Obama wants limits on US company mergers abroad

Comment: Off

President Barack Obama speaks about the economy at the Los Angeles Trade-Technical College in Los Angeles, Thursday, July 24, 2014, on the final day of his three-day West Coast trip. Striking a populist stand ahead of the midterm elections, Obama is demanding “economic patriotism” from American corporations that seek overseas mergers to avoid U.S. taxes. Obama and congressional Democrats are pushing to severely limit such deals, a move resisted by Republicans who argue the entire corporate tax code needs an overhaul. (AP Photo)

President Barack Obama speaks about the economy at the Los Angeles Trade-Technical College in Los Angeles, Thursday, July 24, 2014, on the final day of his three-day West Coast trip. Striking a populist stand ahead of the midterm elections, Obama is demanding “economic patriotism” from American corporations that seek overseas mergers to avoid U.S. taxes. Obama and congressional Democrats are pushing to severely limit such deals, a move resisted by Republicans who argue the entire corporate tax code needs an overhaul. (AP Photo)

President Barack Obama talks about his basketball game with customers at Canter’s Deli in Los Angeles, Thursday, July 24, 2014, where he made a surprise appearance on the final day of his three-day West Coast trip. (AP Photo/Los Angeles Times, Jay L. Clendenin, Pool)

President Barack Obama meets at Canter’s Deli in Los Angeles, Thursday, July 24, 2014, with, from left, Kati Koster, Aaron Anderson, Joan Waddell, hidden, and Katrice Mubiru, on the final day of his three-day West Coast trip. Koster, Anderson, Waddell, and Mubiru wrote letters to the president about issues that included education, military veterans resources, and the economy. (AP Photo)

President Barack Obama speaks about the economy at the Los Angeles Trade-Technical College in Los Angeles, Thursday, July 24, 2014, on the final day of his three-day West Coast trip. Striking a populist stand ahead of the midterm elections, Obama is demanding “economic patriotism” from American corporations that seek overseas mergers to avoid U.S. taxes. Obama and congressional Democrats are pushing to severely limit such deals, a move resisted by Republicans who argue the entire corporate tax code needs an overhaul. (AP Photo)

Buy AP Photo Reprints

LOS ANGELES (AP) — 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 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.

A total of 47 U.S.-based companies have merged with or acquired foreign businesses over the past decade in inversions, according to the Congressional Research Service. The issue gained attention earlier 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 drug store 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 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.”

The speech came at the end of a three-day West Coast fundraising tour. Obama employed many of the same partisan themes in his speech at the college that he did exhorting donors to help the Democratic Party.

“What really is going on is the Republicans in Congress are directly blocking policies that would help millions of Americans,” he said.

The Obama administration began to ramp up attention to inversion transactions last week with a letter from Treasury Secretary Jacob Lew to House and Senate leaders. Lew said such deals “hollow out the U.S. corporate income tax base.”

Obama is calling on Congress to enact legislation that is retroactive to May, arguing that will stop companies from rushing into deals to avoid the law.

Senate Democrats picked up the call this week, with Sen. Dick Durbin of Illinois, the second-ranking Democratic leader, sending a letter to Walgreen President and CEO Gregory Wasson urging him and his board to reconsider the overseas deal.

“I believe you will find that your customers are deeply patriotic and will not support

Comments

comments

About the Author