As more and more American corporations have used mergers and shell companies to shift profits and shrink their U.S. tax liabilities over the past few years, there has generally been a sharp divide between populists who decry the maneuvers and investors who celebrate them.
Friday morning saw a high-profile defection from the economic elites’ camp, however, as outspoken billionaire investor Mark Cuban pledged to sell off his holdings in companies that move offshore for tax reasons. “If I own stock in your company and you move offshore for tax reasons I’m selling your stock,” Cuban tweeted.
Rather than seeking a synthetic boost in their stock price by shifting tax burdens onto others, Cuban said, American companies should persuade investors to accept slower growth in their market returns in exchange for job growth and expansion here at home. His primary rationale is a self-interested rather than a philanthropic or political one, as you might expect from a wealthy investor with a healthy competitive streak. “When companies move off shore to save on taxes, you and I make up the tax shortfall elsewhere sell those stocks and they won’t move,” he tweeted later.
Cuban’s high-profile opposition to corporate offshoring could provide a signal boost of sorts for the Obama administration’s own efforts to encourage a renewed “sense of economic patriotism” among business elites. While President Obama himself has begun speaking against the sorts of moves Cuban decried Friday, the corporate executives who make these decisions may be more receptive to hearing it from one of their own.
As media chatter about offshoring and corporate taxes gets louder, odds of getting actual legislation passed may be improving slightly. The Senate will debate the Bring Jobs Home Act more than two years after it was first introduced. While an actual vote on the measure is still not guaranteed, the last time the bill came up Republicans filibustered it before it could even be discussed fully on the floor. A vote to allow debate on Wednesday represents progress, however marginal and fragile.
The momentum behind such legislation comes in large part from a wave of mergers designed to allow American companies to move their official headquarters to tax haven countries like Ireland. Those mergers, known as “inversions,” have become far more popular in the years since the Great Recession began than they were over the previous two decades. They have also garnered negative attention for companies like Pfizer, Medtronic, and Walgreen’s that are reportedly considering inversion mergers this year.
Profit offshoring costs taxpayers tens of billions of dollars per year, and the total profit held overseas by American companies now hovers around $2 trillion.