NEW YORK (TheStreet) -- On Tuesday, Secretary of the Treasury Jack Lew sent a letter to Dave Camp, Republican chairman of the House Ways and Means Committee, concerning tax reform.
The gist of the letter: Enact new legislation that would stamp out corporate "inversions" where U.S. companies merge with foreign ones and locate the resulting parent company in a foreign country.
The motive for inversions is clear: Corporations want to reduce their tax payments.
The U.S. has one of the highest corporate tax rates in the world, although many large U. S. corporations reduce their de facto tax rates significantly through various accounting moves such as keeping assets on the books of foreign offices.
The concern in Washington is that inversions will cost the Treasury a bundle in coming years. Congressional staff estimate the cost at $20 billion over the next decade.
But inversions aren't anything new.
The reason why the administration is raising the issue now is that there's a midterm election coming up, and the lame-duck Obama administration, after a string of setbacks, is looking for issues that will resonate and mobilize its base in an to attempt to keep the Senate under Democratic control.
The reason why Democrats picked this particular issue is recent publicity about corporate moves.
Note that Mr. Lew's letter asks that the Congress make the new law retroactive to May 2014. Interesting that he picked that particular month.
More recently, there have been discussions between AbbVie (ABBV), the U.S. biopharmaceutical that just was spun off by Abbott Labs (ABT), and Irish drugmaker Shire (SHPG). Ireland would become the new headquarters of the combined companies.