interest deduction, and corporations that avoid U.S. taxes are finally
receiving the legislative protection they so richly deserve. For months now, congressional
Republicans outraged by the IRS's
scrutiny of Tea Party groups have been undermining the agency's ability to crack down on tax cheats. In
June, the House GOP proposed reducing the IRS’s budget by $341 million. They also voted to slash the budget of the IRS’s enforcement division
by 25 percent, equal to $1.2 billion. Such steep cuts, the Associated Press’s Andrew Taylor wrote, “would mean fewer audits of taxpayers and
make it more likely that people who cheat on their taxes will get away with it.” Now, Politico reports that House Republicans are blocking
legislation to give the IRS greater authority to collect back taxes and catch cheaters. “[Republicans are] balking at a Senate plan to go after
doctors who owe back taxes and another to make it easier to figure out if someone is overstating the mortgage interest deduction,” Brian Faler
writes. “They also won’t accept an effort to cut the number of people wrongly claiming a child tax credit.” Republicans
are also
blocking legislation to close a tax loophole that allows corporations to avoid U.S. corporate income
taxes. The practice is known as tax inversion. As New York Times columnist Paul Krugman describes in his column Monday,
companies use this strategy to “relocate” to a country with a much lower corporate tax rate, thus
avoiding the U.S. corporate tax until they repatriate their profits. But these firms aren’t actually physically relocating.
They’re simply buying a foreign subsidiary so that they can claim tax residence in the low-tax country. Everything else remains the same—
except they avoid the U.S. corporate tax. Over the past few months,
more and more companies have begun using tax
inversions to lower their tax bills. On July 18, AbbVie, a Chicago-based pharmaceutical company, agreed to buy the U.K. drug maker
Shire for $54 billion, with the explicit goal of reducing its U.S. taxes. It was the largest tax inversion deal on record. Meanwhile, Walgreens is
reportedly looking into using this tax loophole as well. Democrats have introduced bills in both the House and Senate to crack down on these
tax inversions. President Barack Obama, in Los Angeles last week, and Treasury Secretary Jack Lew, in the Washington Post Monday, have called
Republicans have argued that any changes to corporate tax law should come
through comprehensive reform, not a short-term patch. But considering that Congress can barely pass bills to
address domestic crises at the moment, corporate tax reform isn’t happening anytime soon. Thus, the
effective GOP position is to allow this tax avoidance to continue. A few members within the GOP have recognized this
for Congress to take action.
and expressed an interest in closing the loophole. “There may be steps Congress can take, short of comprehensive tax reform, to address
corporate inversions, and related issues,” Orrin Hatch, the ranking member on the Senate Finance Committee, said. But those voices are rare in
the GOP. It’s
obvious why Republicans are so hostile to closing tax loopholes and cracking down on tax
cheats: the IRS scandal, in which conservative organizations received inordinate scrutiny from the
agency as it vetted groups claiming to be “social welfare organizations.” Republicans argue that the
agency cannot be trusted. “There’s not a whole lot of confidence right now about what the Internal Revenue Service does among the
American people, let alone members of Congress,” Rep. Pat Tiberi told Politico. “Why should we give them more tools to harass taxpayers?”
This doesn’t make much sense. Democrats are not proposing to expand the IRS’s purview, only to give it the resources to do its job. It is
certainly unacceptable for the IRS to target certain ideological groups and its email snafu is embarrassing, but both incidents are irrelevant to
the debate over closing tax loopholes.
Republicans also argue that closing the tax inversion loophole would not
bring in much revenue, around $20 billion over the next ten years. But tax avoidance is a big problem for the federal government. The
Treasury Department estimates that for every additional $1 in spending on the IRS, the agency collects $6 in additional revenue. Much of that
comes from closing the nearly $400 billion annual gap between what Americans owe in taxes and what the federal government actually
collects. To put that in perspective, the Ryan Budget cuts spending by just over $5 trillion over the next decade. In other words, the IRS could
accomplish nearly 80 percent of the deficit reduction in Ryan’s plan just by closing that $400 billion tax gap. Instead, Republicans
have
decided to obstruct the IRS in any way they can, once again proving that their deficit concerns are more
a convenient excuse to cut spending than a deeply held principle.
