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Mr. LEVIN. Mr. President, first I commend Senator Murray and the Budget Committee for the plan they have presented to us. It represents an enormous step forward on an issue of huge significance to American taxpayers. It is a step toward balanced deficit reduction.
An important part of balanced deficit reduction is reducing the deficit without severely damaging important protections for and investments in American families. One way to do that is by ending unjustified tax loopholes and ending the damage they have inflicted on our budget. Senator Murray's summary of the Foundation For Growth, the budget plan before us, refers to ``the sheer magnitude of the revenue lost to off-shore tax abuse, wasteful and inefficient loopholes, and other business tax breaks.''
Many Senators have focused on this issue over the months and the years. A number of them will, I expect, be joining me on the floor over the next few minutes. For many years as chairman of the Permanent Subcommittee on Investigations I have focused on the maze of offshore schemes and complex gimmicks that are concocted to allow a privileged few to avoid paying the taxes that are rightfully owing.
Our subcommittee has, on a bipartisan basis, filled volume after volume with damning detail on how these schemes work and the damage they cause. As Senator Murray and the Budget Committee have pointed out in their blueprint, we are at a moment in history when we can remove this blight. The pressures on the Federal budget and the threat to economic growth and prosperity that they represent require action. We must close these loopholes. The relentless arithmetic of our budget situation compels it; fairness and justice demand it.
We come to the floor today in support of the revenue provisions in the budget resolution before us. We are going to outline the ways for ending these tax avoidance schemes, the preposterous contortions that too many corporations and wealthy individuals employ to avoid paying taxes. We will illustrate the huge loss in Federal revenues, the resulting rise in deficits from these contortions, and will show how that loss has contributed to a shift in the tax burden from corporations and the wealthy to middle-class families and small businesses.
This is a shift that has occurred largely without the notice or the approval of the American public. We are going to demonstrate how closing these loopholes is integral to any balanced deficit reduction agreement that is built on the common good.
The case for additional revenue and for closing tax loopholes as a source of that revenue is overwhelming. Serious deficit reduction requires more revenue, as everybody from the Simpson-Bowles Commission to the Domenici-Rivlin task force to the Concord Coalition to Fix the Debt, has recognized. They have rightly concluded that without additional revenue, the deficit reduction numbers simply do not add up. Republicans have insisted that the discussion of revenue as part of our deficit-reduction approach is finished.
The other day Speaker Boehner claimed, ``The talk about raising revenue is over.'' He is mistaken. Our effort is picking up steam. These Republican protests cannot erase the fact that Federal revenue remains significantly below its historic average as a percentage of the gross domestic product of our economy, and that revenue is, and under current trends will continue to be, below the levels we have needed in the recent past to balance the budget.
In particular, the loss of corporate tax revenues is an ongoing cause of deficits. At a time when corporations enjoy record profits, the highest in half a century, revenue from corporate income taxes has fallen off as a percentage of our taxes collected.
In 2006, corporate tax revenue made up about 15 percent of all Federal revenue. In 2012, it had fallen to 10 percent. Somebody has to pick up the slack. In this case it has been average American families. Why is corporate revenue a shrinking share of our Treasury even though the U.S. corporate tax rate, at 35 percent, is one of the highest in the developed world? It is because the top tax rate doesn't tell the story. While our tax rate at the upper limit is 35 percent on corporations, the average U.S. corporate taxpayer's actual tax rate was just 12 percent in 2011, which is the lowest in generations.
A recent study by two think tanks found that 30 of our largest corporations with combined profits of more $160 billion paid no income tax, zero, from 2008 to 2010.
The Permanent Subcommittee on Investigations, which I chair, has outlined in great detail the black magic that these corporations employ to make their tax bills disappear. One major culprit is offshore tax avoidance. This is hardly a new problem, but it is receiving attention like never before--perhaps because it is simply too big to ignore any longer.
This recent edition of The Economist--just a few weeks ago--pointed out in its lead story and on its cover that tax haven abuse is now a $20 trillion problem for the global economy.
That is $20 trillion, not billion. They also have a special report on this offshore finance. The headline here--and it is an eye-popper, I hope--is that ``The Missing $20 Trillion--How To Stop Companies And People Dodging Tax.''
