Under growing pressure from some Senate Democrats, the White House on Tuesday left open the possibility President Obama will use executive authority to reform the nation’s tax code.
The potential changes would apply to companies that Mr. Obama has dubbed “corporate deserters” — firms that acquire a small competitor from another country and then move their headquarters to that country in order to avoid U.S. corporate tax rates. The U.S. has the highest corporate tax rate in the developed world.
Mr. Obama has zeroed in on the practice — known as “inversion” — in recent weeks and has pressed Congress to address it. Right now, it’s entirely legal.
But with congressional action unlikely in the short term, a trio of high-profile Democrats on Tuesday wrote to the president and urged him to use executive power to stop inversion.
Democratic Sen. Richard J. Durbin of Illinois, Elizabeth Warren of Massachusetts and Jack Reed of Rhode Island said that even though they’ve introduced legislation to end the practice, the president shouldn’t wait any longer.
“Our efforts should not preclude executive action to prevent corporate inversions. The coming flood of corporate inversions justifies immediate executive action,” they said. “We urge you to use your authority to reduce or eliminate tax breaks associated with inversions.”
Asked about the letter, the White House would not rule out executive action.
“If there is any sort of announcements that we have to make about steps the president could take unilaterally, we’ll announce it at a later time. I’m not in a position to make any announcements like that now,” White House press secretary Josh Earnest told reporters. “But it is our view that Congress should take the necessary step to address this loophole.”
In a statement Tuesday, the Treasury Department said that while a congressionally passed law is the only full fix, it would look into what it could do.
“Treasury is reviewing a broad range of authorities for possible administrative actions that could limit the ability of companies to engage in inversions, as well as approaches that could meaningfully reduce the tax benefits after inversions take place,” the department said.
While remaining mum on possible executive actions, Mr. Earnest maintained that the White House fully supports a comprehensive corporate tax reform package. Part of the savings from such legislation, he said, could be used in helping rebuild America’s crumbling infrastructure.
“The president is calling on Congress to act on corporate tax reform, but we understand that that’s a process that would take some time,” Mr. Earnest said. “And so we are hopeful that in the meantime Congress would take the step of closing this specific loophole” dealing with inversions.
In an interview with CNBC last month, Mr. Obama said that while inversion is legal, it’s still morally wrong. American businesses, he said, must act as “good corporate citizens” in addition to focusing on high profits.
“It is true that there are a lot of things that might be legal that probably aren’t the right thing to do by the country,” the president said.
The call for more executive action from Democrats comes amid increasing criticism from Republicans that Mr. Obama has been exceeding his constitutional authority to circumvent Congress.
The Republican-run House voted last week to approve a lawsuit against Mr. Obama for overstepping his authority by selectively enforcing provisions of Obamacare. They’ve also decried his unilateral actions to ease immigration laws.
