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Madam President, I am here to speak in opposition to the offset in Ayotte amendment No. 2603. The bipartisan budget that passed in December included a Republican provision that changed the annual cost-of-living adjustments, or COLAs, for military retirees. I opposed that provision, and I believe there is bipartisan support for repealing it. The main question that needs to be debated is how to pay for that repeal. Amendment No. 2603 would pay for fixing the military retirement COLA problem by denying the refundable child tax credit to millions of eligible U.S. citizen children. That amendment asks, in effect, whether military retirees are more deserving of help than U.S. citizen children who are on the edge of poverty. That is a false choice. That is not the right approach.
The child tax credit is one of our most important programs to reduce child poverty. Tens of millions of families claim the child tax credit each year--more than 35 million families in 2009--both using Social Security numbers and individual taxpayer identification numbers. According to the Congressional Research Service, the child tax credit reduces child poverty by approximately one-fifth. For such an important and widely used program as this, we should be careful that any changes we make to the program do not harm low-income children and working families. Many of these low-income families are headed by women.
Any large program is susceptible to fraud and misuse. When fraud is alleged, the cases should be investigated and the people who commit fraud should be punished. This means targeted, aggressive auditing and enforcement, not wholesale changes to the program that will deny help to kids who are legally receiving it today.
The proponents of the amendment tell us that individuals are fraudulently claiming the child tax credit for kids who live in Mexico or for kids who do not exist. That is already a violation of the law. This is fraud. I agree with the sponsor that we should take steps to prevent this fraud.
The IRS says this amendment would not solve the fraud problem. In 2012, five Senators wrote to the IRS regarding this matter, and their letter asked:
Does the fact that the person filing the return has a Social Security number indicate whether the child claimed for the credit met the residency requirements required under the law?
The response from the IRS, in a letter dated July 20, 2012, was:
The possession of a SSN [Social Security number] by the filer is not relevant in determining whether the child met the residency requirements.
In other words, imposing a Social Security number requirement does not prevent the fraud that the sponsor seeks to prevent. That makes intuitive sense. If a person is going to lie about the existence of a kid, they will lie about the SSN too. This amendment does not solve the problem.
If this amendment does not solve the problem, then what would be the real impact of this amendment? Here is what the amendment would do.
First, it would deny help to roughly 4 million U.S. citizen children from low-income households by making their families ineligible for the child tax credit. The average family claiming the refundable child tax credit earns only about $21,000 a year, and, as I mentioned earlier, many of these families are led by women. Every dollar matters to these families. The child tax credit lifts roughly 1.5 million children out of poverty each year. This amendment would plunge many of these children back into poverty.
I wish to emphasize that because of the way the child tax credit is structured in the Tax Code, only working families are eligible for the refundable portion. These families are working and paying taxes, but in lean years they would be denied help from the child tax credit if this amendment were to become law. They are paying taxes but would be denied help. That is not fair.
Second, this amendment would render these 4 million U.S. children second-class citizens because of who their parents are. That is contrary to the principle of equality on which this country was founded. All citizens should be treated fairly and equally. This amendment says some citizen children will receive help and others will not, depending on who their parents are. That is simply not right.
In closing, there is a better way to pay for repealing the military COLA provision that was included in the budget, and that is to close corporate tax loopholes. The proponents cite a news report from Indiana in which an undocumented worker admitted he had allowed four other undocumented workers to use his address to file tax returns. The four workers did not live there, but he allowed them to use his address anyway. I agree that this is fraud and should be stopped.
This story reminds me of the story of the Ugland House in the Cayman Islands. The Ugland House is a 5-story building that has been identified as the official address for 18,857 companies, all at the same time. Some of the inhabitants of this address are some of the largest publicly traded companies in the United States. As I understand it, this is not a violation of U.S. laws. Tens of thousands of corporations can legally use the same building for their official address. It is not fraud but merely tax planning, I am told.
Offshore mailing addresses and accounting tricks are allowing corporations to shelter enormous profits from U.S. taxes. According to Bloomberg News, 83 of the largest companies in the United States held $1.46 trillion in profits offshore in 2012. Another report, by JPMorgan Chase, estimates that the amount of offshore profits is even higher--nearly $1.7 trillion. How does this work? They funnel their revenues through shell companies to escape taxation. Countries such as Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland--which combined account for less than one-half of 1 percent of the world's population--generated 43 percent of the profits reported by American companies in 2008. Clearly, there is a major tax problem here.
While our colleagues rail against five workers using one address to file taxes, we hear nothing about more than 18,000 companies that have used one address to file their taxes. Talk about egregious. These corporate tax loopholes resulting in the huge amount of taxes companies don't pay are what this Congress should focus on, not on denying a few hundred dollars of help to a U.S. citizen child who is on the edge of poverty.
Senator Shaheen has filed an amendment that begins to address these corporate tax problems. Her amendment, No. 2618, of which I am a cosponsor, will prevent more than 18,000 corporations from pretending they are headquartered in a single building in the Cayman Islands. Like the amendment of Senator Ayotte, the Shaheen amendment will repeal the military retiree COLA provision that was in the budget deal. The difference is that the amendment of Senator Shaheen will pay for the repeal by holding corporations accountable for the taxes they owe instead of denying help to U.S. citizen children of working parents, many of whom are women, who are in poverty.
We all recognize that we have a responsibility to our veterans, taxpayers, and to future generations. The amendment of Senator Shaheen will allow us to meet all of these commitments at the same time. I urge my colleagues to join me in supporting this commonsense approach and vote in favor of the Shaheen amendment and not the Ayotte amendment.
I yield the floor.
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