WASHINGTON - Over the last few months, there has been a growing rush of U.S. corporations seeking to swear off their U.S. citizenship and move their mailboxes, for tax purposes, to a low-tax jurisdiction. I don't think that's right, and it's time we put a stop to it. Three months ago, I introduced the Stop Corporate Inversions Act with 22 cosponsors, which would do just that.
A few weeks ago, I and Sens. Richard Durbin of Illinois, Jack Reed of Rhode Island introduced another bill, the No Federal Contracts for Corporate Deserters Act. This new legislation would at least ensure that companies that shift overseas and renounce their U.S. citizenship to avoid taxes don't get taxpayer-funded federal contracts.
Most Americans agree with us that taxpayer dollars shouldn't be used for contracts with companies that move their addresses abroad to dodge U.S. laws. Over the last 12 years, Congress has passed a series of restrictions on federal contracting with inverted corporations. We passed restrictions in 2002, 2006 and 2007. Since fiscal year 2008, a government-wide provision banning contracts with inverted corporations has been included in every annual appropriations bill.
The No Federal Contracts for Corporate Deserters Act would strengthen that ban by closing a number of loopholes in the current law.
Those loopholes have allowed some inverted corporations to continue collecting revenue from American taxpayers while at the same time shifting their tax burden onto those same American taxpayers. Our bill also makes the existing ban, which has been included in annual appropriations bills, permanent.
Some may say that the real reason for inversions is that our tax rate is too high. It's true the top corporate rate is 35 percent. But the effective tax rate what corporations really pay is about 12 percent. And when companies can go to places like Ireland or the Caribbean and negotiate sweetheart deals to pay little or no taxes, there will always be tax incentives for companies to abandon their country instead of paying their tax bill, no matter what our tax rate is.
Some may say that we should wait for tax reform to address this issue. There are two reasons why we shouldn't. First, if it happens at all, tax reform is months or years away; these inversions are happening now. Second, this is a bill about contracting.
This bill doesn't amend the tax code. And it has been referred to the Homeland Security and Governmental Affairs Committee, which oversees federal contracting, and not to the Finance Committee, which oversees tax policy. So even senators who think we should wait until we pass comprehensive tax reform before fixing the tax inversions problem should be able to support this bill.
In similar circumstances in the past, Congress has chosen to act overwhelmingly and in a bipartisan fashion. This should not be a partisan issue. This is about fairness. It is simply unfair to businesses that don't invert to have to compete with companies that do invert.
This is about putting American families who work hard and pay their share. We shouldn't sacrifice the interests of those families.
We shouldn't ask them to send their hard-earned tax dollars to contractors who skip out on their tax obligations. I look forward to working with my colleagues to move this legislation forward.
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Carl Levin is the senior U.S. senator from Michigan.