In a move aimed at addressing concerns over growing corporate consolidation and taxpayer subsidies, U.S. Senators Sheldon Whitehouse (D-RI) and JD Vance (R-OH) jointly introduced the Stop Subsidizing Giant Mergers Act. The legislation targets tax-free mergers and taxpayer subsidies for acquisitions that consolidate corporate power.
“Record numbers of giant corporate mergers have created an anti-competitive economic landscape. The families who get stuck paying higher prices as a result of these mega-mergers should not also have to foot the tax bill for them,” remarked Senator Whitehouse. “Our bipartisan bill will end a massive tax giveaway for giant corporate mergers and get our government out of the business of subsidizing corporate consolidation.”
Senator Vance echoed similar sentiments, stating, “Massive corporate mergers rarely produce their promised benefits but often leave American workers and families behind. It’s past time to close the unfair loopholes that allow these deals to escape tax liability. This commonsense, bipartisan legislation will ensure our nation’s largest corporations are held to a fair standard while preserving protections for small businesses to grow.”
Over the past decade, the volume of large mergers reported to federal antitrust agencies has nearly doubled. Despite promises of enhanced efficiency, the majority of such mergers fail to deliver their expected value. Instead, they often result in concentrated market power, leaving everyday Americans to bear the costs of corporate consolidation, estimated at up to $5,000 annually for the typical household, according to one study.
One significant loophole in the tax code allows corporations to structure certain mergers in a manner that exempts them from tax liability. This tax-free treatment has become a popular strategy for giant corporations to avoid tax responsibilities. Since 2007, as much as 40 percent of the aggregate value of all U.S. mergers has been structured in this way, with over half of mergers exceeding $1 billion in 2021 being tax-free.
Examples of such tax-free mergers include Facebook’s $19 billion acquisition of WhatsApp in 2014, AT&T’s $85 billion acquisition of Time Warner in 2018, and Canadian Pacific Railway’s $31 billion acquisition of Kansas City Southern.
The proposed Stop Subsidizing Giant Mergers Act aims to put an end to this tax-free treatment for corporate mergers and acquisitions involving firms with combined average annual gross receipts exceeding $500 million over the prior three years. The legislation includes exceptions for small business mergers, and purely internal corporate reorganizations would not incur tax obligations.
“This legislation is a no-brainer, as it’s pretty obvious taxpayers shouldn’t subsidize corporate mergers when America is in the midst of a monopoly crisis. There’s really not much more to say, Congress should pass this one immediately,” commented Matt Stoller, Research Director of the American Economic Liberties Project, which endorses the bill.
As the debate on corporate consolidation and taxpayer subsidies continues, the introduction of this bipartisan legislation signals a concerted effort by lawmakers to address concerns regarding market competition and taxpayer accountability.
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