Pfizer's $100 billion offer to acquire British rival AstraZeneca appears driven, at least in part, by lower corporate tax rates in the United Kingdom, raising the question as to whether the U.S. tax code is broken.
As part of the deal, the New York-based drug manufacturer would engage in tax inversion, a financial maneuver in which a company buys an overseas subsidiary and then changes its corporate structure to where the mother company becomes the subsidiary of the foreign entity.
Pfizer told CNBC it's simply seeking the most "efficient" tax structure. "The transaction, if consummated, is expected to result in the combination of the two companies under a new U.K.-incorporated holding company," Pfizer said in a statement.
To Jared Bernstein, an economist at the left-leaning Center on Budget Policy and Priorities, the deal "doesn't smell very good."
"They're renouncing their American citizenship to ... engage in tax avoidance and I think that's wrong," Bernstein told "Closing Bell" on Monday, adding Pfizer's rationale makes sense because the U.S. has a "very dysfunctional tax system."
Rep. Todd Young, R-Ind., a member of the tax-writing House Ways and Means Committee, said the entire tax code needs to be overhauled in a bipartisan way. Given the highly polarized state of politics today, though, such an undertaking is not likely to happen anytime soon, he suggested.
At the minimum, Young called for lowering the corporate tax rate and raising the research and development credit—but admitted that won't be enough to keep a company like Pfizer in the U.S.
"We need to go far further," Young said on "Closing Bell." "That's why I've been pushing ... to overhaul our entire code. Not just the corporate side, but also for small and medium-sized businesses."