July 23 (Bloomberg) -- The U.S. Senate advanced a narrow attempt by Democrats to limit tax breaks for companies moving jobs out of the U.S.
On a 93-7 vote, the Senate overcame a procedural hurdle on a bill that would deny companies federal tax deductions for the physical cost of moving operations abroad and provide them with a tax credit for moving operations into the U.S. All seven no votes came from Republicans, including Pat Roberts of Kansas and Rand Paul of Kentucky.
Republicans and businesses oppose the bill, and Republicans will still have opportunities to block it. Advancing the bill for a debate allows Republicans to discuss the issue, offer amendments and then complain if Democrats don’t allow votes on their alternative proposals.
The legislation would create little change in U.S. corporate tax collections. According to the Joint Committee on Taxation, the tax break would cost the U.S. government $357 million in forgone revenue over a decade; the denial of deductions would generate $143 million. The government is projected to collect $4.5 trillion in corporate tax revenue over the next decade, according to the Congressional Budget Office.
“It protects American jobs and encourages future job creation within our borders,” Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday.
President Barack Obama’s administration “strongly supports” the bill, according to a budget office statement today. “The nation’s tax code does too little to encourage job creation and investment in the United States,” it said.
The bill doesn’t address the more politically and economically significant issue of corporate inversions, in which U.S. companies use mergers to move their addresses outside the country and reduce their tax bills. In those cases -- including proposed maneuvers by Medtronic Inc. and AbbVie Inc. -- operations and executives almost always stay in the U.S.
Democratic legislation to curb inversions hasn’t advanced out of committee or to the Senate floor. Senate Democrats including Carl Levin of Michigan and Richard Durbin of Illinois have been urging quick action to limit inversions.
Today’s bill, by contrast, would deny companies deductions for what are typically ordinary business expenses.
Some Republicans derided the plan as a political stunt designed to give Democrats a campaign issue in an election year.
“We’ve seen this movie before,” Senate Republican Leader Mitch McConnell of Kentucky said yesterday. “Everyone knows that the Democrats are not serious here. They simply want the bill to fail.”
In July 2012, the last time the Senate voted on this issue, the lead sponsor was Senator Debbie Stabenow of Michigan, who was up for election that year. That 56-42 vote fell short of the 60 needed to advance the measure.
This time, the lead sponsor is Senator John Walsh of Montana, who is on the ballot in November.
Today’s bill is S. 2569. The inversion legislation is S. 2360.
To contact the editors responsible for this story: Jodi Schneider at firstname.lastname@example.org Joe Sobczyk