Mr. Chairman and Members of the Subcommittee:

Thank you for convening this important hearing concerning the troubling practice of American companies reincorporating overseas to avoid paying taxes.  I am strongly opposed to these moves, including the one most recently proposed by Stanley Works in Connecticut.

I have introduced legislation to impose an immediate moratorium to stop Stanley Works, and other companies, from reincorporating in tax haven countries like Bermuda, while giving Congress time to enact broader legislation aimed at keeping jobs and companies in America.  My bill, H.R. 4756, would extend through December 31, 2003.

My legislation will stop the destructive practice of American companies renouncing their American identity to avoid the taxes that provide the very services they benefit from.  American companies should act like American companies and pay their fair share to keep our country strong.

The Treasury Department's recent report on corporate inversions confirmed that more American companies will exploit this tax loophole if action is not taken to address the cause of the problem.  On June 6, 2002, in testimony before the full committee, the Treasury Department made clear that a ban, without taking the further step of reforming our tax code to keep jobs and companies in America, is unlikely to work and could be very harmful to the economy.  Treasury points out that just plugging the Bermuda loophole without solving the larger problem, sets U.S. companies up for foreign takeovers, because foreign owners would escape the very taxes a U.S. company dodges by moving to a tax haven.  Unfortunately, a foreign owner not only escapes taxes, but has less incentive to keep jobs in the U.S.

The Treasury Department prefers my moratorium proposal because we need a thorough understanding of all aspects of the fundamental problem to ensure that the solution we adopt does not make matters worse.  This problem is much greater than companies reincorporating overseas to avoid paying taxes and Congress must make sure that we don't plug one hole, only to leave others open, or create even bigger ones.

The underlying problem is that our tax code is now driving U.S. companies offshore.   The signs have been clear.  For example, I have been lobbying for a bill I introduced with Mr. Neal two years ago and again this Congress to stop reinsurance companies from taking advantage of a similar Bermuda tax loophole.  Insurers originally incorporated in Bermuda that acquire U.S. companies are able to siphon U.S. profits offshore to a tax haven, out of the reach of our Treasury, by reinsuring their U.S.-owned subsidiaries' reserves to Bermuda.  Congress should address both the inversion and reinsurance loopholes, as well as any other loopholes that exist, if we are going to permanently resolve the alarming exodus of U.S. interests to offshore tax havens to avoid paying their fair share of taxes.

And the now near total loss of the reinsurance industry to Bermuda isn't the only sign the committee has had of this problem.  Daimler-Chrysler is German-owned because of the U.S. tax code, so current downsizing decisions are being made in Germany, not the U.S.

Prompt passage of my moratorium is essential.  It will give Congress the time to develop a more comprehensive solution to keep jobs and companies in America.  Without a permanent and all-inclusive approach, loopholes will remain, and tax lawyers will simply circumvent the  legislative proposals before the committee, inviting foreign takeovers of U.S. companies, and put decision-making about U.S. jobs in the hands of foreign executives.

Our goal is simple: Keep companies in America.  Keep jobs in America.  Any proposal that does less is unacceptable!

The Treasury Department has recommended specific steps that Congress should take to remove the tax incentives that are driving companies to reincorporate overseas.  I support taking action on these urgent changes, but this may take time.  Unfortunately, in this politically charged climate, it is often difficult to get the House and Senate to work in a bipartisan way on even the simplest of legislative initiatives.  Given the complexity of this corporate inversion issue, and the short amount of time remaining in this congressional session, I urge the committee to act immediately on my moratorium legislation to stop companies from reincorporating overseas.

There is nearly universal agreement that we must take action to stop companies from reincorporating in tax haven countries.  Given this breadth of support, let's pass a moratorium to  stop them in their tracks and send a powerful message to others who may be looking at other possible tax loopholes, that Congress is watching and we will be acting as quickly as possible to prevent the dodging of U.S. taxes in a comprehensive way.

A moratorium will ensure that no company slips through the cracks while Congress develops a permanent solution to keep U.S. companies in America, keep them competitive and protect American jobs.  We cannot afford to wait.