Friday, April 08, 2016
Billy Long: We need the fair tax
Earlier this month, President Obama tallied what some are calling a “major victory” when the U.S. Treasury announced new rule proposals, which resulted in the termination of U.S. drug maker Pfizer Inc. from finalizing a $160 billion acquisition agreement with Botox provider Allergan Plc. If carried out, the merger would have meant the largest tax inversion – relocating a corporation’s legal address overseas to avoid higher taxes – in history, and the movement of American jobs overseas.
On its surface, the administration’s rules may seem to have steered in the right direction. Agreeably, America’s tax code should not provide statutory incentive for companies looking to sidestep their taxes and move jobs elsewhere. However, federal intervention in these situations can be slippery-slopes toward economic burden.
In the case of Pfizer and Allergan, these health companies were blindsided by the administration after countless costly hours had been put into merging the two companies. Allergan CEO Brent Saunders divulged that, “It really looked like they did a very fine job of constructing a rule here – a temporary rule – to stop this deal, and obviously it was successful.” He added that “for the rules to be changed after the game has started to be played is a bit un-American.”
Seven other inversion deals worth more than $700 million in potential merger & acquisition firm compensation also face the threat of termination under the decision. Experts have predicted that blocking the mergers would cause future hurdles across the industry and leave less-diversified small firms facing the threat of financial misery. However, these ‘boutique’ firms are facing imminent financial turmoil in addition to future threats, as their stock values suffered immediately following the Treasury’s announcement.
Most importantly, inversions like these are indicative of a much bigger problem with our tax code: it is an onerous and complicated web that’s full of loopholes that breed issues like inversion. If we truly want to attack the root of the problem, we must comprehensively reform our tax code. It’s critical that corporations aren’t allowed to avoid paying-up by moving overseas, but America’s leaders can’t pretend to be shocked when they do so while being subjected to the highest corporate tax rates of any industrialized country. Furthermore, American companies that inverted previously have collectively stashed more than $2 trillion in foreign accounts, where it’ll likely stay due to these companies’ fear of having it overtaxed if it were brought back.
Still, taxpayers have every right to be livid with these companies for shirking the same civic responsibility families adhere to each April. From large corporations to small businesses, and from CEOs to Missouri families, Americans who pay their taxes with honesty deserve a simpler and more transparent system.
I have voted numerous times in Congress to cut spending and reduce tax burdens on middle-class workers. These votes mean progress, but we must balance our budget; cap the federal government's yearly spending to less than yearly income; and limit taxation of citizens above a fixed percentage of America's Gross Domestic Product. Also, American companies parking fortunes abroad doesn’t help our economy; we need new standards that will incentivize this money’s return to boost industries at home without the government overtaxing it.
The “Fair Tax,” which I have co-sponsored in every Congress since being elected, could provide much-needed solutions. This plan would replace income, business, and employment taxes with an at-the-counter consumption tax. Savings, investment, tax compliance, and economic freedom would prosper. Similarly, America’s industries investing less time and money navigating the IRS would attract more foreign business partners and incentivize companies to create jobs here rather than moving them abroad through inversion.