Proposing an Amendment to the Constitution of the United States Relating to Contributions and Expenditures Intended to Affect Elections

Floor Speech

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Mr. DURBIN. I am going to give a brief statement about corporate inversion, but before I do I wish to respond to the Senator from Texas, who is my friend, and we have served together for many years. He has taken the floor for a period of time and spoken about some of the problems facing this Nation at home and abroad and has been largely been critical of the President in both categories. I didn't arrive early enough to hear his parade of horribles when it came to domestic policy; I just caught the end of it when he suggested there was something wrong with this President because America's labor force, its workforce, is shrinking. People are giving up looking for work. Well, that is a serious concern, and we ought to ask a question: Why are they giving up looking for work? It turns out it has, perhaps, something to do with the policy of our government, but it also has something to do with the life expectancy of Americans.

I am a little older than the Presiding Officer, and I just barely missed what we call baby boomers. Baby boomers are those born after World War II when the returning soldiers and their wives and spouses sat down and said: We are going to build a family. And they did. A lot of kids were born in America. It was called a baby boom.

Guess what. Baby boomers are facing retirement age. The workforce is shrinking because they are retiring. I would like to blame Barack Obama for that, but I think maybe that is a stretch. I don't think you can blame him for the baby boom. He wasn't even around after World War II, and he certainly can't be blamed because people decide to retire. Longevity kind of suggests when that might happen.

But still in all, it is another one of the things that is ticked off: The shrinking labor pool is an indication of the failure of the Obama labor policy. No. It is an indication of the shrinking baby boomers, who are aging out and retiring--and God bless them; they are entitled to it. Folks ought to think twice about that particular criticism.

I would like to address the foreign policy side, and I do wish to put in perspective what the Senator from Texas had to say, which was a long list--going all across the world--of problems this President has either failed to fix or has created.

I listened carefully, and I always do, because critics of the President have every right to do that. That is part of democracy. But they also bear some responsibility to suggest what we should do as an alternative. Many of them said we have to be more manly, we have to stand up, and we have to show the world we are assertive. What does that mean? What are they saying?

What the President is saying is that we have to be careful that we invest American lives, American treasure, and the American military in this world in places where we can make a difference and take care not to do, as they said inartfully, stupid stuff by sending our military into places where they cannot achieve their goal and reasonably come home in a short period of time. That is the President's position.

I have not heard those on the other side be more specific when they say we have to be more assertive in America.

The date was October 11, 2002, on the floor of the Senate--and I was here. It was 12 years ago, and it was the night we voted on giving President George W. Bush the authority to invade Iraq. The rollcall took place late at night, and I stuck around afterward. There were about three or four of us left on the floor. In the final rollcall there were 23 Senators who voted no on the invasion of Iraq. I was one of them. There was 1 Republican, and the rest were Democrats--1 Independent and 21 Democrats, I should say. Twenty-three of us voted no on invading Iraq. Twenty-three of us questioned whether being assertive at that moment in history was the right thing to do. Remember, we were told about weapons of mass destruction and threats to the United States. Some of us were skeptical. The case had not been made. But we went forward.

I would like to make a note as well that even though there was a difference of opinion about the policy of Iraq under President George W. Bush after the decision was made to go forward, many of us who voted no joined in with those who voted yes to say: Now that we have made the decision, we stand together as a nation. We are going to provide for President George W. Bush the resources for these men and women in uniform so they can accomplish their mission and come home safely.

In other words, partisanship ended at the water's edge after we had made our decision. I still think that is the right course in foreign policy. Even though I voted against that war, I voted for the resources for the troop to execute it.

I thought: What if it were your son, Senator? What if it were someone you loved? Do you want them to have everything they need to get them home safely?

Of course.

I wish that longstanding tradition in Congress would return. Wouldn't it be healthy and inspiring if after a heated debate over a foreign policy issue we said: Now we stand together. The decision has been made. We are going to stand as a nation.

But instead what I hear from the other side when it comes to foreign policy issues: We are going to be critical of whatever he does, whenever he does it, wherever he does it.

I don't think that is constructive. I don't think it speaks well of the United States. The debate is important. The debate is part of us, part of who we are as a democracy. But after the debate, let's get on with working together.

Do you remember that it wasn't that long ago when they discovered chemical weapons in Syria? The President said: This isn't just a threat to Syria; this is a threat to the Middle East and beyond. I am going to make a stand to dismantle those chemical weapons in Syria, and I ask Congress for the authority not to send in troops but, if necessary, a missile, a bomber, a fighter plane to support our efforts to eradicate this chemical weapons stockpile.