The Permanent Subcommittee on Investigations has been digging into these abuses for years. Last year a subcommittee report outlined how three U.S. companies--Apple, Google, and Microsoft--had used offshore gimmicks to avoid taxes on almost $80 billion in profits. Much of this tax avoidance stems from manipulation of intellectual property and other intangibles. Companies develop valuable knowledge within the United States, often using tax credits, grants, and other Federal support. They then transfer that valuable property under various legal schemes to offshore subsidiaries at bargain basement prices, thereby shifting the profit that this valuable property generates overseas where it is shielded from taxes.
Other offshore schemes involve pretzel-like twisting of tax laws. For example, the subcommittee found that Hewlett-Packard employed such a gimmick to bring home money that was held offshore--bring it back to the United States--without paying the required taxes. Here is what the law requires: When profits are brought back to the United States, the profits are taxed. The IRS allows an exemption for very short-term loans from offshore subsidiaries to their domestic parent. Hewlett-Packard exploited that exemption by concocting a rotating series of alternating loans from a pair of offshore subsidiaries to make billions of dollars in what should have been taxable repatriated income appear to be short-term loans exempt from taxation. This is a gimmick that is so blatant that even some of Hewlett-Packard's accountants questioned it.
Our subcommittee found that Hewlett-Packard used this offshore cash--used it here--shielded it in taxes to help run its U.S. operations during the 2010 fiscal year. To quote from the subcommittee's description:
There does not appear to be a gap of a single day during that period where the loaned funds of either BCC or CHCC--
The two offshore subsidiaries in question--
were not present in the United States. Moreover, a similar pattern of continuous lending appeared to be occurring for most of the period between 2008 and 2011.
Now they are talking about short-term loans--which I believe is 30 days or less--but they are supposed to be exempt from taxes when they are lent from an offshore subsidiary back to the parent here in the United States. This has been going on for years without a gap by using a gimmick that they found in the Tax Code, which is egregious. It is time to act.
Senator Whitehouse and I introduced a Cut Unjustified Tax Loopholes Act not too long ago. Our bill would help address some of these tax schemes, and others as well. It is a powerful weapon in our deficit-reduction arsenal if we will use it.
Today a coalition of more than two dozen national public interest groups, as well as dozens of State and local organizations, released a letter urging the Senate to adopt our Cut Loopholes Act.
Mr. President, I ask unanimous consent that this letter be printed in the Record.
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Mr. LEVIN. I see there are a number of my colleagues who have joined me here in this effort so I will close with the following comment. Some of the people argue that they will consider closing tax loopholes but only if the resulting revenue is used to lower tax rates rather than reducing the deficit. This position is unwise for two reasons. First, the budget deficit is a significant problem for our country, and we should address it. Senator Murray's budget wisely takes the view that we need to act to reduce the deficit.
Second, the people who elected us overwhelmingly believe that reforms to end these tax schemes, which I have outlined, should contribute to deficit reduction. A recent poll shows that more than 80 percent of Americans believe that revenue we recover from closing tax loopholes should be dedicated to reducing the deficit, not to cutting rates.
Let's follow the path this budget resolution before us outlines: spending cuts, yes, but prudent, carefully considered cuts that preserve our most important priorities; Savings from reform of entitlement programs, yes, but reforms to keep the faith with seniors today and in the future. And, yes, revenue, revenue that ends the privileges of an influential few who have for far too long enjoyed unjustified tax breaks that boost corporate profits and the bank accounts of the wealthy few at the expense of ordinary Americans.
Earlier today Senators WHITEHOUSE, MCCAIN, and I--a bipartisan group--filed an amendment to the budget resolution suggesting the need to close tax loopholes. Our amendment makes reference to ending offshore tax abuses by large corporations. Our amendment provides that at least some of the revenue generated must be used for deficit reduction. This bipartisan amendment makes a strong statement on the momentum that is building for balanced, commonsense deficit reduction.
There is a group of Senators who have come to the floor with me so we can end these tax schemes and gimmicks. I thank Senator McCain, Senator Whitehouse, and I thank my other colleagues who are here today for the work they put into a very vitally important issue.
Mr. President, I believe Senator Whitehouse is ready to proceed. Senator Whitehouse is my principal cosponsor on this amendment, along with Senator McCain.
Mr. President, how much time do I have?
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