Silly season is upon us. Congress is finishing up its last session before heading out to campaign until the November elections and the political messaging frenzy has reached fever pitch.
Today, Sen. Schumer released legislation to combat earnings stripping, which he claims is “the number one incentive driving the wave of inversions we've seen in recent months.” Forget about American companies desperately trying to compete globally against companies whose home countries don’t onerously double tax their overseas earnings – according to Schumer it’s clearly the ability to earnings strip driving this inversion craze.
Last time a similar anti-stripping provision was scored, it raised an average of $270 million per year for 10 years. If earnings stripping were the primary driver of these transactions, wouldn’t such legislation score much higher?
Senator Schumer kindly provided all the proof necessary that the real issue here is political posturing. The senator isn’t so appalled by inverted companies that he would miss the opportunity to get some ribbon cutting press at a company owned by an inverted company. On Monday, Politico reports, the senator:
...helped celebrate the opening of new ULTRA contact lens manufacturing lines at a Bausch & Lomb facility in Rochester, which will bring 120 new jobs to the facility. Bausch & Lomb is owned by global pharmaceutical company, Valeant, a former U.S. company that moved its tax base to friendlier tax territory in 2010 when it purchased the Canadian company Biovail.
Schumer isn’t the only purveyor of pure silliness. BNA reports that this morning at a forum on tax legislation, Jason Furman, chairman of the Council of Economic Advisers, attacked House Ways and Means Chairman Camp’s tax reform proposal for being too specific. Apparently it escaped Furman’s notice that legislation generally has to be specific to become law.
Chairman Camp responded by stating that, “[w]hat we need from the administration is a specific plan, not a framework.” Presumably, this is in reference to the 2012 White House “joint report” on tax reform which was less of a report and more like the stringing together of the post-it notes left behind in Assistant Secretary (Tax) Michael Mundaca’s office when he left Treasury. Regardless, it was little more than a continuation of the lip service the Administration likes to pay tax reform when convenient.
And finally, citing of serial silliness wouldn’t be complete without a mention of the Oracle of Omaha, Warren Buffett. An AdWeek article wittily titled “Warren Buffet's Underwear Brand Comes Clean About Corporate Taxes” revealed that Fruit of the Loom, a company owned by Berkshire Hathaway, which, in turn, is owned by Warren Buffett, who is funding part of the Burger King-Tim Horton’s upcoming inversion, now:
...has an unusual page that now turns up on the corporation’s website. Headlined “U.S. Tax Responsibilities Commitment,” the page states and clarifies a number of points in very large type, among them: Since 2002, “Fruit of the Loom has… paid more than $400 million in U.S. corporate income taxes.”
Apparently combatting possible bad press for companies owned by the poster child of tax fairness, Buffett, Fruit of the Loom sees it necessary to defend legitimate business decisions and assure Americans it is paying its “fair share.”
Ah, silly season is in full swing. Just imagine if all the energy focused on these distractions was focused instead on comprehensively reforming the tax code, America might actually make some progress on this vital issue.