Here’s What You Need to Know About Tax Inversions: Almost Nothing

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.


I guess that corporate tax inversions are slated to be the topic of the week. This is the maneuver in which a corporation buys a company overseas and then transfers its headquarters to the new country, where tax rates are lower. Voila! A lower tax bill:

Dozens of additional deals are in the works, according to administration and congressional officials, and other companies are quietly contemplating the move. Last month, CVS Caremark chief executive Larry Merlo met with Sen. Charles E. Schumer (D-N.Y.) and urged him to act to stop the rash of expatriations. Otherwise, Schumer said that Merlo warned him, CVS “might be forced to do it, too,” to duck a total tax bill expected this year to approach 40 percent.

“There’s a huge number coming,” Schumer said in an interview. “We hear there are going to be several big announcements in August.”….The potential costs to the U.S. treasury are enormous. One measure, by the congressional Joint Committee on Taxation (JCT), suggests that the nation stands to lose nearly $20 billion in tax revenue over the next decade. Former JCT director Edward Kleinbard said he thinks the potential loss is much higher.

“My guess is they didn’t fully reflect the sharknado of inversions that is about to happen,” said Kleinbard, a law professor at the University of Southern California.

This whole issue is maddening in the usual way. As it happens, both Democrats and Republicans agree that this problem needs to be fixed, but in approximately the same way that Israelis and Palestinians both “agree” that war in the Middle East needs to be fixed. President Obama proposed a corporate tax overhaul years ago, followed by a more targeted proposal back in March, but they’ve gone nowhere because Republicans want a net tax cut. Republicans, for their part, have proposed wide-ranging tax reform, but the prospect of getting the current Congress to agree on wide-ranging tax reform is laughable. Hell, they can’t even agree on a tiny, focused bill to fix the border crisis.

So now Democrats are pushing Obama to fix the problem administratively, and Republicans in turn are yelling “tyranny!” And that’s where we stand. It’s all very edifying.

This post is not an “explainer.” I have deliberately left out every single relevant detail because none of them matter. Republicans want net taxes on corporations to go down, and Democrats want them to stay the same. Ne’er the twain shall meet, and that’s pretty much all you need to know. But it did give me a chance to quote an eminent law professor using the word sharknado.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate