Important Tax Treaties Would Eliminate Unfair Competitive Disadvantage for American Businesses

‘The Senate’s in the midst of considering bilateral tax treaties with Spain, Switzerland, Japan, and Luxembourg. If yesterday’s overwhelming votes on the first protocol are any indication, all four will be ratified with huge bipartisan margins by the end of the day— and American businesses and workers in all 50 states will be thrilled to finally be back on fair footing.’

WASHINGTON, D.C. – U.S. Senate Majority Leader Mitch McConnell (R-KY) delivered the following remarks on the Senate floor regarding the ratification of important tax treaties: 

“The Senate’s in the midst of considering bilateral tax treaties with Spain, Switzerland, Japan, and Luxembourg. If yesterday’s overwhelming votes on the first protocol are any indication, all four will be ratified with huge bipartisan margins by the end of the day— and American businesses and workers in all 50 states will be thrilled to finally be back on fair footing. The details of these nuanced agreements are complicated. But the core principles are very simple.

“Foreign trade and international investment are key cornerstones of the U.S. economy. Major parts of proud American businesses and hundreds of thousands of hardworking Americans’ jobs are oriented around trade with these four nations. So their governments and our government sit down and negotiate which country will tax which kinds of activities. The result is more clarity, more certainty, and a lot less unfair double taxation that has cost American businesses millions and millions of dollars.

“So let me say clearly: The years of delays in getting these non-controversial treaties ratified have cost American businesses that employ American workers millions and millions of dollars. Inaction on this subject has needlessly put our firms that employ all of our constituents at a competitive disadvantage and delayed capital investments that could have helped American workers.

“Let me bring this home with some numbers. I’ve mentioned one Kentucky manufacturer that produces more than a third of all the stainless steel that America makes. They employ 1,500 people. I happen to know this firm is contemplating a capital investment of more than $30 million that would benefit Kentucky workers and provide a shot in the arm for the local economy. But there’s been a wrinkle. Because this one employer had to pay a $15 million tax bill back in April because we hadn’t ratified the agreement with Spain. And if the delay had continued, an additional $35 million tax liability would have been next. If the Senate had not finally acted on this, this single American manufacturer would have owed fifty million dollars in unnecessary or redundant taxes.

“For nearly 6 years, this manufacturer has been laboring on an unfair playing field that discouraged them from making investments that could have expanded operations and created more jobs in Kentucky and elsewhere in America. In fact, I’d like to request unanimous consent that the news story containing their CEO’s statement on yesterday’s ratification of the Spain treaty be included in the record.

“So, multiply this kind of story by all the other numerous significant Kentucky companies whom these agreements affect. Then multiply by 50 states, because U.S. businesses from coast to coast interact with these four nations. Then consider how many hundreds of thousands of workers all these companies employ. That’s the scale of what we’re talking about. The highest consequences. So I know job creators across the country are thrilled that the Senate is finally moving forward this week. I am certainly proud to have helped resolve this.

“But curiously, it seems that not all of our colleagues are thrilled. Don’t get me wrong – the vote totals on the floor have spoken volumes. The cloture vote on the Spain agreement was 94 to 1. Just one Senator in opposition. And the treaty was ratified yesterday 94 to 2. But I was curious to hear one colleague of ours come to the floor yesterday and passionately argue against what I’ve done as Majority Leader to support these agreements. As the member himself stated, he has made obstructing these tax treaties a years-long personal project. The United States and Spain agreed on this protocol in 2013. Spain ratified it in 2014. That’s when it also arrived here in the Senate.

“But for nearly six years, he’s worked to stall ratification. I know, because on multiple occasions I sought unanimous consent to secure Senate ratification of this protocol. During that time, he has tried and failed to persuade Treasury Departments of two different administrations to insist on certain changes that would have required re-opening the international negotiations. He tried and failed to persuade his colleagues on the Foreign Relations committee that his ideas were so necessary that we should risk scuttling the whole treaties over them. He tried and failed to persuade the whole Senate.

“At every step, executive branch officials and Senate colleagues have tried to engage his concerns in good faith. But for six years in the case of the Spain treaty, eight years with respect to Switzerland, and nine years with respect to Luxembourg, he was unable to persuade anybody. All that time, and didn’t persuade anybody. Partly because the changes he’s demanded don’t solve a real problem. Partly because they would have forced re-opening the treaties for even more negotiation. And partly because everybody else was actually listening to the job creators who have been pleading for years for us to get this millstone off their necks.

“Nine years. Nine years of rejecting reasonable counter-offers and accommodations. Nine years of working to hold up these treaties and trying to sell the Obama administration, and the Trump administration, and his Senate colleagues an off-the-wall story that failed to persuade anybody. I’m a patient man, but my patience is not inexhaustible. After unanimous consent was denied on multiple occasions, I determined -- after consulting with the Treasury Secretary and the chairman of the Foreign Relations Committee -- that I’d prepare to file cloture on these tax protocols. Yet even after this whole journey, our colleague still was not blocked or shut out of the process.

“A few weeks ago he had the opportunity to offer amendments to the protocols in Committee. They failed on a vote of 17 to 5. Last night we put two more of his amendments up for votes, here on the floor. They went nowhere. Nine years is long enough. In fact, it’s far too long — too long for our U.S. businesses to have been either paying needless double taxes or deferring huge amounts of money in dividend payments that could otherwise have been invested right here at home. Year after year after year, money that could have been immediately used to hire Americans or make new investments had to be either frozen up or handed over in duplicate taxes.

“All in large part because one of our colleagues could not accept that one single Senator who hasn’t persuaded his fellow members is not entitled to single-handedly rewrite international treaties. No wonder all kinds of American employers came out of the woodwork yesterday and urged the Senate to reject his misguided amendments and waste no more time in ratifying these treaties. I don’t know why the senator believes he was close to a breakthrough after his years of effort.  Hope springs eternal, I suppose. Even if he had convinced the administration or his colleagues, the U.S. government would have had to reopen the treaties for negotiation all over again with the other party, which would almost certainly have changes to demand of their own. 

“No wonder President Trump’s Treasury Department expressed opposition to these amendments. Treasury told Senators yesterday that going back and inserting these changes could force a years-long renegotiation of the treaties themselves, jeopardizing their ratification, and ‘have a significant adverse impact on [America’s] standing among the international community.’ Well, I’m not quite sure what all these years of heel-dragging will have accomplished… except impose unnecessary taxes on Kentucky employers and deferring investment in the U.S.

“I can’t see anything to show for this crusade except hurting American companies for the better part of a decade, all to no effect. But I am glad we can turn the page this week and get these treaties on the books. I haven’t been able to identify a constituency for which he has advocated. But I know that my actual constituents in Carroll County -- real people in Kentucky -- are sure glad the Senate has taken this important action. It’s the right thing to do for the country. It’s the right thing to do for Kentucky workers and all the employers nationwide who have been waiting and waiting for this unfair competitive disadvantage to be removed. I’m glad that’s exactly what we are doing this week.”

Related Issues: Taxes, Jobs, Small Business