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.
But it is also interesting that Mr. Lew's letter came out just one day after Andrew Ross Sorkin published an article on the front page of the business section in The New York Times titled, "Reluctantly, Patriot Flees Homeland for Greener Tax Pastures."
Sorkin writes about the dilemma faced by Heather Bresch, the CEO of Mylan (MYL), a company that produces generic and specialty pharmaceuticals for the global market.
Mr. Sorkin emphasis in his article is the trauma Ms. Bresch has gone through getting to the point where she "announced plans to renounce her company's United States citizenship and instead become a company incorporated in the Netherlands, where the tax rates are much lower. She did so by agreeing to acquire Abbott Laboratories' European generic drug business."
Sorkin continues, "Ms. Bresch says she entered the deal reluctantly, and she genuinely seems to mean it."
The economics of the situation are just overwhelming for CEOs attempting to maximize profits, and that is why U.S. companies have been taking this path for some time now.
The politics of the situation, however, are not that overwhelming. The chances for the passage of such a tax reform bill at this time is not that good, yet the timing couldn't be better for a desperate administration with an election coming up.
The thing is that this meager effort is just one of many issues the Obama administration has attempted to "float" to see if it can gain any traction with the electorate.
The sad thing about all this fuss is that there really needs to be tax reform passed by the Congress to allow American corporations to become more competitive in the global environment.
The case of Ms. Bresch is a very telling one, and worthy of much attention. As Mr. Sorkin writes, she really does not seem to want to move the location of her company's headquarters to the Netherlands.
Yet, the economics of the situation is so compelling. And, someone with much less "patriotism" would, obviously, move with much less incentive that what Bresch faces.
However, don't expect anything to be done at this time, even though there may be some rushed efforts to get a bill through Congress.
The Republicans will not allow something like this to get passed under these circumstances, and there does not really seem to be any "heart" in this effort on the part of the Obama administration or the Democrats in Congress. As I mentioned before, it is just one of several issues that have been tossed out into the air to see if something catches on with the electorate.
My guess is that the issue would have more chance of traction with the public if the companies involved were in industrial manufacturing rather than in pharmaceuticals. Then the focus could be on loss of jobs, internationally, and not loss of tax dollars.
At the time of publication, Mason held shares of ABBV and ABT.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.