U.S. Senate to debate end to corporate offshore tax break
The U.S. Senate will proceed to debate a bill ending tax advantages for companies that move jobs abroad and giving a tax break for companies moving jobs back.
U.S. Sen. Jeff Merkley says that’s progress, given that a similar move two years ago failed to reach the 60-vote threshold required.
The Oregon Democrat cosponsored the bill in 2012, when it got 56 votes, four short of the threshold. The move Wednesday won 93 votes.
“I think a lot of folks have started to see how much our economy has been hollowed out by the loss of manufacturing jobs,” he told reporters in a conference call.
Merkley says the issue is important to Oregon, whose economy is dependent on manufacturing, but has lost an estimated 50,000 manufacturing jobs over 10 years. The national total is 5 million such jobs, which Merkley said pay enough to support families.
“You don’t have a middle class in America if you don’t make things here in America,” he says.
According to the Congressional Joint Committee on Taxation, companies that have jobs overseas would pay $143 million more in taxes over 10 years under the legislation. Corporate earnings from overseas subsidiaries are not taxed until the money is brought home, where it is taxed at 35 percent.
The bill’s proposed tax break would allow companies to take a credit, subtracted directly from taxes owed, based on 20 percent of their cost of creating jobs in the United States. But the return would be $357 million over 10 years.
President Barack Obama supports such legislation.
Despite the 93 votes in favor of proceeding with the legislation, Merkley said, “I’m not sure that the bipartisan vote to debate the bill will translate into a bipartisan vote to support the bill.”
Even if the bill does pass the Senate, it may run into a political roadblock in the Republican-controlled House. The Senate passed bills to overhaul immigration policy and ban discrimination based on sexual orientation — the latter debate led by Merkley — only to have them stall in the House.
Still, Merkley says, this legislation is directly about jobs.
“Sometimes you think things are less likely to occur because of an upcoming election, but other things are more likely to happen,” he says.
On a related matter, the issue of “corporate inversions” is drawing new attention in the Senate this week after U.S. drugmaker AbbVie Inc. announced it would buy British rival Shire for $55 billion and reincorporate in the Isle of Jersey, which does not tax most corporate earnings. The move would allow it to avoid the U.S. tax of 35 percent on foreign earnings.
About 50 such moves have occurred in the past decade, 14 of them announced this year. The Joint Committee on Taxation estimates that the U.S. Treasury will lose $20 billion in collections over 10 years.
Oregon Sen. Ron Wyden, a Democrat who is chairman of the tax-writing Finance Committee, described them as “infections” that Congress needs to deal with.
“The Finance Committee must respond now, on a bipartisan basis, to plug the inversion loophole,” Wyden said at a hearing Tuesday. “America’s free enterprise system works best when there’s a level playing field, and inversions further distort the free market by bestowing tax favors on some at the expense of the American taxpayer.”
Republicans say the issue should be part of a more comprehensive overhaul of the federal tax code. But there is little likelihood such legislation will come to a vote in either the Senate or House this year.
The issue came to public attention in May, when U.S. pharmaceutical giant Pfizer said it would buy British firm Astro Zeneca and then moved its headquarters overseas. The move later fell through.
