Brady, the top Republican on the powerful Ways and Means Committee, told the Washington Examiner during an expansive interview that the Democratic tax agenda would have appalling consequences for the country. He said that it would flag a return to the “old days” of the tax code when corporate inversions were making headlines.
The Texas Republican said that “without question,” there will be a new surge of corporate inversions if President Joe Biden complies with increasing the corporate tax rate from 21% to 28% (the 2017 tax cuts lowered the rate from 35%). Biden has also suggested raising the top individual income tax rate to 39.6% and taxing capital gains for households making more than $1 million as ordinary income.
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Brady also said there will be more long-term rulings by companies to move their research and development, their intellectual property, their manufacturing, and their headquarters overseas.
Corporate inversions are when a U.S. multinational company merges with a smaller company in a lower-tax country to establish residency there and get the rewards of the lower tax rates without inherently changing its operations in the United States.
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In the years leading up to the 2017 tax cuts, corporate inversions were fairly commonplace. Dozens of companies merged with foreign associates and ended up paying lower taxes. In 2014, for instance, Burger King merged with Tim Hortons and became a subsidiary of Canada-based Restaurant Brands International.
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While the Biden administration has claimed that the GOP tax cuts, led to as the Tax Cuts and Jobs Act, incentivized offshoring, advocates of the tax overhaul say there is no physical evidence to support that claim. Republican advocates of the tax reductions said these inversions were a key motivation for the tax legislation, which severed the corporate tax rate and overhauled taxation of foreign profits.
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Brady, who has served in Congress for more than two decades and thinks of retiring after this term ends, said that the corporate tax policy proposals pushed by Biden could be deja vu.
“You’ll see a return to where any time an American company is acquired by a foreign company, or even the other way around, it will likely be headquartered overseas because the tax code tells them that’s the best place to do it,” Brady said. “We’ll see without question a return to those days.”
“At the end of the day, this is more than just a tax grab, it’s more Washington control of your earnings, your work, your thrift, and your investment,” he added.
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