Amid Inversion Talk, Hatch Calls for Internationally Competitive Tax Code to Keep Job Creators in U.S.

In Speech on Senate Floor, Utah Senator Says, “Instead of imposing arbitrary inversion restrictions on companies retroactively and thereby further complicating the goal of comprehensive tax reform, we should first keep our focus on where we can agree. By uniting around the goal to create an internationally competitive tax code, we can keep American job-creators from looking to leave in the first place.”

WASHINGTON – In a speech on the Senate floor today, Finance Committee Ranking Member Orrin Hatch (R-Utah) called on Congress to unite around the goal to create an internationally competitive tax code that would make the United States a more desirable location to headquarter one’s business.

“Broadly speaking, there are two different ways to address the problem of inversions. The first way is to make it more difficult for a U.S. corporation to invert. Just today, we’ve read accounts of Members of Congress who propose doing just that. The second way is to make the United States a more desirable location to headquarter one’s business. I believe the latter is the better way. That would mean lowering the corporate tax rate and having a more internationally competitive tax code,” said Hatch.

Below is the text of Hatch’s full speech delivered on the Senate floor today:

Mr. President, before I begin, I’d like to just take a moment to address some proposals we’ve been hearing about in the tax space.

Many of us, myself very much included, were concerned to see the news the other day that a very large American corporation has announced plans to merge with a somewhat smaller, but still large, UK corporation, and then have the combined entity domiciled in the United Kingdom.

Apparently a desire to escape the high U.S. corporate tax was part of the motivation for the merger. This type of transaction where a U.S. corporation escapes the US tax net is sometimes referred to as an inversion.

Broadly speaking, there are two different ways to address the problem of inversions.

The first way is to make it more difficult for a U.S. corporation to invert. Just today, we’ve read accounts of Members of Congress who propose doing just that.

The second way is to make the United States a more desirable location to headquarter one’s business.

I believe the latter is the better way.

That would mean lowering the corporate tax rate and having a more internationally competitive tax code.

Under current law, U.S. corporations are taxed on their worldwide income. But foreign corporations are subject to tax only on income arising from the U.S.

In other words, we subject our own corporations to a worldwide tax system, while subjecting foreign corporations to a territorial tax system.

It’s strange that the U.S. government treats foreign corporations more favorably than American corporations, but that’s nonetheless what we do.

There is a danger, if the relatively unfavorable treatment of American companies is ratcheted up – which seems to be the effect of some of these anti-inversion proposals – that American companies will become even more attractive targets for takeover by foreign corporations.

So, as important as it is to get the corporate tax rate down, no matter how low we get the rate we still need to replace our antiquated worldwide tax system.

Instead of imposing arbitrary inversion restrictions on companies retroactively and thereby further complicating the goal of comprehensive tax reform, we should first keep our focus on where we can agree. By uniting around the goal to create an internationally competitive tax code, we can keep American job-creators from looking to leave in the first place.

Successful tax reform can help reverse the trend and cause more businesses to locate in the U.S., bringing more jobs to Americans.

And make no mistake, the trend is alarming. Just look at the number of U.S. based firms, ranked by revenue, in the global Fortune 500 over the past decade and you will see a significant decline in the number.

That, of course, means a lower tax base for the U.S.

As I just said, tax reform can be used to reverse that trend, make the U.S. an attractive place to locate businesses and global headquarters, and prove a base for more jobs in America.

As the Ranking Member of the Senate’s tax-writing committee, that is where my focus is, and I will work with anyone – Republican or Democrat – to achieve that goal.

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