Democratic presidential candidates Bernie Sanders and Hillary Clinton on Monday blasted the latest planned merger that would result in a U.S. company reincorporating overseas to lower its taxes.
Milwaukee-based Johnson Controls, a multi-industrial company, and Irish-based Tyco, a fire and security provider, announced Monday that they will merge, with the new firm keeping Tyco’s Irish legal residence.
{mosads}“The potential Johnson-Tyco merger would be a disaster for American taxpayers,” Sanders said in a statement Monday. “Profitable companies that have received corporate welfare from American taxpayers should not be allowed to renounce their U.S. citizenship to avoid paying U.S. taxes. These corporate inversions must stop.”
Sanders denounced “corporate deserters” that he said want to be American companies only for benefits such as contracts with the federal government.
“If you want the advantages of being an American company then you can’t run away from America to avoid paying taxes,” he said.
Sanders, an Independent Vermont senator, and some congressional Democrats have sponsored targeted legislation aimed at stopping inversions, but many Republicans think that the only way to halt these types of transactions is through tax reform.
Clinton on Monday criticized the Johnson-Tyco deal and touted the proposal to stop inversions that she released last month. She has suggested that executive action could be used to crack down on companies shifting earnings overseas to lower their taxes.
“As I have said throughout my campaign, these efforts to shirk U.S. tax obligations leave American taxpayers holding the bag while corporations juice more revenues and profits,” the former Secretary of State said. “I have a detailed and targeted plan to immediately put a stop to inversions and invest in the U.S., block deals like Johnson Controls and Tyco, and place an ‘exit tax’ on corporations that leave the country to lower their tax bill.”
The Treasury Department has issued two rounds of guidance aimed at reducing the tax benefits of inversions, but Secretary Jack Lew has said that only Congress can halt the deals.
The Johnson-Tyco deal is expected to create at least $150 million per year in tax savings, and the merged company expects to have at least $500 million in operational savings in the first three years after the transaction closes, according to a news release.
The announced merger comes about two months after U.S. pharmaceutical giant Pfizer announced it would invert by merging with Ireland-based Allergan.
“U.S. businesses are continuing to defect to Ireland, stranding honest taxpayers,” said Senate Finance Committee Ranking Member Ron Wyden (D-Ore.). “Congress needs to act now.”
House Ways and Means Committee Chairman Kevin Brady (R-Texas) said that “until we move forward with pro-growth reform, American companies will continue to flee overseas and American workers will be left behind.”
This story was updated at 5:27 p.m.