Democratic presidential candidate Hillary Clinton onWednesday urged Congress to take action against companies thatavoid taxes by shifting their debt to American soil while movingprofit overseas, a technique known as earnings stripping, and saidthat if they don't, the Treasury Department should crack down withnew rules.

Clinton's call for action on earnings stripping is part of herbroader plan, unveiled Wednesday in Iowa, to stop corporateinversions—the practice of moving a company's tax address bymerging with a foreign company—and other corporatestrategies for shifting profits overseas to avoid U.S.corporate income taxes.

She is also urging lawmakers to pass an “exit tax” aimed atpenalizing U.S. companies that move their tax addresses offshore.Clinton has also called for Congress to raise the threshold ofshares that a U.S. company must sell to foreign shareholders inorder to shift its tax address overseas from 20 percent to 50percent.

Inversion, Clinton said at a town hall in Waterloo, is a“technical term for a trick” and earnings stripping is also “atrick.”

Clinton's proposals seize on the widespread attention generatedlast month when New York-based Pfizer Inc. announced plans to mergewith Allergan Plc in a $160 billion deal that would move its taxaddress to Ireland. Companies that use inversion and othermaneuvers “to game the system and leave everybody else holding thebag are just offensive to me,” she said.

“Fundamentally, this is not only about fairness. This isabout patriotism,” Clinton added. “You should pay for what you owejust like everybody else.”

The Pfizer-Allergan announcement prompted condemnations fromboth parties; Republican candidate Donald Trump called the move“disgusting” and said politicians should be “ashamed” for allowingit.

The issue has broad resonance, said Neera Tanden, a closeoutside policy adviser to Clinton and president of the Center forAmerican Progress. “This is a toxic brew,” she said. “People feellike the game is rigged. Donald Trump and Elizabeth Warren as wellas many of politicians in between them tap into that, and it's hardto think of a better example than a company” shifting its profitsoverseas.

A Pfizer spokesman didn't immediately respond to a request forcomment.

It's unclear whether the company formed by the Pfizer-Allerganmerger would take advantage of earnings stripping, which is one ofthe main strategies companies use to reduce taxes after aninversion. Here's one way it works: The U.S. subsidiary takes aloan from its new offshore parent. The interest payments back tothe parent are deductible in the U.S., where the top corporate is35 percent. They're income in the foreign country, where the taxrate is lower. (Ireland's is 12.5 percent, for example.)

The Clinton campaign estimates that a crackdown on earningsstripping could bring in about $60 billion in tax revenue over 10years. That money, the campaign said, would go toward incentivizingcompanies to bring jobs back to the U.S. and toward supportingsmall businesses, manufacturing, and research.

The exit tax proposal, meanwhile, would go after the offshoreprofits that companies have accumulated—if they decide to movetheir tax address offshore. Under current law, companies pay noU.S. income tax on that profit, provided that they keep itoffshore. As of the end of 2014, Pfizer had about $74 billion insuch “unremitted earnings of our international subsidiaries.” TheClinton campaign has not yet settled on what the rate of taxationwould be.

The ideas that Clinton supports are not new. In September 2014,Democratic Senators Sherrod Brown and Dick Durbin—both of whom haveendorsed Clinton—proposed the exit tax concept for companies thatdecide to invert. Another Senate Democrat, Chuck Schumer, offeredup a bill that same month targeting earnings stripping, and theObama administration has made a similar legislative proposal in itsrecent budgets.

Republican leaders in Congress have said that corporate taxationissues should be addressed in the larger context of tax reform, inlegislation that would include lowering tax rates.

Tackling inversions is “not something that [Clinton] is going toput on hold” until there is broader tax reform, Gene Sperling, anoutside economic adviser to Clinton who served in the Bill Clintonand Obama White Houses, said Tuesday on a campaign conference call.“What she is making very clear is she's not waiting.”

After a rash of inversions, the Treasury Department hasannounced new rules restricting them twice since September 2014. Sofar, the rules haven't addressed earnings stripping, which manylawyers say is critical to limiting the tax benefits of inversions,but administration officials indicated as recently as Tuesday thatthey are still considering taking action on the issue.

Treasury Department officials will “continue to look at ways tomake inversion transactions less attractive, and potentialearnings-stripping guidance is one of the options,” John Merrick,special counsel to the Internal Revenue Service associate chiefcounsel, said at a D.C. Bar Association Tax Section forum onTuesday, Bloomberg BNA reported. Treasury special adviser BrendaZent said at the same event that if the department were to takeaction, it could be effective back to Sept. 22, 2014, the day whenTreasury and the IRS issued some initial guidance oninversions.

Clinton's exit-tax proposal takes “a pretty hard run at thecorporate inversion problem and links it to keeping jobs” in theU.S., said Jared Bernstein, the former top economic adviser to VicePresident Joe Biden. “People have criticized the exit tax for notbeing more than a speed bump,” he said. “Looks to me like it's apretty steep speed bump. And what's wrong with speed bump?”

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