LOS ANGELES – Staking out a populist stand ahead of the midterm elections, President Barack Obama on Thursday demanded economic patriotism from U.S. corporations that use legal means to avoid U.S. taxes through overseas mergers.
I don’t care if it’s legal, Obama declared. It’s wrong.
Obama and congressional Democrats are pushing to severely limit such deals, a move resisted by Republicans who argue that the entire corporate tax code needs an overhaul.
At issue are companies that enter into arrangements with foreign companies, shifting their tax addresses overseas while retaining their U.S. headquarters.
They’re technically renouncing their U.S. citizenship. They’re declaring they are based someplace else even though most of their operations are here, Obama said at a technical college in Los Angeles. You know, some people are calling these companies corporate deserters.
He also charged that such companies are cherry-picking the rules.
Though Obama included a proposal to rein in such mergers and acquisitions in his 2015 budget, his speech marked a new, more aggressive focus on the subject.
The push came amid a developing trend by companies to reorganize with foreign entities through deals called inversions, partly to reduce their tax payments in the U.S.
It also came ahead of the fall political campaign as Democrats seek to draw sharp contrasts with Republicans by portraying them as defenders of corporate loopholes. Sen. Elizabeth Warren, D-Mass., and others have been drawing praise from liberal arms of the Democratic Party for their overtly populist positions.
The growth of inversions has also concerned Republicans, but by and large, they have called for a broader tax overhaul that would reduce corporate rates.
Forty-seven U.S. companies have merged with, or acquired, foreign businesses during the past decade in inversions, according to the Congressional Research Service. The issue gained attention this year when Pfizer made an unsuccessful attempt to take over British drugmaker AstraZeneca. The deal would have allowed Pfizer to incorporate in Britain and thus limit its exposure to higher U.S. corporate tax rates.
Most recently, Walgreen Co., the drugstore chain that promotes itself as America’s premier pharmacy, is considering a similar move with Swiss health and beauty retailer Alliance Boots.
Obama, speaking in shirt sleeves under a hot sun in a campaign rally atmosphere, sought to shame companies seeking such deals even though he mentioned none by name.
You don’t get to pick the tax rate you pay, Obama told a crowd of about 2,000. Folks, if you are a secretary or a construction worker, you don’t say, You know, I feel like paying a little less, so let me do that.’ You don’t get a chance to do that. These companies shouldn’t, either.
He added: You shouldn’t get to call yourself an American company only when you want a handout from American taxpayers.