Obama: Tax avoidance akin to renouncing citizenship
LOS ANGELES (CNN) — American-based firms that use legal loopholes to avoid paying U.S. taxes have effectively renounced any allegiance to their home country, President Barack Obama will claim during remarks at a community college here on Thursday.
Taking up a harsh new attack against companies that establish residency in tax havens like the Cayman Islands and Bermuda while keeping the bulk of their operations in the United States, Obama will call on Congress to mend a loophole allowing billions in tax revenue to slip through the government’s fingers.
A White House official, previewing Obama’s remarks, said the President would make the case on Thursday that tax-avoiding companies “are essentially renouncing their American citizenship so that they can ship their profits overseas to avoid paying taxes — even as they benefit from all the advantages of being here in America.”
Obama will touch on an issue Democrats believe could help them win over voters in this year’s midterm contests. The President has long decried the inherent unfairness in large, multimillion dollar corporations that operate chiefly in the United States but pay little in U.S. taxes. He used the issue to attack Republican Mitt Romney during the 2012 presidential campaign.
Both Republicans and Democrats say the entire tax code needs an overhaul, but Obama is pressing lawmakers to take action now to prevent so-called “inversions,” which allow U.S. companies to merge with foreign firms in countries with lower tax rates.
In the past decade, at least 47 U.S. companies have made the move. Several inversions have been proposed this year and more are in the works.
“We should prevent companies from effectively renouncing their citizenship to get out of paying taxes. What we need is a new sense of economic patriotism, where we all rise and fall together,” said U.S. Treasury Secretary Jack Lew In a letter to lawmakers last week, adding he believed any new measure should prevent companies from gaining tax advantages by incorporating overseas.
Lew said a new law should retroactively bar any firm that moved abroad after May 2014 from enjoying lower tax liabilities.
The White House has aimed this week to advance the President’s domestic agenda, focusing on jobs programs and the economy. Bolstering the middle class has formed much of Obama’s midterm election year pitch.
But world events — including Israel’s ground invasion of Gaza and furor over the downed airliner in Ukraine — have largely overshadowed the intended topics this week, despite the White House’s attempts to highlight new job training measures.
Obama’s remarks Thursday, which he’ll deliver at a technical college in downtown Los Angeles, come at the end of a three-day fundraising swing which also brought him to Seattle and the Silicon Valley. The event will be the only public showing for Obama during his stay on the West Coast.
He withstood some criticism for not canceling the trip, which aides countered by saying the president could conduct his job from anywhere. The White House did, however, nix an appearance on “Jimmy Kimmel Live,” replacing the late night show with a more sober CNBC interview.
CNNMoney’s Jeanne Sahadi contributed to this report.
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