Here’s a smart idea from the TPC’s Steve Rosenthal on a way to make corporate tax inversions more costly to companies engaged in this particular brand of tax avoidance. You put up a toll booth in the form of an exit tax on their deferred earnings, i.e., profits they’ve held overseas (really, “booked” overseas) but never “repatriated” so as to avoid their US corporate tax liability.
And lo and behold, this AMs paper says that candidate Clinton will endorse the idea later this week:
Hillary Clinton on Wednesday will unveil a proposal for a new “exit tax” aimed at cracking down on corporate inversions, a practice that permits U.S. companies to merge with corporations overseas to lower their tax bill.
The new tax would be part of a broader effort to target what experts say is roughly $2 trillion in profits U.S. companies are hoarding abroad to reduce their taxes. The Democratic presidential front-runner will propose spending the revenue raised by the new tax to boost manufacturing jobs in the U.S., campaign aides said. They spoke on condition of anonymity ahead of the official campaign announcement.
It will take Congress to legislate this, and companies may do the math and still decide it’s worth it to invert. But we must move against such tax avoidance, and this would be a useful step in that regard.