No deal – too partisan
Cohn 7/25 (Michael, editor-in-chief of “accounting.com”; “Mark Cuban Battles Corporate Tax Inversion Trend”
http://www.accountingtoday.com/news/celebrity-tax-news/mark-cuban-battles-corporate-tax-inversion-trend-71462-1.html 7/25/14) Jessi
President Obama, Treasury Secretary Jack Lew and members of Congress have been discussing the
increasing trend of U.S. companies merging with companies in low-tax countries in order to lower their
tax rates (see Obama Says Tax Law Must Change to Stop ‘Corporate Deserters’ and Treasury Secretary Lew Hopes to Prevent Further
Corporate Inversion Tax Deals). Congress held a hearing this week on the matter and is considering legislation to
curtail the practice (see Hatch’s Conditions on Inversion Law Spotlight Partisan Gap and Congress Casts Aspersions on Corporate
Inversions). On Thursday, Obama accused companies of being “corporate deserters who renounce their citizenship to shield profits.” “You
shouldn’t get to call yourself an American company only when you want a handout from American taxpayers,” Obama said. Among the
companies with inversion deals in the works are AbbVie, Medtronic, Mylan, Auxilium Pharmaceuticals, Chiquita Brands International, Horizon
Pharma, Applied Materials and Salix Pharmaceuticals. Democratic lawmakers in Congress have pushed to discourage inversions, with Sen. Carl
Levin, D-Mich., having introduced a bill in May called the Stop Corporate Inversion Act of 2014. International
tax attorney Charles
Kolstad of Venable LLP in Los Angeles doubts that such legislation will pass before the November elections,
however. “The problem with tax reform is it requires both sides of the House to get together and act, and
that’s been difficult of late,” he said in an interview Thursday. “It’s not quite clear that any legislation that gets
proposed has any real chance of being passed in the near-term future until after the midterm elections
in November, and perhaps some shifts in the balance of power.” He sees the current debate as “political
arm twisting.” “If you can’t pass legislation and you can’t pack it through regulations issued by the IRS,
what are you left with?” Kolstad asked. “You’re left with trying to convince people that it’s not appropriate, not patriotic, whatever.
The problem is, if you’re the CEO of a large company and you have a shareholder base who worries about stock prices, you worry about
international competitiveness, and you’re sort of forced to do it because that’s what is in the best interests economically for your
shareholders.”
Won’t pass despite Dem push
Becker 7/7 (Bernie, writer for the Hill “Offshore tax deals on the rise, says top Dem,” 7/17/14,
http://thehill.com/policy/finance/211466-offshore-tax-deals-on-the-rise-top-dem)//KJZ
Congressional Democrats have stepped up their efforts to battle inversions in recent months, spurred on by
the drug giant Pfizer’s ultimately unsuccessful attempt to merge with AstraZeneca, a British pharmaceutical company. Walgreens, the pharmacy
chain, and Medtronic, a medical device maker, have openly discussed leaving the U.S. in recent weeks. Tim Hortons, the coffee and doughnut
chain, and the underwear maker Fruit of the Loom are among the 75 corporations that went through with an inversion since 1994. Levin, the
top Democrat on the tax-writing House Ways and Means Committee, has unveiled legislation to make it harder for companies to change their
addresses for tax purposes. His brother, Sen. Carl Levin (D-Mich.), has introduced similar legislation in the Senate, where Finance Committee
Chairman Ron Wyden (D-Ore.) has also said he wants to tackle the issue. "Barely a week seems to pass without news that another corporation
plans to move its address overseas simply to avoid paying its fair share of U.S. taxes," Rep. Levin said in a statement on Monday. "These
corporate inversions are costing the U.S. billions of dollars and undermining vital domestic interests. We can and should address this problem
immediately through legislation to tighten rules to limit the ability of corporations to simply change their address and ship U.S. tax dollars
overseas."
Given the gridlock on Capitol Hill, however, tax lobbyists don’t expect Congress to pass any
legislation on inversions any time soon, despite the tough Democratic rhetoric . Wyden has said he
would prefer to deal with the matter through a broader rewrite of the tax code. Top GOP tax writers
have insisted that going after inversions ignores the key reason that companies seek to move abroad:
the U.S.’s top statutory corporate tax rate of 35 percent, the highest in the industrialized world.
Executive Action Solves
Obama will use executive action to bypass Congress and stop inversions
Carswell 7/29 [Simon, 7/29/2014, Obama may act on tax inversions without waiting for agreement
from Congress, www.irishtimes.com/business/economy/obama-may-act-on-tax-inversions-withoutwaiting-for-agreement-from-congress-1.1881040] MJ
As long as the US charges companies at a top rate of 35 per cent on corporate profits made on global income, multinationals will continue to
look at moving their tax headquarters overseas to places such as Ireland where they can file tax returns at 12.5 per cent rate.¶ Some may
discount the prospect of a bitterly divided Congress passing any kind of tax reform given that Democrats want a new law immediately to halt
the acceleration in inversions, while Republicans want a go-slow approach fearing it might weaken US firms.¶ The Democratic Bill on the table,
which is being backed by Obama, would curtail inversions by insisting on foreign ownership of the newly combined company being increased to
50 per cent from 20 per cent and the new company retaining close connections to the US.¶ A
former senior US treasury
department member has pointed out that the Democratic president – who is struggling to pass anything by a
Republican-controlled House of Representatives in a contentious election year – may not require new legislation to curb
inversions.¶ Stephen Shay, a professor at Harvard Law School, said in an article published yesterday that the
president could remove a key incentive for US corporations reincorporating overseas.¶ Obama could
invoke a 1969 tax law that would restrict foreign companies using inter-company loans and interest
deductions to reduce their tax bills, wrote Shay in an article spotted by news wire Reuters on Monday in the journal Tax Notes.¶
“People should not dawdle,” Shay said, noting how the regulatory power contained in section 385 of the US tax code
was “extraordinarily broad” and was a “slam dunk” for the treasury department in tightening the rules
on inversions.¶ Given Obama’s fighting talk and his frustration with House Republicans, he may act
alone on this issue at a time when he has threatened to bypass Congress and take executive action on other issues.