Do you remember what happened? I do. What happened was we had a debate in the Senate Foreign Relations Committee and a vote--a bipartisan vote--which supported the President. Then we couldn't bring it to the floor because there was not adequate support from the other side of the aisle to stand by the President when it came to dismantling chemical weapons in Syria. He went forward, working then with Russian leader Vladimir Putin, and basically all of those weapons have been dismantled. When the President asked for the authority to dismantle those weapons, he couldn't get the support of the other party. That was the reality.

Now we face a new challenge, and there are those who say that if we had just been bold and assertive--and I wonder if what they are saying is if we had just shown the strength we showed with the invasion of Iraq, this might not have occurred.

Make no mistake. I am honored to chair the Defense Appropriations Subcommittee. It is the biggest. Our budget is just under $600 billion a year. It is almost half of domestic discretionary spending. I have come to learn that our military is really the best in the world, starting with the men and women who serve but way beyond that--our technology, our intelligence. We have the very best, but we have learned the hard way that even the best military in the world can run into obstacles they did not anticipate.

The first time I went to Walter Reed, I visited with a disabled Iraqi veteran. He was a sergeant from Ohio who had his right leg blown off below the knee.

I said: What happened?

He said: It was an IED.

I said: What is that?

He said: Well, it is an explosive device, roadside bomb. And we were in the best military equipment in the world, and this crude roadside bomb went off and blew off my leg.

I thought to myself: I wonder, if the greatest military in the world with the greatest technology in the world can be brought to a stop by a crude roadside bomb, if we are properly evaluating war today, fighting terrorism today.

What the President is trying to do is to find effective ways to stop this onset of terrorism in the Middle East, this new round of terrorism in the Middle East, this group called Islamic State.

Why are we picking this group out of all the other terrorist groups--and there are many of them. They are quantitatively, qualitatively different. They are the first terrorist group we know that has taken and held territory. Usually terrorist groups set off a bomb in the marketplace and they are gone. No, they take and hold territory. They capture banks--go inside and take all the resources out--so they have a treasury. Some people think they earn as much as $1 million a week off the oil wells they are controlling in Iraq. They use American equipment that has been left behind or stolen, and they engage in the worst level of savagery we have seen in modern times. The beheading of those two innocent Americans was heartbreaking--heartbreaking in one respect as I thought about their poor families and what they face, but it also enraged me to think that this group, the Islamic State, would do that to two innocent Americans, defying us and saying to us: This is just the beginning. It is a serious threat, and it is a threat to the stability in Iraq.

Here we are 12 years after we invaded Iraq, after we have lost 4,476 American lives in Iraq, after 30,000 of our troops have come home seriously injured, after we put $1 trillion more on our national debt to pay for the Iraqi struggle, and the country is virtually in chaos.

The President is saying to the American people: I want to fight terrorism, I want to do it effectively, and I want to do it smartly. I want to do it in a way where we are not sending in troops who are there for long periods of time to just be targets for terrorists. Let's use our resources and our forces in a thoughtful way.

I am awaiting a speech tomorrow night because I want to hear, as he lays this out, what he hopes to accomplish, how long we are going to be there, where we are going to be, and by what authority he is moving forward and using these military resources. Those are all legitimate questions, and it is right for the loyal opposition to raise questions about where he is going, why he is going, and what he wants to do. But for the time being, I think the American people want the President to present his case and then make their judgment as to what is fair to bring stability to this critical part of the world.

CORPORATE INVERSION

Mr. DURBIN. Mr. President, when a company moves its corporate headquarters overseas, but only on paper so it can avoid paying its fair share of U.S. taxes, these companies , are called corporate inverters. But let's call them what they really are: corporate deserters.

These companies profit using roads and bridges built with American tax dollars to deliver goods to U.S. customers. They benefit from access to America's educated workforce ..... American investments in basic research ..... and American patent protections. And some have even made millions, if not billions, of dollars from taxpayer-funded government contracts and programs like Medicare.

But when it comes time to pay their fair share of U.S. taxes--the very taxes that pay America's roads and bridges ..... our colleges and universities ..... basic research ..... patent protections ..... Medicare ..... and other competitive advantages--these companies do everything they can to dodge U.S. taxes. And they have gotten very good at shirking their fair share.

