A Senate Democrat this week put forward a surprisingly simple idea for stopping U.S.-based companies from moving their headquarters overseas in order to escape high U.S. corporate taxes — lower those taxes.
Sen. Sherrod Brown (D-Ohio) on Monday mocked Burger King for considering the purchase of Canada-based Tim Hortons, which would allow Burger King to move its headquarters to Canada. He said he would support other U.S.-based burger chains who "haven't abandoned their country or customers," and said companies shouldn't pursue these corporate inversions just for the sake of a lower tax burden.
Burger King is the latest company to seek lower taxes overseas. One Democrat says the way to stop corporate inversions is to lower U.S. corporate taxes. Justin Sullivan/Getty Images
"To help business grow in America, taxpayers have funded public infrastructure, workforce training, and incentives to encourage R&D and capital investment," he said. "Runaway corporations benefited from those policies but want U.S. companies to pay their share of the tab."
But at the same time, Brown seemed sympathetic to Burger King, as he said the way to stop companies from leaving is to reduce the corporate tax rate.
"Lowering the statutory corporate tax rate would put companies on a level playing field with foreign competitors and reduce the incentive for them to shift jobs and profits overseas," he said.
Brown introduced legislation a year ago that would reduce U.S. corporate taxes to help reduce the incentive for companies to leave. That bill was supported by then-Senate Finance Committee Chairman Max Baucus (D-Mont.), who said the U.S. tax code has not kept up with the times.
"As a result, they stifle U.S. business and contribute to slow job growth," said Baucus, who is now U.S. ambassador to China.
Last year, Brown promoted a plan to cut the U.S. corporate tax rate to ensure it's competitive with the average rate of countries in the Organization for Economic Cooperation and Development.
Another part of Brown's plan is to create a global minimum tax rate, which would impose a minimum tax on companies regardless of where they are headquartered. That minimum tax would change depending on which country companies choose to call home, and Brown says this plan would help reduce the incentives to seek out overseas tax havens.
While Brown says lowering taxes is the best way to stop tax inversions, the Obama administration and many other Democrats have sought more aggressive solutions to the problem. The White House is considering executive actions that would put limits on the ability of companies to pursue the tax strategy, or reduce the tax benefits they enjoy.
Others, like Sen. Dick Durbin (D-Ill.), have issued stern warnings to companies that Americans may no longer buy goods and services from companies that renounce their "American corporate citizenship."
But the allure of a healthier bottom line appears to be irresistible for many companies. In Canada, Burger King would see just a 15 percent corporate tax rate, as opposed to the U.S. rate of 35 percent.
Early Tuesday morning, Burger King confirmed that it would buy Tim Horton's for $11 billion, and that its new corporate headquarters would be in Canada.
Famed investor Warren Buffett helped finance the deal. Buffett was the inspiration for Obama's call for higher taxes on wealthy Americans. Earlier this month, Buffett's company was hit by an $896,000 fine from the Department of Justice for failing to notify the government of an investment in 2013.