“There is no doubt that there needs to be tax reform. And that for it to be successful, there must be changes in how companies engaged globally are taxed.
“There is considerable talk today that as a first step we should reform our tax code as it relates to companies that are American based with operations overseas.
“But there are immense difficulties in doing piecemeal tax reform. And it can’t be done just to raise short-term revenue without considering long-term effects.
“And there are serious challenges in doing tax reform without considering the impact on domestic businesses. That is why the head of the Business Roundtable said last week, “I don’t think you can take them piecemeal. You’ve got to have revenue on the table. You’ve got to have lower tax rates on the table."
“The odds seem strong that the only way to address tax reform is to undertake it comprehensively on a bipartisan basis. For example, the large number of pass-throughs represents a major challenge to how you do business reform without doing individual tax reform.
“That does not mean that Congress should be frozen in place. Not doing one big piece does not mean we cannot act when there is a smaller piece that goes after abuses that would have to be addressed in any tax reform.
“That’s the case with the rapid race of inversions. More and more of the horses are galloping out of the barn, using a huge loophole. Failure to close the barn door is bad for the American economy and unfair to the typical American taxpayer who can’t lower their taxes by simply changing their address to another country with a lower tax rate. The JCT score of more than $40 billion on the legislation we introduced to stop inversions shows how abused this tax dodge is.
“What makes it worse is that the companies that invert often then engage in earnings stripping. The U.S. entity usually ends up paying excessive amounts in deductible interest payments to its foreign parent, ultimately lowering its U.S. taxes.
“We need to shut the barn door before more and more horses run off from the U.S. and race overseas to lower the taxes they pay to the U.S."
