Tearing into companies he dubbed “corporate deserters,” President Obama on Thursday launched an election-year push to make it harder for U.S. companies to avoid paying taxes.
Under a bright sun at a trade and technical college in Los Angeles, Obama issued a damning assessment of a “small but growing” group of companies taking advantage of a “loophole” in corporate tax law by reorganizing overseas, often in low-tax countries.
FOR THE RECORD
An earlier version of this post said Sen. Ron Wyden represented Washington. He represents Oregon.
Obama accused the companies of “renouncing their U.S. citizenship” and “fleeing the country” while sticking U.S. taxpayers “with the tab.”
“You shouldn’t get to call yourself an American company only when you want a handout from the American taxpayer,” Obama told a crowd gathered at the Los Angeles Trade-Technical College. The speech capped a three-day West Coast trip primarily focused on raising money for Democrats ahead of the midterm elections.
Obama ended the trip by trying to offer another kind of assistance -- a message -- to Democrats in tough races across the country. The president’s remarks were a rhetorical return to an economic populism that served him well in his own reelection and may be key to revving up Democratic turnout in November. Obama’s words echoed previous campaign-friendly initiatives to close corporate jet tax breaks or raise taxes on millionaires.
The president’s riff on corporate tax dodgers was cheered by the enthusiastic crowd at the event, although his speech was initially interrupted by a man shouting religious phrases. The crowd drowned out the man’s yelling with chants of “Obama!”
Obama’s target on Thursday was so-called inversion transactions, a practice that allows U.S. companies to reincorporate overseas, either through a merger or purchase of a foreign entity, and thus avoid paying U.S. taxes on its foreign earnings.
The practice is often used by companies even as they retain a U.S. headquarters and continue to do much of their business in the U.S., senior administration officials said this week in advance of the president’s remarks.
The president acknowledged the practice is legal, but added “my attitude is, ‘I don’t care if it’s legal -- it’s wrong.’”
The White House is urging Congress to change the law quickly, saying lawmakers should not let the effort wait until they can agree on a larger corporate tax deal. Like most things in Washington, corporate tax reform has little chance of passing any time soon.
Obama has endorsed a legislative effort led by some Democrats in the House and Senate. A bill proposed by Rep. Sander Levin (D-Mich.) would redefine a foreign company under tax law as an entity with at least 50% foreign ownership instead of the current 20%. The rule would be retroactive to May 2014.
Sens. Ron Wyden of Oregon and Carl Levin of Michigan have introduced companion legislation in the Senate and Obama put a similar provision in his 2015 budget proposal.
The White House said the change would generate an additional $19.5 billion in tax revenue over the next decade.
Obama’s effort for a fast change faces a steep climb in Congress. Not all Democrats agree the inversion issue should be pulled out separately from the larger effort to overhaul the corporate tax code. And Republicans and Democrats are deadlocked on that front.
“Until the White House endorses our tax reform plan or convinces Senate Democrats to act, every pink slip from companies moving overseas may as well be signed ‘President Barack H. Obama,’” Michael Steel, a spokesman for House Speaker John Boehner (R-Ohio), said in a statement.
The president put the blame on Republicans for holding up tax reform and other pieces of his economic agenda. He argued he’d taken action on minimum wage, shrinking the gender pay gap, improving job training and reforming student loans.
“Why isn’t Congress doing something?” he said.