Raise more from corporations

Recently, the Treasury Department acted to curb corporate inversions — tax avoidance schemes in which large U. S. multinational corporations merge with smaller foreign corporations to become a foreign company, but only on paper.

Inverted companies remain headquartered in the United States, retaining access to our infrastructure and educated workforce without paying U. S. corporate income taxes.

Treasury should be praised for its robust use of the tools available to stop inverting multinationals from shifting their tax burdens onto domestic firms and workers. Treasury’s actions have already led Pfizer to cancel a planned inversion with Ireland- based Allergan. If this were the only inversion stopped, taxpayers would still save the $ 35 billion in taxes that Pfizer wished to avoid.

It would, of course, be best to craft a comprehensive solution to this problem rather than have Treasury play Whac-A- Mole with insufficient tools.

Many in Congress believe that inversions and other international tax avoidance schemes are prima facie evidence that our corporate tax rate is too high, and they refuse to pass targeted legislation to stop them. Instead, they insist, comprehensive reform that cuts corporate tax rates is the only answer. This is strange logic. Our country’s top corporate tax rate should not be lowered because skillful corporate tax engineers game the system.

The fact that the corporate tax code needs reform shouldn’t stop Congress from halting the worst abuses of the tax avoidance industry. At a minimum, Congress should stop inversions by demanding that foreign firms that owe no U. S. taxes really are foreign.

Furthermore, while closing the loopholes riddled throughout the corporate tax code would allow us to broaden the tax base while lowering the statutory rate corporations pay, we should not lock in the terrible erosion of the corporate tax base by insisting that this reform be revenue neutral.

The corporate income tax is projected to raise just 1.6% of the gross domestic product this year, down from 5.9% in 1952. If anything, corporate tax reform efforts should raise more revenue.