MINNEAPOLIS (WCCO) — A new TV ad by Democratic Sen. Al Franken claims his Republican opponent Mike McFadden searches the world for places to avoid paying taxes.
A claim McFadden says is “dishonest.”
Franken’s ad skillfully weaves fact and fancy.
It’s misleading, but it’s not completely false.
“Where do you go to avoid paying taxes? How about Bermuda?” the ad asks. “That’s where Mike McFadden’s company benefits from a tax loophole to avoid paying American taxes.”
We said this before, in a previous Reality Check: McFadden worked for a giant financial firm which is headquartered in tax-free Bermuda.
But the company McFadden led, Lazard Middle Management, is headquartered in Delaware.
And it pays U.S. taxes.
“Then there’s Ireland,” the ad continues. “McFadden’s company made $11 million on a deal to help a company avoid U.S. taxes by moving there.”
McFadden represented the Irish company in the deal, not the American firm.
But he did negotiate the purchase, and the American company, Jazz Pharmaceuticals, moved to tax-friendly Ireland in a maneuver that’s now widely known as a tax inversion.
And finally: “China?” the ad asks, as a postcard appears on the screen. “McFadden supports tax breaks for companies that move our jobs overseas.”
This one’s a stretch.
McFadden opposed a Democratic bill to fund food stamps by closing corporate loopholes.
Does it mean McFadden favors loopholes to move jobs overseas to China?
McFadden says he supports closing many corporate tax loopholes — but not Franken’s way.
But even though McFadden has repeatedly criticized Franken for votes to close tax loopholes and use the money for something else, we checked:
McFadden doesn’t have a specific tax plan of his own.
His campaign provided us with the following statement:
“Our tax code has too many loopholes and deductions that help out special interests, leaving the rest of us with high bills. We don’t need to raise taxes — we need to simplify the tax code and make it fairer by eliminating these special interest tax breaks. By doing that we can lower tax rates for everyone while making America a more attractive place to invest and create jobs.”
The Franken campaign calls McFadden’s tax code comments “wildly disingenuous.”
“The bottom line is if Mike McFadden actually wanted to end tax breaks for companies that ship American jobs overseas,” said Franken spokeswoman Alexandra Fetissoff, “then he wouldn’t have attacked Al Franken for doing just that.”
Here are some of the sources we used for this reality check:
Franken “Postcards” Ad
Text of Franken Ad
“Where do you go to avoid paying taxes? How about Bermuda? That’s where Mike McFadden’s company benefits from a tax loophole to avoid paying American taxes.” Then there’s Ireland. McFadden’s company made $11 million on a deal to help a company avoid U.S. taxes by moving there. China? McFadden supports tax breaks for companies that move our jobs overseas.”
Franken for Senate
Jazz Pharmaceutical Inversion
HF 1586 Bill to Close Tax Loopholes to Help Fund Food Stamp Program
Tax Loophole Modifications Text / HF 1586Subtitle B: Revenue Offsets – Amends the Internal Revenue Code, with respect to the taxation of foreign income and the foreign tax credit, to: (1) suspend the recognition of foreign tax credits until the related foreign income is taken into account for U.S. tax purposes; (2) deny a foreign tax credit for foreign income not subject to U.S. taxation due to a covered asset acquisition (defined as an acquisition that results in an increase in tax basis for U.S. tax purposes but not for foreign tax purposes); (3) apply a separate foreign tax credit limitation for each item of income that would be treated as derived from sources within the United States and that would be treated as arising from sources outside the United States under a treaty obligation (if the taxpayer chooses the benefits of such treaty); (4) limit the amount of foreign tax credits that may be claimed by a U.S. domestic corporation with respect to a deemed dividend paid by a foreign subsidiary; (5) prevent a reduction in earnings in profits of a foreign corporation in an acquisition if more than 50% of the dividends arising from such acquisition would not be subject to U.S. taxation or would be includible in the earnings and profits of a controlled foreign corporation; (6) treat a foreign corporation as a member of an affiliated group for interest allocation and apportionment purposes if more than 50% of its gross income is effectively connected with a U.S. trade or business and at least 80% of either the vote or value of its outstanding stock is owned directly or indirectly by members of the affiliated group; (7) repeal tax rules exempting foreign source income attributable to the active conduct of a foreign trade or business from withholding of tax requirements; and (8) provide that the statute of limitations for failure to provide information to the Internal Revenue Service (IRS) on certain foreign transactions shall not be tolled if such failure is due to reasonable cause and not willful neglect.
Washington Post Tax Loopholes Vote