Let me tell you how this corporate "Three Card Monte'' works. First, a company in the U.S. purchases a company in Switzerland, Ireland or another country with a lower corporate tax rate. The U.S. company then files papers saying it is relocating overseas.

In many cases, almost nothing changes. The CEO and other senior executives stay in the U.S., no new headquarters are opened overseas, and up to 80 percent of the shareholders are the same, but suddenly the company gets a huge tax break.

But this is only the beginning of the story. Next, the new parent company--headquartered overseas--shifts the debts off its own books and onto the books of its U.S. subsidiary. Abracadabra: Another huge tax break, because the company can write off its debt and interests on that debt. This is called ``earnings stripping.''

Now, here is the third card in the Three Card Monte: the hopscotch loophole. U.S. corporations currently have nearly $2 trillion in foreign earnings stashed overseas. As long as they keep that money parked overseas, they can defer paying taxes on it.

But when a company "inverts,'' the inverted company--the corporate deserter--can access the millions--sometimes billions--of dollars they I have parked overseas without paying US taxes on the money. So the "hopscotch loophole'' gives these corporations another massive tax break. The inverted company can use the money it had parked overseas to pay back the loans it used to finance the inversion ..... or to pay dividends to U.S. investors--and pay little to no taxes.

Let me give you an example. Let's say a U.S. company wants a big tax break by inverting and purchasing an overseas company.

It doesn't have enough cash in the U.S. to buy the overseas company and it doesn't want to use the money it has stashed overseas--because once the money comes home, it is subject to U.S. taxes. So what does the corporation do?

First, it gets a short-term loan from a bank to fund the inversion. Once that transaction is complete, the company can use the money it has stashed overseas to pay off the short-term loan while dodging U.S. taxes on those overseas profits.

The result of this corporate Three Card Monte? Corporate deserters are able to avoid billions in U.S. taxes--and other folks--families and companies that are working hard to make it in America--have to pay more taxes. To add insult to injury, some of these corporate deserters have made their millions and billions off of federal contracts paid for by U.S. taxpayers--the very taxpayers who will have to pay for their tax dodging.

I'm not the only person who thinks this is wrong. Mark Cuban is a billionaire investor. Listen to this warning he tweeted to corporate deserters--quote: ``If I own stock in your company and you move offshore for tax reasons I'm selling your stock.''

Why did he say that? Because when companies move off shore to save on taxes, American workers and companies that stay in America, that believe in America, have to make up the shortfall.

That's not right, it's not fair, and we should take action to stop these corporations from dodging taxes and taking advantage of earning stripping and hopscotch loopholes.

REDUCING CORPORATE TAX RATES NOT A SOLUTION

Many of our Republicans colleagues point to our broken tax code and say if we just reduce the corporate tax rate, it will stop companies from inverting.

They are wrong, plain and simple. Absolutely, our tax code is broken and Congress should reform it. We should close loopholes that allow some to avoid paying their fair share of taxes. We should fix the tax system so it works for hard-working Americans and for companies that want to help America succeed.

But let's not try to fool people into thinking that if we just lower our corporate tax rate the deficit will disappear and all of our economic challenges will be solved. There is no realistic tax reform proposal that would reduce U.S. tax rates to compete with Ireland, which has a tax rate of 12.5 percent, or Switzerland, with its 17 percent corporate tax rate.

This is a race to the bottom the United States can't win and should not be lured into entering.

Instead, we should immediately act to stop companies from inverting and then we should get to work on reforming our tax code. Before a doctor can perform heart surgery, she or he first has to stop the bleeding and that is what we need to do.

There are at least a dozen companies that have announced they are inverting or are considering inversion. We should act now--either through Congressional or executive action--to close the tax loopholes that allow inverters--these corporate deserters--to avoid their fair share of taxes and push their tax obligations off onto the rest of us. Once we stop the bleeding, we can turn our attention to real tax reform where and a long-term, comprehensive solution.

Senator Levin's bill would stop the bleeding by placing a 2-year moratorium on many inversions. Only inversions where no more than 50 percent of the shareholders remain the same after the inversion would be allowed to go forward.

We should also limit the damage caused by inversions by limiting the practice of "earnings stripping''--that's the tax-lawyer's trick where you load all the debt onto the U.S. subsidiary and then write off the debt and the interest payments as a tax deduction.

That is the purpose of a bill I am introducing tomorrow (Wednesday) with Senator SCHUMER. Our proposal would prevent certain corporations from taking excessive interest deductions and sticking U.S. taxpayers with the tab.

