Senator Manchin: What My Daughter Did Should Be Illegal

West Virginia senator vows to support legislation that would stop CEOs like his daughter from renouncing firms’ U.S. citizenship.

WASHINGTON, DC - SEPTEMBER 17: Sen. Joe Manchin (D-WV) talks to reporters before heading to a Senate Democratic policy luncheon, on Capitol Hill, September 17, 2013 in Washington, DC. Manchin discussed gun control issues with reporters in light of the Navy Yard shootings in Washington yesterday. 
National Journal
Ron Fournier
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Ron Fournier
July 23, 2014, 7 a.m.

You’re a United States sen­at­or from a state strug­gling to com­pete in the world eco­nomy. Your daugh­ter runs a gi­ant drug com­pany with roots in your state, and the firm makes a for­tune from tax­pay­ers via Medi­care and Medi­caid. Everything’s cozy and con­nec­ted and per­fectly Wash­ing­ton — un­til your daugh­ter re­nounces the firm’s U.S. cit­izen­ship to re­duce its U.S. taxes. What do you do?

If you’re Joe Manchin, you duck a re­port­er’s tele­phone call for six days, then emerge for an in­ter­view in which you vow to make your daugh­ter’s ac­tions, from this day for­ward, il­leg­al.

Sort of.

The West Vir­gin­ia Demo­crat told me he’d “be happy” to sup­port a bill that out­lawed so-called in­ver­sions, a loop­hole that al­lows U.S. cor­por­a­tions to avoid fed­er­al taxes by shift­ing their tax dom­i­ciles over­seas. Such trans­ac­tions are set­ting a re­cord pace since the first in­ver­sion was done 32 years ago.

Manchin’s daugh­ter, Mylan CEO Heath­er Bresch, an­nounced last week that the gen­er­ic-drug com­pany will re­nounce its U.S. cit­izen­ship and in­stead be­come in­cor­por­ated in the Neth­er­lands. After wait­ing a day for Manchin to re­turn my call, I wrote a column on Bresch’s an­nounce­ment head­lined, “How to Re­nounce Amer­ica and Still Be Called a Pat­ri­ot.”

“I think, ba­sic­ally, in­ver­sion should be ab­so­lutely re­pealed,” Manchin said. “All of them. Get ‘em all, Ron. Get ‘em all.” The second-term sen­at­or said he had no pri­or warn­ing of his daugh­ter’s de­cision.

He ar­gued, vaguely, that con­gres­sion­al tax re­form would keep com­pan­ies like Mylan in the United States, des­pite know­ing that such ef­forts are stalled. He said he has no plans to in­tro­duce an anti-in­ver­sion bill, and ex­pressed doubt that any would pass.  While vow­ing to sup­port whatever in­ver­sion le­gis­la­tion emerges from the de­bate in Con­gress, Manchin didn’t seem to have a grasp on the par­tic­u­lars of those dis­cus­sions. “You usu­ally don’t jump in some­body else’s bathwa­ter,” he said. His an­swers were of­ten dis­join­ted.

In short, Manchin struck me as a con­veni­ent con­vert.  He is wor­ried that his daugh­ter’s busi­ness de­cision, while in ac­cord with the laws passed by Manchin and his col­leagues, will hurt his polit­ics. This is a lightly ed­ited tran­script of Tues­day’s tele­phone in­ter­view:

I wanted to ask you too about the Mylan story I did last week.

Of course.  It was pretty rough! Give me a chance there, buddy!

I called you. You didn’t call back.

I didn’t know about that. I guess it came, I don’t know, of course, Jon [Kott, his spokes­man], if you talk to Jon it goes dir­ectly through him and dir­ectly to me, so I don’t know how it didn’t come through.

I left a voice­mail. Let’s do the oth­er side of the story here.  The broad­er ques­tion, be­fore we get to your daugh­ter’s com­pany, is do you think, in gen­er­al terms, is it right or wrong when a U.S. com­pany — I know they have the right to do this — but is it right for them to re­nounce cit­izen­ship, es­pe­cially a com­pany that gets fed­er­al con­tracts. Is that the right thing to do?

