U.S. Sen. Dick Durbin (D-Ill.) is now in charge of legislation to end “corporate inversions.” This is when an American company gets itself bought by a foreign firm, and declares itself to be based in that foreign country to avoid its American tax liability. Durbin says he understands the desire of businesses to pay as little as possible, but everyone has to pay taxes.
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“I would hope that some of these corporations accept the responsibility of living in this great nation, with all the benefits it produces, and are prepared to pay their fair share of taxes. If it’s a race to the bottom on tax rates, it’s not something that I want to be part of,” he said at a news conference in Washington introducing the legislation. Sen. Carl Levin of Michigan was the unsuccessful sponsor in the last Congress, but he retired and Durbin is now sponsoring the bill.
The legislation would treat a combined company as American if the shareholders of the former U.S. corporation own more than half of the new combined corporation, or if the combined corporation is managed and controlled in the United States.
The estimated tax loss from inversions, Durbin says, is $34 billion over 10 years – a burden which then falls on other taxpayers.
The existing law that tightened rules against inversions was enacted in 2004 – passed by a Republican Congress and signed by a Republican president. Durbin says that law needs this update.