Our bill would reduce the cap on interest deductions from 50 percent of adjusted taxable income to 25 percent. It would eliminate the ability of a company to carry forward any excluded interest.

It would also require the IRS to pre-approve related-party transactions for up to 10 years after these companies move their headquarters overseas to ensure greater transparency.

This bill is a targeted approach to a serious problem.

I urge my colleagues to support the bill.

There's more we need to do. I plan to work with my colleagues to develop a more comprehensive proposal to address both earnings stripping by foreign corporations and the hopscotch rule.

Foreign corporations should not be allowed to load up the U.S. subsidiaries with debt and expect U.S. taxpayers to pay their debts. Inverted corporations should not be rewarded with additional tax breaks by dodging taxes on their profits earned overseas.

These two proposals, along with Senator LEVIN's Stop Corporate Inversion Act, must be part of any comprehensive tax reform proposal.

Before I close, let me mention one other issue.

Some of the very companies that move their headquarters overseas in order to avoid paying their fair share of U.S. taxes then have the nerve to come back to the U.S. with their hand out asking to profit from U.S. government contracts.

Yes, that is right. Over the past 5 years, these corporate deserters have received $1 billion in federal contracts paid for by U.S. taxpayers, while avoiding U.S. taxes. This has to stop.

That is why I introduced a bill with Senators LEVIN and JACK REED to ban federal contracts for these corporate deserters. There is a companion bill in the House that is sponsored by Representatives DELAURO, DOGGETT and SANDER LEVIN.

This isn't a new idea. In 2008, Congress prohibited inverted corporations from obtaining any Federal contract under the annual appropriations bills, and for the most part this ban has worked.

But these companies found a loophole. That is why they pay their tax attorneys and advisors the big bucks--to find the little loopholes worth billions of dollars. We need to close this loophole so that corporate deserters aren't able to profit from taxpayer-funded government contracts.

About 50 companies have inverted in the last decade. Another dozen companies--including three headquartered in my State of Illinois--have announced that they are planning or considering inversion. If these companies want to renounce their corporate citizenship, that is their choice. I think It is a bad choice, but it is their choice.

But they should not expect American workers and other American companies to pick up the tab for them while they take advantage of all that America offers. That is not a free market. That is freeloading.

This isn't a partisan issue. Every inversion increases the burden on you and me to make up for the lost tax revenue.

I look forward to working with my colleagues on both sides of the aisle and the President to address this important issue.

It was about 2 weeks ago that I was in central Illinois and I was heading to a forum for Senate candidates. It was put on by the farmers in downstate Illinois. I have a lot of friends there. We went off to a farm, and before we arrived I had an extra 45 minutes. I hadn't had lunch. So we were driving around Bloomington-Normal, IL, in McLean County.

I said: Let's stop and get a sandwich somewhere.

My driver said: Well, there is a Burger King.

I said: No, thanks. There is a Steak 'n Shake--which happens to be a franchise we are very proud of in the Midwest and in Illinois.

I consciously decided not to stop at Burger King. Why? Because in the past several weeks Burger King has consciously decided they are leaving the United States. This iconic hamburger chain--second largest in the world--has bought a doughnut chain in Canada, and now they want to move their headquarters to Canada from Miami, FL. Why would they move their corporate headquarters out of the United States of America, where they have most of their restaurants? To cut their taxes. It is called inversion.

If you can pick up and on paper move your corporation to Switzerland, Ireland, the island of Jersey, Canada--you name it--there are ways that accountants and lawyers have figured out how to reduce your tax burden. But, of course, as companies decide to do that, they are also making conscious decisions to stop paying U.S. taxes or avoid paying U.S. taxes--at least some part of them.

We have seen a lot of companies announce this. AbbVie, which is a pharmaceutical company in the northern suburbs of Chicago, used to be Abbott Laboratories. AbbVie has decided they want to move overseas.

I took a look at it and thought for a moment: Interesting. A pharmaceutical company wants to move overseas.

How important was the United States to the success of a pharmaceutical company such as AbbVie, to the fact they developed drugs and products that were profitable? How important was this country to that company? I would say critically important. Companies don't usually come up with all the ideas for new drugs. They rely on the National Institutes of Health, the premier biomedical research agency in the world. The annual budget is in the range of $31 billion, and they do research which they then turn over free of charge to pharmaceutical companies to develop drugs to make money. The National Institutes of Health is supported by American taxpayers.

