Congressional Republicans still haven’t agreed on a plan of their own to prevent corporations from shielding profits overseas from U.S. taxes, leaving them to carp from the sidelines at tough new rules issued by the Treasury Department targeting corporate inversions.
House Ways and Means Chairman Kevin Brady of Texas decried the “punitive” actions in a statement Monday night and insisted his committee would work on its own tax plan. But time is running out quickly, with election season in full swing and no bipartisan agreement in sight.
Republicans pin the blame for the lack of agreement to date on the White House, including Democrats’ demands that any overhaul needs to generate tax revenue to spend on things like transportation. But the Republican tax-writing panels have yet to issue detailed proposals of their own, let alone formally mark up bills.
John Cornyn of Texas, the No. 2 Senate Republican, said there would be “applause” if the White House were to agree to a tax-code fix that doesn’t raise revenue, but that doesn’t appear to be in the cards.
“I don’t think they’ve taken care of our broken tax code or tax system,” Cornyn said. “It’s really regrettable, when Republicans and Democrats and the White House alike all understand that our tax code’s broken, but basically the ransom that the White House wants the country to pay in terms of increased taxes is just too high a price. So we are where we are.”
Senate Majority Leader Mitch McConnell on Tuesday put the chances of a broader overhaul at “slim to none,” even if the White House agreed it would be revenue-neutral. He also said chances were slim that Congress would tackle a narrow corporate tax overhaul that would leave higher rates for individuals in place.
The White House said that Republicans’ inaction is exactly the reason the administration had to move ahead on its new inversion rules under its executive authority.
“So far, Republicans in Congress have yet to act,” President Barack Obama told reporters Tuesday. “My hope is they start getting serious about it.”
Calling the tax provisions that allow inversions “one of the most insidious tax loopholes out there,” he added: "Only Congress can close it for good and only Congress can make sure all the other loopholes that are being taken advantage of are closed.”
Democrats have been filing bills of their own targeting “earnings stripping” and other tax-avoidance techniques that have made inversions attractive for corporations. More are on the way, including one promised from Senator Ron Wyden of Oregon, the ranking Democrat on the Finance Committee.
Some Republicans, including Brady and Senator Rob Portman of Ohio, have continued to hold out hope that Congress will act this year on a broader international corporate tax rewrite. Such an overhaul would address inversions among other things and potentially return to the U.S. more than $2 trillion in profits that have been stashed overseas to avoid paying the 35 percent corporate tax rate. Portman agreed with Democratic Senator Chuck Schumer of New York on an outline for such a plan last year, but that effort stalled once Congress decided to go a different route to pay for last year’s highway bill.
The challenge for Republicans is that inversions are very unpopular; indeed, it’s a standard talking point for Donald Trump, their party’s front-runner, who promises he’ll put a stop to them. That makes criticizing Treasury’s actions a difficult political balancing act.
Senate Finance Chairman Orrin Hatch of Utah called on the White House to work with Republicans in good faith to fix the problem.
“We need a strong partner in the White House that is more interested in creating real bipartisan results to address the disease of inversions than issuing unilateral band-aids that only attempt to alleviate the symptoms," he said Monday night in a statement. Republicans blame the president for a lack of leadership in bringing the parties together on the issue.
Brady’s comments were harsher, calling the actions “punitive regulations that will make it even harder for American companies to compete and will further discourage businesses from locating and investing in the United States.”
It’s another in a long line of executive actions the GOP has chafed against, including several related to undocumented immigrants.
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