[Congressional Record Volume 141, Number 110 (Monday, July 10, 1995)]
[Senate]
[Pages S9602-S9603]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                       BILLIONAIRES' TAX LOOPHOLE

  Mr. KENNEDY. Mr. President, one of the worst examples of Republican 
misplaced priorities is the current blatant attempt to keep the tax 
loophole open for billionaires who renounce their American citizenship 
in order to avoid paying taxes on the massive wealth they have 
accumulated in America.
  Under current law, these unpatriotic billionaires get a juicy tax 
break for turning their back on Uncle Sam. Does anyone in America 
seriously think they deserve it?
  When Democrats initially tried to close the loophole last April, our 
proposal was rejected--supposedly because a few so-called technical 
questions needed to be addressed.
  It turns out that the only serious technical issue was how to keep 
the loophole open, or at least save as much of it as possible.
  The Joint Committee on Taxation completed its long-awaited study on 
the loophole on June 1 and it turned out to be a blatant attempt to 
save the loophole, rather than close it.
  The Ways and Means Committee found the ways and means to keep the 
loophole open. They have even given the bill an appropriate number--
H.R. 1812.
  What a perfect number for a tax loophole bill--1812. That is about 
the year their thinking on tax reform stopped. Democrats will try to 
bring their 1812 bill into the 20th century when it gets to the 
Senate--and close that loophole tight on those unpatriotic 
billionaires.
  I just wish our Republican friends would put as much time and effort 
into closing tax loopholes and reducing corporate welfare as they put 
into keeping loopholes open.
  We would save tens of billions of dollars, and balance the budget far 
more fairly, instead of balancing it on the backs of Medicare and 
education and low-income working families.
  Tomorrow, the Senate Finance Committee will be holding a hearing on 
the billionaires' tax loophole. It is vitally important that the Senate 
stand firm in its desire to close this flagrant loophole once and for 
all.
  On April 6, 96 of us went on record in favor of closing it. If we 
really want to close this loophole, we cannot accept the Ways and Means 
Committee bill. That bill is more loophole than law.
  It does not prevent massive income tax avoidance by patient 
expatriates, and it does nothing to prevent avoidance of estate taxes 
and gift taxes.
  First, the House bill allows expatriates to pay no U.S. tax on their 
gains if they wait 10 years before they sell their assets.
  This part of the loophole already exists in current law, as has been 
repeatedly pointed out.
  There is no reason to leave it open. Expatriates should be taxed when 
they expatriate--at the time they thumb their nose at Uncle Sam.
  Second, under the House bill, gains from foreign assets built up 
during U.S. citizenship would not be subject to U.S. tax after 
expatriation takes place. All U.S. citizens pay taxes on worldwide 
income, so why should not expatriates?
  Any serious proposal to address this issue must tax the gains on the 
expatriate's worldwide assets, and this tax must be imposed at the time 
of expatriation.
  In addition, under the House bill, expatriates will continue to use 
tax planning gimmicks to avoid taxes on gains from domestic assets by 
shifting income from this country to foreign countries. As long as the 
Tax Code exempts foreign assets from the tax, wealthy expatriates will 
find new ways to shift assets and avoid taxes.
  Third, the House bill cannot be effectively enforced. Expatriates can 
leave the U.S. tax jurisdiction without paying the tax or posting any 
security. They merely fill out a form at the time of expatriation, and 
the IRS will be left in the cold.
  Fourth, the House bill does nothing to prevent expatriates from 
avoiding gift and estate taxes. With good legal advice, an expatriate 
can transfer all assets to a foreign corporation and then give it all 
away without any gift tax liability.
  Finally, in a particularly obnoxious maneuver, the Ways and Means 
Committee bill unsuccessfully attempted to gerrymander the effective 
date of its watered-down reform in a transparent attempt to permit a 
few more undeserving billionaires to slither through the full loophole 
before the mild committee changes take effect.
  Under this proposal, wealthy tax evaders would have qualified for the 


[[Page S 9603]]
loophole by simply having begun, not completed, the process of 
renouncing their citizenship by the February 6 effective date.
  The Ways and Means Committee knows how to set a strict effective date 
when it wants to. On the very bill where the controversy over the 
billionaires' loophole first erupted, the committee set a strict 
effective date to prevent Viacom, Inc., from obtaining a $640 million 
break on the sale of its cable TV properties.
  The committee required a binding contract to be reached by the 
effective date. Viacom could not meet that requirement, even though it 
had taken many steps over many months before the effective date to 
negotiate the contract.
  Viacom lost the tax break because it had not taken the final step--
and the same strict requirement of final action should be applied to 
billionaires who are in the process of renouncing their citizenship.
  If they had not completed the final step by February 6, they should 
not be able to use the loophole.
  Fortunately, the Democrats prevailed on the effective date, because 
of the spotlight placed on the issue. But that still did not stop them 
from finding an additional loophole for some of those seeking 
exemption.
  To help these expatriates, the Republicans on the committee carved a 
new loophole for expatriates who become a citizen of a country in which 
the individual's spouse or parents were born.
  In sum, at a time when Republicans in Congress are cutting Medicare, 
education, and other essential programs in order to pay for lavish tax 
cuts for the rich, they are also maneuvering to salvage this 
unjustified loophole for the least deserving of the superwealthy--
billionaires who renounce America, after all America has done for them.
  I say, this loophole should be closed now, and it should be closed 
tight--no ifs, ands, or buts. I intend to do all I can to see that it 
is.
  Let us close the loophole, not just pretend it is being closed as the 
Ways and Means Committee bill does.


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