Ron, if I could vote for a piece of le­gis­la­tion, in­tro­duce a — if I get any sup­port for le­gis­la­tion that says if you’re go­ing to do busi­ness with the United States gov­ern­ment on the tax­pay­er, which is a cit­izen’s sup­port, you should be a U.S.-based cit­izen. Now, you’re go­ing to have them com­ing out of the wood­work on mil­it­ary and everything else.  We don’t make any an­ti­bi­ot­ics in the coun­try.  But I’m say­ing that in a per­fect world, I’m with you 1,000 per­cent. By God, and let’s pass the law today.

And why?

What do you mean, “and why?”

Why do you think that would be a good law?

People will agree from a pat­ri­ot­ism, that it’s a pat­ri­ot­ic law.  But I guess the world has changed so much that a ba­sic­ally lot of the things we use to de­fend ourselves, we don’t even make here in Amer­ica any­more.  The an­ti­bi­ot­ics we use to pro­tect ourselves is not even made in Amer­ica any­more.  So it goes on and on and on.  How do we get to where we are today?  How come we be­came de­pend­ent on oth­er parts of the world?  I’m un­der­stand­ing that if Rus­sia cut us off with ti­tani­um, Boe­ing would have a hard time stay­ing in busi­ness. 

Well, one way we got to this state is people like your daugh­ter mak­ing a de­cision to re­nounce the com­pany’s cit­izen­ship and go over­seas.  Did you know about that ahead of time?

I had no idea. I read about it the same time you all read about it.  Monday morn­ing, whenev­er it was up. 

That’s the first you knew about it?

First I knew about it.

And what con­ver­sa­tions have you had with her since about it?

Ex­plan­a­tions. Tell me what’s go­ing on.”¦ The bot­tom line is, there’s noth­ing to do as I’m un­der­stand­ing — I’m learn­ing more about it — it has noth­ing to do with the Amer­ic­an — they’re go­ing to pay their Amer­ic­an rates.  Ba­sic­ally, they don’t pay on their for­eign in­come, and the bot­tom line is that we changed our tax code back in the ‘60s, I un­der­stand. There was an art­icle done, I guess, back when Kennedy, some state­ments that Kennedy made back in the ‘60s, and it was changed back then to ba­sic­ally ter­rit­ori­al, and “¦

Sir, but the bot­tom line is that her com­pany, as I think you know, ex­ists mainly to sell drugs to Medi­care/Medi­caid, which you help over­see.  And the bot­tom line is, they’re go­ing to be pay­ing a lot less taxes to your Treas­ury. 

OK, let me ask you this: I’m happy to pass a piece of le­gis­la­tion [that] says if they’re “¦ go­ing to be a drug com­pany that’s selling to Medi­care/Medi­caid, that they have to be a U.S. cit­izens?  I’d vote for that today! 

That the com­pany would be a U.S. cit­izen.

Has to be a U.S.-based cit­izen.  A U.S.-based com­pany, I’m sorry. A U.S.-re­gistered com­pany. Let me ask you this: What hap­pens to Teva, the largest gen­er­ic in the world? What do you do there?

Who are you talk­ing about?

Teva, the Is­raeli gen­er­ics, the largest in the world. Pays no taxes.

Well, let me ask you, do you plan to in­tro­duce that bill in the Sen­ate?  You say you’d be will­ing to vote for it, but are you go­ing to in­tro­duce it?

I can do that.  I’d be happy to. You know the bot­tom line is that you have to have sup­port for it, but I’m happy to do it.  I could take the lead.  I can be part of that bill, I can be part of that.  And I think very strongly.  I think ba­sic­ally in­ver­sion should be ab­so­lutely re­pealed.  All of them.  Get ‘em all, Ron.  Get ‘em all.

In­clud­ing your daugh­ter?

