The top Republican on the Senate Finance Committee said he is willing to consider short-term measures to deal with the trend of companies moving their legal addresses outside the U.S. for tax reasons.
Senator Orrin Hatch of Utah said in a letter to Treasury Secretary Jacob J. Lew that he opposes policies like those urged by the administration that he said would involve “constructing a wall” around U.S. companies.
“There may be steps Congress can take, short of comprehensive tax reform, to address corporate inversions and related issues,” Hatch wrote in a letter dated yesterday. “I’m certain we can find alternatives that could easily be enacted and are less punitive and restrictive to businesses” than administration proposals.
Hatch’s letter wasn’t more specific.
“We’re open to any good idea that will develop incentives to make it more attractive” for businesses to stay in the U.S., he said to reporters in Washington yesterday.
Still, it represents the first signal from a senior Republican that there is the potential for a bipartisan, short-term change to the tax laws that would affect inversions. Most Republicans, including Hatch, have argued for waiting to address the issue as part of a broader revamp of the U.S. tax code that won’t occur until next year at the earliest.
Hatch, 80, would likely become chairman of the Finance Committee if Republicans take control of the Senate in November, making him the negotiator with the administration on fiscal policy.
The administration has proposed making it effectively impossible for U.S. companies to buy smaller foreign businesses and move their addresses for tax purposes. Companies such as Medtronic Inc. and Mylan Inc. are doing so.
Hatch in the rest of the letter criticized Lew and the administration for seeking “economic patriotism” and putting debt reduction low on the administration’s list of priorities.
“My hope is that your definition of ‘economic patriotism’ is not so narrow as to only include a particular business practice that happens to be the tax topic of the month in the political echo chamber,” Hatch wrote. “I hope that you share my view that ‘economic patriotism’ includes a desire to fix the problems that are truly ailing our country.”
The administration is eager to revise the tax code and wants to put a brake on inversions in the meantime, said a senior administration official who spoke on condition of anonymity yesterday.
Even after the U.S. cuts its corporate tax rate, the official said, there will be an incentive for companies to engage in inversions. The proposed limits would be part of the broader legislation anyway and won’t be harmful now, the official said.
Camp said yesterday on the House floor that he was glad the administration agrees with his preference for major tax changes and lowering the corporate tax rate. Near-term changes like the ones proposed by the Obama administration, he said, would create an incentive for companies to move abroad.
“That is the worst thing we could do for American workers,” he said.