The current administration continues to astonish us. We hope they get their head handed to them again in court for their attempt to re-write the law administratively, this time on on mergers. Pfizer’s CEO Ian Read put it like this in the WSJ:
The U.S. tax code has among the highest rates in the Western world and forces its multinationals to pay U.S. tax on income earned abroad if they want to bring it back to this country.
This puts Pfizer at a disadvantage so they want to merge with Allergan, an Irish company, to reduce their tax disadvantage. These types of mergers, often referred to as inversions, have become a punching bag on the left. The Treasury Secretary, Jacob Lew took to the Washington Post to say:
To be clear, there is nothing wrong with cross-border merger activity; our economy is stronger for our investment overseas and for foreign investment in the United States. But these activities should be based on economic efficiency, not tax savings.
So rather than fix the problems with corporate taxes in the US (see the bold in the first quote) we try to outlaw the problems they cause after the fact. Seriously, we have a tax code that penalizes investing in the US. Don’t we want to fix that now? We hope that Pfizer fights the administrative fiat and wins and that Mr. Lew will have the common sense to resign in disgrace.