Speaking at a technical college in Los Angeles on Thursday President Obama told an audience of about 2,000 that the tactics used by corporations to avoid paying taxes may be legal but are wrong, and called on those corporations to begin practicing “economic patriotism.”
“I don’t care if it’s legal,” he said, “it’s wrong,” referring to the practice of merging with overseas companies in order to avoid paying taxes in the U.S.
While the President and Congressional Democrats have been promoting legislation to limit these mergers which allow a company to utilize overseas addresses for tax purposes while maintaining headquarters in the U.S. Republicans have resisted insisting that the entire tax code needs to be revamped.
The President said:
“They’re technically renouncing their U.S. citizenship. They’re declaring they are based someplace else even though most of their operations are here. You know, some people are calling these companies corporate deserters.”
The President’s stand on the issue is not new, a proposal to make these mergers more difficult was included in his 2015 budget proposal due to the growing number of corporations engaging in the practice known as “inversions” with an eye toward reducing tax obligations here.
Republicans have expressed concern over the rapid growth of the practice as well but rather than eliminate the loopholes they prefer a sweeping overhaul of the tax code and making substantial cuts in corporate tax rates even though most corporations already pay at a much lower rate than the nominal rate.
The Congressional Research Service reports that 47 U.S. companies have taken advantage of the practice of “inversion” the most recent being Walgreen’s which continues to call themselves “America’s premier pharmacy” even as they consider a merger with the Swiss company Alliance Boots.
“Folks, if you are secretary or a construction worker you don’t say, ‘You know, I feel like paying a little less so let me do that.’ You don’t get a chance to do that,” he told the crowd. “These companies shouldn’t either.”
In an interview with CNBC’s Steve Liesman later on the President noted that these companies take advantage of the infrastructure and education system in the U.S. while avoiding taxes here:
“There are a whole range of benefits that have helped to build companies, create value, create profits. For you to continue to benefit the entire architecture that helps you thrive, but move your technical address, simply to avoid paying taxes, is neither fair nor is it something that’s going to be good for the country over the long term.”
Watch part of the interview below.
h/t: Huffington Post