Senators Plan to Fight Corporate Tax Avoidance

Senators Ron Wyden (Oregon) and Carl Levin (Michigan) have announced that they are planning new legislation to fight corporate emigration to lower tax jurisdictions.

Senator Wyden, the chairman of the tax-writing Finance Committee, views corporate flight to more tax friendly nations as “a serious symptom of our broken tax code and is currently looking at the issue.” Senator Levin also made a statement saying that he would soon propose legislation that would tighten requirements for moving businesses outside of the U.S.

While both Republicans and Democrats believe that this sort of corporate flight is problematic, the two parties have different ideas about how to remedy the situation.

The U.S. has the highest corporate tax rate at 35%, which raises the question of whether a lower tax rate would prevent corporation emigration. To avoid much of this tax, corporations keep huge amounts of their cash overseas.

“I am talking to my colleagues about legislation to close the loophole, which I intend to introduce soon. Companies that exploit this loophole benefit from the protection and services the federal government provides, including patent protection, research-and-development tax credits, national security and more; they shouldn’t be allowed to shift their tax burden onto others,” Senator Levin stated.

Source: McKinnon, John D., “Senators Plan Legislation to Stem Overseas Corporate Tax Avoidance,” The Wall Street Journal, May 8, 2014