If a pharmaceutical company develops a new drug they think has the potential to be a blockbuster and sell a lot, there is another step. They have to go to the U.S. Food and Drug Administration, and the FDA tests it.

If at the end of testing they come up with the conclusion that it is not only safe but effective for what it is being used for, they give it a seal of approval. It is the gold standard of safety of pharmaceuticals. The Food and Drug Administration is supported by the U.S. Government and American taxpayers.

Then it is not over. There is at least one last stop. You go to the patent office to make sure you protect your intellectual property, this pharmaceutical formula. The U.S. patent office is supported by the government and U.S. taxpayers.

So here is a pharmaceutical company using research, using testing, and using protections of patents from our government that says: Incidentally, we are leaving. We don't want to pay taxes to this government. We want to reduce our tax burden to this government.

There is something wrong with this picture. Mr. President, 49 or 50 corporations have done it, and more are threatening. Take Burger King. The sale of hamburgers does not involve a great deal of research, but the product that you are cooking at your store has been inspected for safety by the U.S. Federal Government. And the place where your store is located probably is on a highway or street supported by our government.

But then there is one other element. The people who work in fast food in America are not usually paid a lot of money. Their income is supplemented by government programs such as food stamps. It turns out to the tune of about $7 billion a year. That is what taxpayers in America pay to subsidize the income of workers in fast food restaurants. So here is Burger King that is using the largess, protection, rule of law in the United States to do their business, counting on our government to step in and supplement the income of the person frying the hamburgers and serving it, and saying: Incidentally, we are leaving; we don't have any obligation to this country to pay taxes; we are going to Canada--on paper.

There is something wrong with this picture. To me, if you are going to desert this country as a corporation, consumers first ought to be aware of it. That is why I drove past Burger King. I do not care to do business with a company that does not think it owes its fair share of taxes. Because if they do not pay their fair share of taxes, other good American companies will be forced to pay more and other individuals will too.

So it is right for us to speak up now about this process of inversion and bringing it to an end. It is not just a matter of escaping taxes. There are accounting techniques. There are countless techniques which these inverted corporations can use to even reduce their corporate taxation more.

Some people say the U.S. corporate income tax is too high. The nominal rate is 35 percent. The effective rate is closer to 25 percent, and the major corporations pay in the range of 10 to 15 percent. When you look at the countries they are going to--Ireland, I believe their corporate income tax rate is 12.5 percent; the Cayman Islands, zero. So we cannot play it to the lowest denominator, play to the bottom line, the bottom corporate income tax. It is a lose-lose situation.

What we have to do is to make sure that the inversion comes with a price. I am joined with Senator Schumer. We will put in a bill later this week to talk about this whole question of inversion as it relates to the Tax Code. It is a technical bill Senator Schumer has largely written as a member of the Senate Finance Committee and asked me to join him on because of my interest on the subject. It limits the practice of ``earnings stripping''--a tax lawyer's trick where you load all the debt on to the U.S. subsidiary and then write off the debt and the interest payments as a tax deduction. The bill which I will introduce with Senator Schumer is designed to prevent corporations from taking excessive interest deductions and sticking U.S. taxpayers with the tab. There are other parts of that bill.

I believe the Tax Code should be written in a positive fashion. It is not positive in our Tax Code to set the stage for corporations to move their jobs and headquarters overseas. In fact, we allow under our Tax Code for these corporations to deduct their moving expenses if they are going overseas. What are we thinking? Why would we create an incentive, a deduction, for taking jobs out of America? I think there is a better approach. When the time comes for tax reform--and I hope it is soon--I am going to propose that we have something called the patriot employer tax credit. Here is what it says. It is pretty simple. If your headquarters for your corporation are in the United States; if you have kept your jobs here in the United States; if at least 90 percent of your employees are paid at least $15 an hour; if you have good health insurance, according to the standards of the Affordable Care Act; if you will contribute at least 5 percent of your employees' earnings toward their retirement; and if you will give a veterans preference, we will give you a tax credit.

We want to reward--we should reward--and incentivize companies that build their future in America, companies that believe in America, companies that pay a decent wage in benefits to the people who work for them.

That is what should be in the Tax Code. Let's start incentivizing job building and job expansion here in the United States. Let's stop these deductions for moving jobs overseas. And let's put an end to this corporate inversion.

These folks have to realize we are not going to stand still for them gaming the Tax Code to avoid their responsibility to the country which, by and large, created the success of most of their corporations.

I yield the floor.

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