Executive action solves the impact
Drawbaugh 7/28 [Kevin, Reuters, 7/28/2014, Obama could curb corporate 'inversions'
on his own: ex-U.S. official, finance.yahoo.com/news/obama-could-curb-corporateinversions-own-ex-u-042506738--sector.html] MJ
WASHINGTON (Reuters) - President Barack Obama
could act without congressional approval to limit a key incentive
for U.S. corporations to move their tax domiciles abroad in so-called "inversion" deals, a former senior
U.S. Treasury Department official said on Monday.¶ By invoking a 1969 tax law, Obama could bypass
congressional gridlock and restrict foreign tax-domiciled U.S companies from using inter-company loans
and interest deductions to cut their U.S. tax bills, said Stephen Shay, former deputy assistant Treasury
secretary for international tax affairs in the Obama administration. He also served as international tax counsel at
Treasury from 1982 to 1987 in the Reagan administration.¶ In an article being published on Monday in Tax Notes, a journal for tax lawyers and
accountants, Shay said the federal government needs to move quickly to respond to a recent surge in inversion deals that threatens the U.S.
corporate tax base.¶ "People should not dawdle," said Shay, now a professor at Harvard Law School, in an interview on Friday about his article.¶
If the administration were to take the steps he discusses, Shay said, some of the many inversion deals
that are said to be in the works might be halted in their tracks.¶ The regulatory power conferred by the
tax code section he has in mind, known as Section 385, is "extraordinarily broad" and would be a "slam
dunk" for the Treasury Department, he said.¶ A recent sharp upswing in inversion deals is causing alarm in Washington, with
Obama last week urging lawmakers to act soon on anti-inversion proposals from him and other Democrats. But Republican opposition has
blocked Congress from moving ahead.
Bill Doesn’t Solve Inversions
Targeted legislation doesn’t solve the impact – comprehensive tax reform is needed
Chicago Tribune 7/29 [7/29/2014, Boost the economy. Create jobs. Fix the tax code.
www.chicagotribune.com/news/opinion/editorials/ct-tax-reform-inversion-durbin-obama-edit-0730-jm20140730,0,7166449.story]
Durbin, Obama and Lew want to add yet another complication to U.S. taxes. Unintended
consequences will follow — again. Some experts believe legislation to thwart inversions could make U.S.
companies more vulnerable to foreign takeovers, which in some cases would achieve the same tax savings that such a law
would be intended to discourage.¶ The real problem isn't inversions. It's an uncompetitive U.S. tax code that
makes inversions so attractive.¶ The real solution: Tax reform.¶ Comprehensive tax reform was last accomplished in
Now
1986, and with the passage of time and much political fiddling, the tax code has become a mess again. It's complicated, unfair and out of step
with the tax regimes of other countries. Its 35 percent business income-tax rate, in particular, puts American companies at a huge
disadvantage. Just ask Walgreen, or North Chicago-based AbbVie, or any other U.S. company under pressure to serve its shareholders by
moving.¶ The Democrats say tax reform is too difficult to accomplish in an election year. We reject that conventional — and, for incumbents
such as Durbin, politically convenient — thinking.¶ On the contrary, Americans would welcome strong leadership on this issue. As Durbin & Co.
well know, U.S. Rep. Dave Camp, chairman of the House Ways and Means Committee, offered just such a comprehensive plan in February.
Thanks to Washington inertia in general and election-year caution in particular, Camp's plan has languished.¶ Consider
the economic
benefits that would flow from tax reform. It's hard to think of any action from Congress that would do
more to improve the U.S. economy and boost the nation's competitiveness worldwide. That boils down
to more jobs. Wouldn't that help the authors of such progress to win elections?¶ As Doug Oberhelman, chairman and CEO of Illinois'
Caterpillar Inc., noted in a recent interview, "Full-blown tax reform in this country is absolutely needed and will
absolutely stimulate growth."¶ Shame on politicians who admit the need for tax reform but who won't fight to make it happen now.