The United States has the highest corporate tax rate in the developed world, so for years, some American businesses have moved their headquarters abroad in an effort to cut their bill. The Treasury Department today released new rules to prevent such a maneuver—but its legality is highly questionable.
Take it from Treasury Secretary Jack Lew, himself.
In July 2014, he told reporters that after looking at the tax code, “we do not believe we have the authority to address this inversion question through administrative action. If we did, we would be doing more.”
But less than a month later, Lew apparently discovered new authority to do just that—a move the Wall Street Journal noted “sure sounds like rewriting tax law by executive fiat, which violates the Constitution’s separation of powers.”
At the time, we and others wondered whether Lew’s Treasury had even considered the legality of such a move. Our records request revealed that, at least at the time, Treasury had failed to seek such a legal opinion from the Justice Department’s Office of Legal Counsel.
Of course, if the Obama administration could also work with Congress to reform tax laws. The Journal reports today:
House Speaker Paul Ryan (R., Wis.) has tried to reach an agreement with the administration and Senate Democrats on international taxes, but the two sides so far been unable to turn a broad consensus for lower rates, fewer tax breaks and lighter taxes on U.S. companies’ foreign income into a coherent proposal. They have struggled with the complex details of tax policy and the difficult politics of separating international corporate taxation from small businesses, domestic companies and individuals, all of which have strong pull in Congress.
Why bother with that pesky Congress anyway?