WASHINGTON, D.C. — It’s the yin and the yang of the U.S. corporate climate.
At the White House, President Barack Obama played the role of business pitchman on Tuesday, saluting 11 executives whose companies have chosen to gain or expand a footprint in the United States.
In Congress the same day, a group of 14 Democratic senators introduced legislation to keep U.S. firms from going in the other direction, using foreign acquisitions to avoid paying higher U.S. corporate tax rates.
The events illustrated the competing factors facing U.S. and foreign businesses as they make investment, market and tax decisions. The U.S. has the highest corporate tax rate, at 35 percent, among industrialized countries. At the same time, its workforce, low energy costs and access to consumers can make it an attractive destination.
“We want folks to know this is a great place to do business,” Obama told the executives, including Ericsson North America CEO Angel Ruiz, Lufthansa chairman and CEO Carsten Spohr, who met just outside the Oval Office in the White House Roosevelt Room. “We don’t always do what it takes to go after business around the world and make sure that they know the benefits of investing in the largest market on Earth.”
The roundtable discussion by the executives and top White House officials kicked off a week devoted to promoting foreign investments in the United States, all part of a congressional election-year strategy to confront lingering public anxiety about employment and financial wellbeing.
An effort by Obama to streamline U.S. outreach to foreign companies, called SelectUSA, has resulted in $18 billion in new business investments in the United States in 17 different states and territories, White House officials said.
Overall foreign direct investments last year rebounded, from $166 billion in 2012 to $193 billion in 2013, still far short of the $310 billion in 2008.
In addition to Ericsson and Lufthansa, firms represented at the White House Tuesday were Ford, chip manufacturer GlobalFoundries, toy maker K’nex, South Korea’s Hankook Tire, Danish biotechnology company Novozymes, Canadian apparel maker Richelieu, Belgian materials technology company Umicore, French high-tech company Safran and Switzerland-based Zurich Insurance Group.
Obama’s attention to the influx of foreign business coincided with new concern in Congress with a trend of U.S. companies seeking to set up overseas headquarters in part to avoid U.S. tax rates. The Senate legislation, which faces long odds in a divided Congress, would set a two-year moratorium on corporations acquiring offshore companies to shift their addresses to low-tax countries.
The practice is called “inversion” and drew recent prominence when Pfizer Inc. sought to take over British drugmaker AstraZeneca. It can cost the U.S. government billions of dollars in lost tax revenue.
“These transactions are about tax avoidance, plain and simple,” said Sen. Carl Levin, the main sponsor of the Senate legislation.
Levin’s bill is similar to an Obama administration proposal to dissuade companies from making such transactions. The Treasury estimated that the change would generate $17 billion in tax revenue over 10 years.
Sen. Ron Wyden, the Democratic chairman of the Senate tax-writing Finance Committee, has also wanted to address such corporate tax flight, but as part of a broader overhaul of tax laws. The White House has embraced both a comprehensive change to the tax code, but has also pushed for targeted elimination of loopholes.
“The United States has the highest tax rates of any country in the world. It’s a tax code that’s ridden with loopholes and it’s a taxation of international income that is substantially broken,” said Jason Furman, the chairman of Obama’s Council of Economic Advisers. “A big part of the answer has to be reforming our tax code to make America a more competitive and attractive place, while continuing to look at the inversion issue in particular.”
Follow Jim Kuhnhenn on Twitter: http://www.twitter.com/jkuhnhenn