There’s a relatively new term that’s entered the political lexicon: Corporate Inversion. It occurs when a company located in the United States moves its headquarters overseas in order to reduce its U.S. tax burden. The Obama administration isn’t in favor of the practice, with Treasury Secretary Jack Lew calling for a new economic patriotism that would inspire corporations to remain headquartered in their mother country.
Rejecting Lew’s exhortations, businesses say they are acting in their own self interest. They point out that while they may have originally made most of their sales and profits in the United States, the 21st century global economy causes more of their sales to come from overseas. And because of U.S. tax law, they are forced to pay taxes on that income. If they purchase a foreign corporation and then declare it their corporate headquarters, they avoid the tax. It’s all perfectly legal, but some pundits on the left have called for companies to sign loyalty oaths, promising they won’t take their business out of the country.
Given all of that, it’s not surprising that Georgia’s U.S. Senate candidates disagree on what should be done about the problem. Walter Jones of the Morris News Service has the story:
When it comes to taxing profits U.S. corporations earn overseas, Michelle Nunn and David Perdue disagree.
Nunn, the Democratic Senate nominee, says profits earned abroad should be taxed and companies avoiding it are taking advantage of a loophole that needs to be closed.
Perdue, her Republican opponent, believes companies shouldn’t have to face a tax in the first place because no other country taxes overseas profits. He argues removing the tax would give those companies the incentive to use an estimated $2 trillion in ready cash sitting idle in foreign banks as a way to invest in American job creation.
While all three candidates in the race, including Libertarian Amanda Swafford, are calling for some sort of tax reform to solve the problem, the approach each would take would be different. Nunn appears to want to solve the problem by closing loopholes, implementing policies that would discourage relocating jobs and business overseas, and implementing revenue neutral tax reform. Perdue favors overall rate reductions, and along with Swafford considers the FairTax a possible solution to the problem.