The Hill reports that presidential candidate and Senator Bernie Sanders (I-VT) “is urging the Treasury Department to take action to prevent pharmaceutical giant Pfizer from reincorporating overseas to lower its taxes.”
NTU has written previously on this issue and at the time we noted that Treasury had already taken steps to make it more difficult for corporations to undertake such a merger. Throwing up more regulatory obstacles in order to compel companies to remain in the United States, where they are saddled with a corporate tax burden far above their global competitors, is the policy equivalent of an angry child clinging to his parents’ legs to prevent them from leaving.
Doubling down on ineffective and burdensome strategies does little to address the root cause of corporate inversions: high taxes. At the same time, it further demonstrates to the business world that the United States is a hostile work environment that corporations would be wise to steer clear of.
Writing at Reason.com, economist Veronique de Rugy points out that not only does an exorbitant tax regime place American corporations at a disadvantage – making their products more costly and discouraging international companies from bringing foreign profits back to the U.S. – it also hurts employees. According to de Rugy, “The data show that most of the corporate tax burden is actually shifted to workers, who end up shouldering the tax in the form of lower wages. “
According to The Hill, Sanders’ letter also “said Congress should pass legislation that would end inversions...”. While we probably have different legislative particulars in mind, NTU couldn’t agree more. The best way for Congress to end inversions isn’t to treat U.S. businesses as taxpayer hostages, but to dramatically reduce the corporate tax burden and move to a territorial tax system. Doing so would make the U.S. a place where businesses want to stay and grow, creating much-needed good paying jobs and far-reaching economic benefits.