Durbin: Let's Call Corporate Inverters What They Really Are: Corporate Deserters
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) spoke on the U.S. Senate Floor to discuss a tactic called corporate inversions, a move many companies are considering. These companies move their headquarters overseas, but only on paper, to avoid U.S. taxes. Most recently, Burger King decided to renounce its American corporate citizenship by acquiring Canadian company Tim Horton’s. Nearly 50 companies have inverted in the last 10 years, with another dozen companies – including three in Illinois – having announced that they are planning or considering a corporate inversion.
“To me, if you are going to desert this country as a corporation, then consumers should be aware of it first. I don’t care to do business with a company that doesn’t think it owes its fair share of taxes. If they don’t pay their fair share of taxes, then other good American companies and individuals will be forced to pay more. It’s right for us to speak up now about this process called corporate inversion and bringing it to an end,” Durbin said. “These folks have to realize that we are not going to stand still while they game the tax code and avoid their responsibility to the country, which by in large, created the success of most of these corporations.”
Video of Durbin’s remarks on the Senate Floor is available here.
This week, Durbin plans to introduce a bill with Senator Chuck Schumer (D-NY) that would reduce the damage caused by inversions by limiting the practice of “earning’s stripping”. Earnings stripping is tactic an inverted company uses to shift the debt off its own books and onto the books of its U.S. subsidiary. The company is then able to write off interests on that debts, effectively avoiding U.S. taxes and shifting the burden onto American taxpayers. Durbin and Schumer’s bill would prevent certain corporations from taking excessive interest deductions and sticking U.S. taxpayers with the tab. It would reduce the cap on interest deductions from 50% of adjusted taxable income to 25%.
In July, Durbin joined Senator Carl Levin (D-MI), Representative Rosa DeLauro (D-CT) and Representative Lloyd Doggett (D-TX) to introduce the No Federal Contracts for Corporate Deserters Act. The legislation would bar contracts from going to businesses that incorporate overseas, are majority-owned by shareholders of the old U.S. corporation, and do not have substantial business opportunities in the foreign country in which they are incorporating.
In addition to co-sponsoring the No Federal Contracts for Corporate Deserters Act, Durbin has introduced the Patriot Employer Tax credit Act of 2014 which would provide a tax credit to companies that provide fair wages and good benefits to workers while closing a tax loophole that incentivizes corporations to send jobs overseas. The loophole costs the U.S. Treasury approximately $50 billion each year at a time when outsourced jobs and stagnant wages force more American families to turn to safety net programs to make ends meet.
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