West Virginia senator vows to support legislation that would stop CEOs like his daughter from renouncing firms’ U.S. citizenship.

(Drew Angerer/Getty Images)

By Ron Fournier

July 23, 2014

You’re a United States senator from a state struggling to compete in the world economy. Your daughter runs a giant drug company with roots in your state, and the firm makes a fortune from taxpayers via Medicare and Medicaid. Everything’s cozy and connected and perfectly Washington – until your daughter renounces the firm’s U.S. citizenship to reduce its U.S. taxes. What do you do?

If you’re Joe Manchin, you duck a reporter’s telephone call for six days, then emerge for an interview in which you vow to make your daughter’s actions, from this day forward, illegal.

Sort of.

The West Virginia Democrat told me he’d “be happy” to support a bill that outlawed so-called inversions, a loophole that allows U.S. corporations to avoid federal taxes by shifting their tax domiciles overseas. Such transactions are setting a record pace since the first inversion was done 32 years ago.

Manchin’s daughter, Mylan CEO Heather Bresch, announced last week that the generic-drug company will renounce its U.S. citizenship and instead become incorporated in the Netherlands. After waiting a day for Manchin to return my call, I wrote a column on Bresch’s announcement headlined, “How to Renounce America and Still Be Called a Patriot.”

“I think, basically, inversion should be absolutely repealed,” Manchin said. “All of them. Get ’em all, Ron. Get ’em all.” The second-term senator said he had no prior warning of his daughter’s decision.

He argued, vaguely, that congressional tax reform would keep companies like Mylan in the United States, despite knowing that such efforts are stalled. He said he has no plans to introduce an anti-inversion bill, and expressed doubt that any would pass. While vowing to support whatever inversion legislation emerges from the debate in Congress, Manchin didn’t seem to have a grasp on the particulars of those discussions. “You usually don’t jump in somebody else’s bathwater,” he said. His answers were often disjointed.

In short, Manchin struck me as a convenient convert. He is worried that his daughter’s business decision, while in accord with the laws passed by Manchin and his colleagues, will hurt his politics. This is a lightly edited transcript of Tuesday’s telephone interview:

I wanted to ask you too about the Mylan story I did last week.

Of course. It was pretty rough! Give me a chance there, buddy!

I called you. You didn’t call back.

I didn’t know about that. I guess it came, I don’t know, of course, Jon [Kott, his spokesman], if you talk to Jon it goes directly through him and directly to me, so I don’t know how it didn’t come through.

I left a voicemail. Let’s do the other side of the story here. The broader question, before we get to your daughter’s company, is do you think, in general terms, is it right or wrong when a U.S. company – I know they have the right to do this – but is it right for them to renounce citizenship, especially a company that gets federal contracts. Is that the right thing to do?

Ron, if I could vote for a piece of legislation, introduce a – if I get any support for legislation that says if you’re going to do business with the United States government on the taxpayer, which is a citizen’s support, you should be a U.S.-based citizen. Now, you’re going to have them coming out of the woodwork on military and everything else. We don’t make any antibiotics in the country. But I’m saying that in a perfect world, I’m with you 1,000 percent. By God, and let’s pass the law today.

And why?

What do you mean, “and why?”

Why do you think that would be a good law?

People will agree from a patriotism, that it’s a patriotic law. But I guess the world has changed so much that a basically lot of the things we use to defend ourselves, we don’t even make here in America anymore. The antibiotics we use to protect ourselves is not even made in America anymore. So it goes on and on and on. How do we get to where we are today? How come we became dependent on other parts of the world? I’m understanding that if Russia cut us off with titanium, Boeing would have a hard time staying in business.

Well, one way we got to this state is people like your daughter making a decision to renounce the company’s citizenship and go overseas. Did you know about that ahead of time?

I had no idea. I read about it the same time you all read about it. Monday morning, whenever it was up.

That’s the first you knew about it?

First I knew about it.

And what conversations have you had with her since about it?

Explanations. Tell me what’s going on… The bottom line is, there’s nothing to do as I’m understanding – I’m learning more about it – it has nothing to do with the American – they’re going to pay their American rates. Basically, they don’t pay on their foreign income, and the bottom line is that we changed our tax code back in the ’60s, I understand. There was an article done, I guess, back when Kennedy, some statements that Kennedy made back in the ’60s, and it was changed back then to basically territorial, and…

Sir, but the bottom line is that her company, as I think you know, exists mainly to sell drugs to Medicare/Medicaid, which you help oversee. And the bottom line is, they’re going to be paying a lot less taxes to your Treasury.

