The deal "will leave U.S. taxpayers holding the bag," Hillary Clinton said. | AP Photo HEALTH CARE Drug merger unleashes Dem fury — and more calls for tax reform At issue: Companies that merge to reduce their U.S. tax bills.

Pfizer’s blockbuster $160 billion merger with Irish pharmaceutical maker Allergan is stoking the partisan debate on corporations that move their headquarters overseas to lessen their U.S. tax bills — with Democrats like Hillary Clinton quickly condemning the deal while Republicans called it a symptom of a broken tax code.

The deal "will leave U.S. taxpayers holding the bag," Clinton said in a statement Monday, calling on Congress to limit corporations’ ability to use the tax-limiting maneuver known as an inversion.


Democratic primary rival Bernie Sanders called on the Obama administration to block the deal, and while the White House didn’t go that far, spokesman Josh Earnest accused Republicans who refuse to support limits on inversions of being “bought and paid for” by big business.

The proposed merger would be the biggest inversion ever and create the world's largest pharmaceutical company. It would let Pfizer shift its legal corporate residence to Ireland to lower its adjusted tax rate to between 17 and 18 percent, down from Pfizer’s current 25 percent effective rate.

Republicans, including GOP presidential front-runner Donald Trump, say the only way to discourage these kinds of deals is to lower the 35 percent U.S. corporate tax rate, currently the highest statutory rate in the developed world, and exempt some foreign earnings.

“The fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting. Our politicians should be ashamed,” Trump said in a statement Monday.

Despite the heated rhetoric, little is likely to be done to halt the practice any time soon. No major changes to the tax code will happen until after the next president is in office, if then, most analysts say.

And while the Treasury Department has taken some steps to make inversions less attractive — the latest coming just last week — the Pfizer-Allergan deal demonstrates how ineffective those measures have been, despite a temporary lull after Treasury initially issued “guidance” in September 2014.

“It changes things around the edges and it tightens things … but the Pfizer-Allergan transaction is the perfect example of what Treasury can’t affect,” BakerHostetler partner Jeff Paravano said.

Pfizer executives sought to head off political blowback with letters to lawmakers emphasizing the corporation’s commitment to the U.S.

In a letter to Senate Majority Leader Mitch McConnell (R-Ky.) just hours after the announcement of the merger, Pfizer CEO Ian Read said the pharmaceutical behemoth will keep its "global operational headquarters in New York City" and maintain an American employee base of 40,000 across 25 states.

"As a result of this combination we will be gaining greater access to resources that will enable us to make significant investments in the U.S. in research and development. We believe this will be good for patients and for U.S. competitiveness,” Read wrote

But Democrats were in no mood for promises.

Sanders said the merger "would be a disaster for American consumers who already pay the highest prices in the world for prescription drugs."

While declining to comment on the Pfizer-Allergan deal specifically, Earnest tore into inversions.

"It may serve the corporate bottom line of some of these companies, but it certainly doesn't strengthen the economy of the United States and it certainly doesn't enhance the prospects of middle class families in this country," he said.

Nonetheless, some Democrats — including President Barack Obama — have acknowledged shortcomings in the U.S. tax code’s treatment of American multinational corporations. The U.S. taxes foreign earnings at the same rate as domestic earnings, while many U.S. competitors have moved toward exempting those earnings.

That’s what makes inversions so attractive. While an inverted company still pays tax on its U.S. operations, it no longer has to pay a tax on profits earned abroad if it brings them to the United States.

“It has nothing to do with whether corporations pay high enough taxes, it has to do with who corporations are competing against,” said a person close to Pfizer. “You know, you can’t really make a value judgment on this, because corporations are not people. They’re serving their consumers and their shareholders with the best deal possible.”

Sen. Chuck Schumer (D-N.Y.) has endorsed creating a “patent box” that would lower tax rates on intellectual property as one way to encourage companies to stay. House Speaker Paul Ryan said last week that he and Schumer are still in talks to produce a bipartisan international tax reform plan, emphasizing the urgency of the issue as corporations explore ways to invert.

But Schumer’s reaction to the Pfizer deal — blasting the company’s decision to “forsake America” — underscored the difficult politics of lowering taxes for multinational corporations amid reports of some high-profile corporations, including Apple and General Electric, paying obscenely low rates in recent years.

Treasury released new guidance Thursday to make inverting less attractive, but the proposed rules don’t apply to the Pfizer-Allergan deal for a few reasons, analysts said.

Chief among them: Pfizer shareholders will own less that 60 percent of the combined corporation’s stock, tax lawyers pointed out, so the transaction wouldn’t reach the minimum ownership threshold for penalties. Under current regulations, a combined corporation is considered domestic if at least 80 percent is owned by the former U.S. parent, with tax penalties starting to kick in at the 60 percent threshold.

Senate Finance Committee ranking member Ron Wyden (D-Ore.) said the Treasury rules “can only go so far” in a statement addressing the Pfizer deal.

“The only course of action that will stop this concerning trend of American firms continuously looking for ways to shift their headquarters overseas is comprehensive tax reform,” he said. “The fact is, our tax code and our economy work as an ecosystem, so when Congress or the administration make changes in one area to solve an immediate crisis like inversions, there’s always a risk of unforeseen effects popping up somewhere else.”

Some tax lawyers, for example, argue stricter anti-inversion rules just make U.S. companies better acquisition targets, rather than buyers, but do little to change the motivations for leaving.

“Building walls historically doesn’t work; you can’t trap people into operating against their economic interests,” Paravano said. “If you want companies to have their headquarters here, you need to make it attractive for them to have their headquarters here.”

Sarah Karlin contributed to this report.