(Bloomberg) Republicans and business allies such as House Ways and Means Chairman Dave Camp and the U.S. Chamber of Commerce say they know the way to stop companies from changing addresses to cut their tax bills: Reform the tax code.

Yet that call for the first major revision of the U.S. tax system in three decades hasn’t translated into action and won’t anytime soon. There’s no consensus on what changes would prevent companies from fleeing the system. And the inertia in Washington is opening the way to further deals, known as inversions.

“The people who are arguing that this needs to be done in the context of corporate tax reform are basically arguing that we shouldn’t stop it,” said Kimberly Clausing, an economics professor at Reed College in Portland, Oregon, who studies international taxation.

The act-now vs. go-big debate among lawmakers has left Congress in a deadlock on inversions, prompting Treasury Secretary Jacob J. Lew to say he will decide on possible administrative action in the “very near future.”

Lawmakers of both parties lament the trend that's leading companies such as Medtronic Inc. and Mylan Inc. to move their tax homes outside the U.S. President Barack Obama has labeled the practice an “unpatriotic tax loophole.”

Still, they can’t agree on what to do about it.

Republicans have resisted the stopgap law advocated by Obama, maintaining it would be punitive and counterproductive. Instead, they emphasize cutting the corporate rate and imposing lighter taxes on foreign income, to move the U.S. tax system closer to the codes in countries such as the U.K. that have attracted some companies.

High Bar
Senator Orrin Hatch of Utah, a prominent Republican who’s open to legislation focusing on inversions, has laid out criteria for a stopgap bill that he says set a high bar and aren’t negotiable. He said yesterday that plans offered by the Democrats don’t make the grade.

Camp, a Michigan Republican and the House’s chief tax- policy writer, said that only a comprehensive set of changes can work.

“Specifics on inversions don’t fix it, because we did that in 2004, and it doesn’t work,” he told reporters this week, referring to limits that largely prevented so-called naked inversions in which companies move by creating a foreign shell company. “It’s just such a complex area if you don’t do it in a larger way, you don’t really make any progress.”

Democrats such as Lew agree that a tax-code revamp is the ultimate answer, yet say legislation or regulation is needed in the meantime.

‘Island Countries’
Even in a revamped tax code, Democrats say there should be specific language that would stop companies from buying smaller foreign businesses and taking their addresses.

“There’s still going to be a lot of warm island countries around the world” without corporate taxes no matter how low the U.S. rate goes, Jason Furman, a top economic adviser to Obama, said during a joint appearance with Camp on Sept. 10 at the Business Roundtable in Washington.

For now, talk about the biggest tax-code changes since 1986 is just that.

Doing anything would require resolving long-simmering philosophical disputes about the size of government as well as narrower political fights about the relative merits of every imaginable tax break.

‘Self Help’
Companies are responding to the congressional deadlock, partly through inversions.

The delays have caused some to seek “self help” through inversion transactions, John Samuels, senior counsel for taxes at General Electric Co., said at a Sept. 8 panel discussion in Washington.

Other companies—particularly those reaping advantages from the current system—may have looked at draft proposals and options from both parties and concluded that they should exit the U.S. tax system now.

“These companies may well have concluded, even after tax reform, it’s going to be better in a foreign country, so we might as well get out of Dodge now before the new sheriff comes to town,” Samuels said.

The continued calls to revamp the tax code come against the backdrop of companies such as AbbVie Inc. and Burger King Worldwide Inc. announcing plans to merge with smaller foreign businesses and take a non-U.S. tax address.

Retroactive Measure
Democrats are advocating retroactive stopgap legislation, though they probably won’t vote on it before the Nov. 4 election.

And both parties keep talking about a comprehensive tax bill.

Camp has been trying to advance a rate-cutting, base-broadening tax bill since he became chairman of the Ways and Means panel in January 2011. He released his international tax plan that year and followed it with a complete draft in February 2014. This week, he pressed Furman for a detailed proposal from the White House.

The administration proposed its framework for business tax changes in February 2012 and added measures focused on limiting inversions in this year’s budget plan.

On corporate taxes, the two sides have a lot in common. They want a rate cut, they want tougher rules to prevent U.S. companies from booking profits in low-tax countries and they generally want a revenue-neutral corporate revamp. Both parties also want to use one-time revenue from the transition for a new system to finance infrastructure construction.

Shifting Profits
So what, within that context, would make inversions unattractive?

A rate cut—to Camp’s 25 percent or Obama’s 28 percent—might not do it, because companies are already skilled at shifting profits from high-tax foreign countries into no-tax jurisdictions such as Bermuda and the Cayman Islands.

“The aggressive players here are interested in getting way south of 25 percent,” Clausing said. “I don’t think you can wipe it out with rate changes alone.”

And because reducing the marginal rate just equalizes what are now disparate effective rates, many U.S. companies would face higher taxes in a changed system, giving them an incentive to leave now.

On top of the rate cut, Republicans and corporations want to switch to a territorial tax system, in which U.S. companies’ overseas profits would face minimal taxes upon repatriation.

Eliminating Incentives
The switch would eliminate the current system’s incentives for companies to stockpile profits outside the U.S. and shift to a foreign address so future overseas profits are beyond the reach of the Internal Revenue Service.

“It’s the more worldwide nature of our tax system, which is so much out of step with everybody else,” said Douglas Holtz-Eakin, a Republican economist and president of American Action Forum.

Administration officials, who prefer a global minimum tax that would be more burdensome to many companies than the Camp plan, say any revamp should include specific anti-inversion measures.

Namely, they want to prevent U.S. companies from buying a smaller foreign business and taking its address. Currently, if shareholders of the former U.S. company own less than 80 percent of the combined business, it can invert and not be treated as a domestic company.

Democrats want to apply the U.S. tax system to companies managed and controlled in the country, effectively upending the current system, which respects companies’ own arrangements.

Earnings Stripping
Camp said that approach could give companies an incentive to move abroad. Republicans say they worry that the Democrats’ changes would encourage more foreign corporations to buy U.S. companies for the tax benefits of being based outside the U.S.

On top of that, some Democrats support immediate changes to combat earnings stripping, the practice of using intra-company transactions to shift income out of the U.S. after an inversion.

Camp, Obama and Senator Charles Schumer of New York all have proposals that would tighten those rules.

“Whatever system you go to, you need to essentially have very strong anti-abuse rules.” said Thomas Hungerford, director of tax and budget policy at the Economic Policy Institute, which advocates policies to benefit middle-income workers. “Dave Camp’s plan, there’s a lot I disagree with. But it was a good place to start.”

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