Ab­so­lutely.  Get ‘em all!  Don’t just pick and choose.”¦ I’m for re­peal­ing all of that, but I want to make sure they do it and do it right. But you and I both know that un­less we get com­mit­ted to total re­form — so a large tax re­form, which I have been beg­ging for, sup­port­ing, send­ing every let­ter I can, go­ing to every meet­ing I could go; I’ve been very open about, spoken, about this and will con­tin­ue to be, but it’s just ri­dicu­lous that we won’t come for­ward and do a total tax re­form that puts some cer­tainty in the tax sys­tem that we have, and fair­ness “¦  

That’s a fair point.  Let me circle back on that.  First let me make sure that I un­der­stand you.  The first you knew that she was do­ing the in­ver­sion was Monday.  Was that the first you knew that she and her com­pany were even think­ing about it? Or did you know ahead of time that they might be think­ing about it?

I know it’s hard for you to be­lieve, but we did not talk about her busi­ness. 

Well, that’s not hard for me to be­lieve. I do find it hard to be­lieve — I don’t want to make it sound like I don’t be­lieve you, so what’s a bet­ter way to put it? I would’ve thought that when she came up to the Hill, as she said she did, and com­plained to every­body on the Hill, over and over and over again, as she says she did, that “We need to re­form the tax code, or my com­pany is go­ing to have to do this.” I’m sur­prised that you wer­en’t one of the people to whom she said, “Hey we need to do this, Dad, or I’m go­ing have to do in­ver­sion.”  She nev­er men­tioned it to you?

Ba­sic­ally, when she came up, when they came up — I don’t know how long ago that’s been, Ron — I just made sure that Max Baucus “¦ I said, “Max, they want to come talk to you.”  And she and her people went and spoke to Max Baucus [the since-re­tired Montana Demo­crat who chaired the Sen­ate Fin­ance Com­mit­tee] I was in that meet­ing be­cause I wanted to make sure that they were talk­ing about the tax and get­ting in­to de­tail.  And their people were left, I guess, to talk about it fur­ther be­cause Max had an in­terest in it, and Dave Camp [a Michigan Re­pub­lic­an who chairs the House Ways and Means Com­mit­tee] has put a piece of le­gis­la­tion out. But noth­ing has ever happened. Now, I was not told “If we don’t, if you guys; don’t “¦.” I nev­er heard that com­ing out as a threat.”¦ This is what’s hap­pen­ing around the world. 

Right. Right.

I’m un­der­stand­ing they’re the last com­pan­ies that — you know, I nev­er knew any­thing of this stuff be­fore­hand

Well, they’re cer­tainly not by any stretch of the ima­gin­a­tion the first. She’s not the first do this.  You’re right about that. 

I un­der­stand it’s the last gen­er­ic in Amer­ica — the last large gen­er­ic in Amer­ica “¦ to do it.

So what do you plan to do about it, be­sides con­tinu­ing to push for tax re­form?

I’m listen­ing that hope­fully Ron Wyden [the Ore­gon sen­at­or who re­placed Baucus as Fin­ance Com­mit­tee chair], and his group can come to a reas­on­able solu­tion.  And if they come to a solu­tion, and they say that in­ver­sions are wrong for our coun­try, they’re il­leg­al and we’re go­ing to go back and re­peal every one, every in­ver­sion for the last five years, Hal­le­lu­jah!  Hal­le­lu­jah!  Say they’re all wrong!  You can’t leave some com­pan­ies that have been out there and who­ever’s jumped on the band­wag­on.  I don’t think you can start pick­ing and choos­ing.  They still do between a rock and a hard place, then bite the bul­let and do the tax re­form.

Now I’m con­fused.  And this is just my ig­nor­ance of the Hill, sir.  Why are you wait­ing for Wyden and oth­ers to come for­ward with a bill?  Why don’t you do this?

First of all, I’m not on Fin­ance or the Budget; I’m on For­eign Ser­vices, on Bank­ing.  So ba­sic­ally it ori­gin­ates there, but I’m happy to co­sign once it’s drawn.  Whatever they want me to do, if they think it would help. You usu­ally don’t jump in some­body else’s bathwa­ter. 

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