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A mega-merger between Pfizer (PFE) - Get Pfizer Inc. Report and Allergan (AGN) - Get Allergan plc Report could spark a political fight over corporate taxes during a presidential election year.

Pfizer reached out to Allergan to begin negotiations about a potential combination, which would create the world's largest pharmaceutical company, according to the Wall Street Journal, citing unnamed sources close to the situation.

Lowering its corporate tax burden is a key motivating factor for New York-based Pfizer in any blockbuster deal. As long as the deal is structured correctly, a merger with Dublin-based Allergan would allow Pfizer to "invert," or take on the lower corporate tax rate available to companies which domicile in Ireland instead of the U.S.

Pfizer shareholders would certainly cheer such a move but it would raise some tricky political issues. The U.S. Treasury has already put in place some restrictions to make it harder for U.S. companies to avoid paying taxes by structuring their operations overseas.

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Drug companies have been the target of sharp criticism of presidential candidates in both parties for drug-price increases, so a high-profile deal between Pfizer and Allergan might bring more negative attention to the pharmaceutical industry.

There's a counter-argument, too: Pfizer can't compete with global pharmaceutical companies able to operate with a lower tax burden; therefore something must be done domestically to reduce tax rates for all corporations headquartered in the U.S. In previous remarks to investors, Pfizer CEO Ian Reed has said any deal involving tax inversion would need to be completed with the current Congress in place because of uncertainty about how the next Congress might make further changes to corporate tax law.

"An acquisition of Allergan by Pfizer makes sense. Pfizer desperately needs a large acquisition and the resulting synergies to reinvigorate its tepid earnings growth rate. Also, Allergan would help Pfizer escape the uncompetitive U.S. corporate tax rate, which has led company after company to domicile away from its shores," said Maxim Jacobs, an analyst at Edison Investment Research.

At Wednesday's close, Allergan's market value was $113 billion. Pfizer was worth $219 billion. In early trading, Pfizer shares rose 2%, and Allergan shares are up 10%.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.