Today, Congressman Dan Maffei introduced legislation to close loopholes in the corporate tax code and lower the overall corporate tax rate to no more than 23 percent. This legislation is necessary because certain industries -- especially those with high-paid lobbyists and heavy influence in Washington -- have managed to force loopholes and carve outs that benefit only their industry. The result of a tax code riddled with so many holes is that the overall corporate rate has been pushed to one of the highest rates in the industrialized world.
Representative Maffei said: "The bill I'm proposing today aims to fix both of these problems. First, it will eliminate the irresponsible tax loopholes that only benefit certain sectors of certain industries. It will close one loophole that currently allows foreign corporations to avoid paying taxes on income they earn in the United States by funneling the money through different countries where we have tax treaties. This misuse must stop. Using the revenue from those closed loopholes, we can drastically lower our overall corporate tax rate. We must make our tax system fairer for everyone."
The worst of these special breaks allow companies to take advantage of U.S. tax deductions on income they make overseas. It actually rewards companies for taking business, and jobs, out of our country and sending them to China, India or elsewhere. Under current law, corporations can defer taxes on business income they earn through foreign companies while they take deductions related to that income when they pay U.S. taxes. In effect, we are encouraging corporations to ship jobs overseas -- and then telling the American taxpayer to give them a special tax break.
At the same time loopholes benefit some, our entire business community is at a competitive disadvantage in the worldwide market: China's corporate tax rate is 25%, the United Kingdom's corporate tax rate is 28%, Japan's corporate tax rate is 30%, but the United States' top marginal corporate tax rate is 35%.
Maffei's Bill Seeks To:
* Eliminate a corporate tax loophole that allows American firms to not pay US income tax on foreign operations while still counting that income toward US tax deductions.
* Make permanent a small business expensing deduction of $125,000 (with a $500,000 phase-out threshold) that is due to expire at the end of this year.
* Require multinational companies incorporated in tax havens such as Bermuda and the Cayman Islands to pay taxes on income earned through subsidiaries in the United States.
* Lower the top corporate tax rate from 35 percent to 23 percent. Those companies in the 34 percent and 25 percent brackets also would see their tax rates lowered to 23 percent.
Using the revenue raised by closing loopholes, we can sharply reduce our corporate tax rate to 23%, boosting our entire business community. This is a major tax cut that would allow companies from Upstate New York and around the country to better compete in the global economy -- and it would ensure that all companies benefit, not just those with good lobbyists.