OK, let me ask you this: I’m happy to pass a piece of legislation [that] says if they’re … going to be a drug company that’s selling to Medicare/Medicaid, that they have to be a U.S. citizens? I’d vote for that today!

That the company would be a U.S. citizen.

Has to be a U.S.-based citizen. A U.S.-based company, I’m sorry. A U.S.-registered company. Let me ask you this: What happens to Teva, the largest generic in the world? What do you do there?

Who are you talking about?

Teva, the Israeli generics, the largest in the world. Pays no taxes.

Well, let me ask you, do you plan to introduce that bill in the Senate? You say you’d be willing to vote for it, but are you going to introduce it?

I can do that. I’d be happy to. You know the bottom line is that you have to have support for it, but I’m happy to do it. I could take the lead. I can be part of that bill, I can be part of that. And I think very strongly. I think basically inversion should be absolutely repealed. All of them. Get ’em all, Ron. Get ’em all.

Including your daughter?

Absolutely. Get ’em all! Don’t just pick and choose… I’m for repealing all of that, but I want to make sure they do it and do it right. But you and I both know that unless we get committed to total reform – so a large tax reform, which I have been begging for, supporting, sending every letter I can, going to every meeting I could go; I’ve been very open about, spoken, about this and will continue to be, but it’s just ridiculous that we won’t come forward and do a total tax reform that puts some certainty in the tax system that we have, and fairness …

That’s a fair point. Let me circle back on that. First let me make sure that I understand you. The first you knew that she was doing the inversion was Monday. Was that the first you knew that she and her company were even thinking about it? Or did you know ahead of time that they might be thinking about it?

I know it’s hard for you to believe, but we did not talk about her business.

Well, that’s not hard for me to believe. I do find it hard to believe – I don’t want to make it sound like I don’t believe you, so what’s a better way to put it? I would’ve thought that when she came up to the Hill, as she said she did, and complained to everybody on the Hill, over and over and over again, as she says she did, that “We need to reform the tax code, or my company is going to have to do this.” I’m surprised that you weren’t one of the people to whom she said, “Hey we need to do this, Dad, or I’m going have to do inversion.” She never mentioned it to you?

Basically, when she came up, when they came up – I don’t know how long ago that’s been, Ron – I just made sure that Max Baucus … I said, “Max, they want to come talk to you.” And she and her people went and spoke to Max Baucus [the since-retired Montana Democrat who chaired the Senate Finance Committee] I was in that meeting because I wanted to make sure that they were talking about the tax and getting into detail. And their people were left, I guess, to talk about it further because Max had an interest in it, and Dave Camp [a Michigan Republican who chairs the House Ways and Means Committee] has put a piece of legislation out. But nothing has ever happened. Now, I was not told “If we don’t, if you guys; don’t …” I never heard that coming out as a threat … This is what’s happening around the world.

Right. Right.

I’m understanding they’re the last companies that – you know, I never knew anything of this stuff beforehand

Well, they’re certainly not by any stretch of the imagination the first. She’s not the first do this. You’re right about that.

I understand it’s the last generic in America – the last large generic in America … to do it.

So what do you plan to do about it, besides continuing to push for tax reform?

I’m listening that hopefully Ron Wyden [the Oregon senator who replaced Baucus as Finance Committee chair], and his group can come to a reasonable solution. And if they come to a solution, and they say that inversions are wrong for our country, they’re illegal and we’re going to go back and repeal every one, every inversion for the last five years, Hallelujah! Hallelujah! Say they’re all wrong! You can’t leave some companies that have been out there and whoever’s jumped on the bandwagon. I don’t think you can start picking and choosing. They still do between a rock and a hard place, then bite the bullet and do the tax reform.

Now I’m confused. And this is just my ignorance of the Hill, sir. Why are you waiting for Wyden and others to come forward with a bill? Why don’t you do this?

First of all, I’m not on Finance or the Budget; I’m on Foreign Services, on Banking. So basically it originates there, but I’m happy to cosign once it’s drawn. Whatever they want me to do, if they think it would help. You usually don’t jump in somebody else’s bathwater.