Constitution

Corporate Inversions: The Latest Target of Unilateral Executive Action

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New York Business Journal

Sometimes, pens and phones are mightier than swords. Having put aside its legal qualms, the Obama administration will move ahead with plans to take unilateral regulatory action against corporate inversions, seeking to make them more expensive and more difficult to finagle.

The president explained his decision yesterday in a statement loaded with enough buzzwords to make even a climate change activist blush:

We've recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I'm glad that [Treasury] Secretary [Jack] Lew is exploring additional actions to help reverse this trend.

The "loophole" allows companies to take shelter overseas from America's byzantine corporate tax structure. Under the current system, American-domiciled companies are not only taxed at the highest rate in the world, they also owe Uncle Sam taxes on income earned outside U.S. territory. American companies can avoid these taxes by merging—"inverting"—with foreign companies.

But the economics of his proposed solution aside, the proposal is just the latest in a long Obama administration tradition of taking unilateral action, often with the briefest perfunctory nod at Congress: Congress duly passed Obamacare, but the president's administration has made a habit of selectively enforcing provisions and unilaterally changing parts of the law. The president dubiously claimed he didn't need congressional approval for military action in Libya. Obama is also hoping to bypass Senate approval for a new international climate change accord.

If Libya wasn't proof enough of a reversal of Obama's 2007 position on executive power, he now claims he doesn't need approval to attack ISIS in Syria and Iraq. This despite the patent illegality of the whole affair—John Yoo notwithstanding. The president has instead been content with paying lip-service to congressional approval for military action in the Middle East, saying that "he would welcome congressional action that demonstrates a unified front," but denying he actually needs it.

And so too with his executive action cracking down on corporate inversions: "Both Lew and Obama have said that they would prefer to see Congress take action to prevent inversions, but lawmakers have been deadlocked." 

President Obama has claimed that "we are strongest as a nation when the president and Congress work together." Yet it is becoming increasingly clear that Obama thinks the nation strongest when Congress agrees to whatever he wants. And should there be disagreement, well, he'll forge ahead anyway.