New Jersey May Be First State to Punish Inversions With Bill
Allergan, the maker of Botox, is incorporated in Dublin and operated out of Parsippany, New Jersey. Its record $160 billion merger with New York-based Pfizer, the maker of Viagra, would result in the largest so-called corporate inversion, in which U.S. companies use a merger to take a foreign address and cut their income-tax rates.
The federal government this year made the deals more difficult and limited their benefits. At the state level, New Jersey would be the first to ban financial aid as well as contracts for such companies, said Assemblyman Troy Singleton, a bill sponsor. If cleared by the Democrat-controlled Legislature, the measure could set up a showdown with Governor Chris Christie, a Republican presidential candidate who says the U.S. should deter the moves by lowering corporate taxes.
“I don’t begrudge anyone from using the tax code to their advantage, but I also don’t think New Jersey should be subsidizing them,” said Singleton, a Mount Laurel Democrat. “To have companies who inverted and are still eligible for tax breaks just struck me as odd.”
For decades, U.S. companies have been decamping to Ireland to take advantage of its 12.5 percent company tax rate. The U.S. rate is 35 percent. Pfizer already makes an ingredient for Viagra in Cork, in Ireland’s south, while Allergan produces Botox in Mayo, in the west.
In 2010, Pfizer was awarded $9.2 million over a decade from New Jersey’s Economic Development Authority to bring as many as 225 additional jobs to its campus in Madison from New York. None of that has yet been paid, part of a standard lag in disbursements, said Virginia Pellerin, a spokeswoman for the authority. The company also has offices in Peapack, New Jersey.
“I want to send a strong message to Pfizer as well as any other corporate deserters looking to do the same thing,” said Senator Shirley Turner, a Lawrenceville Democrat who sponsors the measure in her chamber. “They are parasites living off of our taxpayers, and it’s not like they’re going bankrupt by any means.”
In 2003, California enacted a law prohibiting state agencies from entering into contracts with "expatriate corporations" and North Carolina has instituted a ban that applies to certain tax haven countries. Neither bans apply to the subsidies states use to lure jobs.
New Jersey’s legislation, to be considered Thursday by the Assembly, would make the state treasurer responsible for policing the list of banned firms. It would then need approval from the Senate and then the governor.
Christie and other Republicans on the state and federal level have said that the patchwork of measures targeting companies that have inverted fails to address the disparity in the taxes that makes them lucrative.
Brian Murray, a spokesman for Christie, declined to comment on pending legislation.
“This legislation discourages investment in New Jersey,” Joan Campion, a Pfizer spokeswoman, said in an e-mailed statement. “A reformed tax code that includes a territorial system would stimulate investment in the United States and allow American businesses to compete on a level playing field.”
At a Nov. 30 business roundtable in Portsmouth, New Hampshire, Christie said he spoke two years ago with Pfizer’s chief executive at a Republican event and was told the American tax system is "crazy" and would drive the corporation out of the country. Christie has taken shots at President Barack Obama for trying to ban inversions without addressing the tax system. He’s called for lowering the corporate rate to 25 percent.
“I want to fix it by by making it no longer profitable to do” inversions, he said last week while campaigning in New Hampshire.
Assemblyman Declan O’Scanlon, a Republican from Little Silver who tends to support Christie’s views, said the bill is “well-intentioned, but nonsensical.” He, too, would rather see a cut in federal taxes.
“We’re saying that because we don’t like something you do on the federal level we don’t want your jobs. New Jersey shouldn’t be disinterested in any job,” said O’Scanlon. “Inversions don’t deprive New Jersey of any taxes, yet we’re going to punish them by pushing jobs out of state?”