[Congressional Record Volume 153, Number 21 (Monday, February 5, 2007)]
[Senate]
[Pages S1567-S1568]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      TAX GAP AND THE MINIMUM WAGE

  Mr. GRASSLEY. Mr. President, I would like to speak about two issues 
that have been much in the news lately: the tax gap and the minimum 
wage bill. We had on the front page of the Times today the discussion 
about the tax gap. In addition, with the release of the President's 
budget today, the administration has provided Congress substantive 
proposals to deal with the tax gap. It is now Congress's responsibility 
to consider these proposals, review them, and hear from the public and 
also see what more is possible in terms of addressing the tax gap. But 
the good news is we have already taken steps in this Congress to deal 
with the tax gap. We have very important tax reforms and tax gap 
measures included in the minimum wage bill. So Congress is effectively 
killing two birds with one stone.
  First, we are providing needed tax relief for small businesses that 
could be harmed by the increase in the minimum wage--and I voted for an 
increase in the minimum wage. Second, in the minimum wage bill we are 
going after the tax gap and those who engage in the tax scams.
  Two things: No. 1, we are dealing with efforts to help small business 
and, No. 2, we are at the very same time bringing more money into the 
Federal Treasury by closing tax scams and reducing the tax gap.
  I would say, as a sidenote to my colleagues, particularly the new 
leaders on the Budget Committee, that these tax provisions are only the 
latest example of the Finance Committee producing additional revenues 
by changes in the Tax Code. Unfortunately, I feel as though I need to 
put on a Sherlock Holmes hat and hire a bloodhound to go out and try to 
find any savings that the Budget Committee makes and had enacted into 
law when it comes to the spending side of the ledger. We have more than 
done our job on the tax side. I say it is time for the Budget Committee 
to deliver savings on the spending side.
  But let me turn back to the tax gap and turn back to the minimum wage 
bill. I am very pleased that in working with Senator Baucus we have, as 
part of the tax provisions contained in the minimum wage package, a new 
provision--a number of provisions, in fact--that will go after those 
engaged in tax shelters and tax scams and take steps, then, in the 
process, to address the tax gap--in other words, money that is owed but 
not paid. I would like to highlight just a few of these provisions that 
are in the minimum wage bill that are closing the tax gap and shutting 
down tax scams.
  We shut down the SILO scheme. That is an acronym. U.S. corporations 
cut their tax bills by purchasing and leasing back overseas government 
facilities such as sewer plants and subways in the country of Germany. 
We take additional steps to go after corporations that move to the 
Bahamas and have just a mailbox, not any people, and use the gimmick to 
cut their taxes. I can't tell you how many times I have heard speeches 
about that issue from Senators on the other side of the aisle. We can 
end the talking and we can start doing something about it with these 
very provisions contained in the minimum wage bill if we do not let 
suceed people who are talking about separating the tax provisions of 
the wage bill just to get a minimum wage bill passed.
  We also tightened the rules on individuals who expatriate to avoid 
taxes legally owed in the United States--and we have that happen.
  We end the fast and loose ways that corporations account for fines 
and penalties, so if a corporation gets a penalty for, let's say, 
polluting the environment, they do not get to deduct that from their 
income tax. We also increase penalties for those who underpay taxes due 
to fraud. I think everybody would agree with that. We double the fines 
and the penalties for those who use offshore financial arrangements to 
avoid taxes. The Finance Committee views that as a growing problem and 
a major reason that there is such a tax gap. We expand and improve the 
whistleblower program which will provide the Internal Revenue Service a 
roadmap for corporate tax fraud.

  We modify the collection due process rules to protect the tax 
protesters from abusing the system. This is something that the 
administration proposed in its budget today to help deal with the tax 
gap.
  This collection due process provision contained in the minimum wage 
bill only emphasizes my point that we can start dealing with a tax gap 
today, right now.
  And then a final provision I will make reference to is one provision 
that closes a loophole in section 162(m), the $1 million limitation for 
corporate executives. The provisions provide that a CEO can't avoid the 
effects of 162(m) by not being on the job at the end of the year.
  Mr. President, forests have been sacrificed to print the speeches 
that politicians make decrying excessive CEO pay. Yes, we have a 
provision in the minimum wage bill that tightens the deduction that can 
be taken for higher CEO pay.
  So I get down to the basics, and I get down to the basics because I 
have been hearing some rumors from Senators--but more importantly from 
the leadership of the other body--that in order to get a minimum wage 
bill passed, we ought to drop the tax provisions and pass the minimum 
wage bill. But I have always been hearing over the years from those 
people who are saying: We need to do something about the tax gap; we 
need to do something about the tax scams; we need to do something about 
people going offshore to avoid the payment of taxes, and on and on. So 
I have to ask the Democratic leadership if they are going to put the 
provisions I am talking about--closing the tax gap, closing down the 
tax scams--if they want to put those provisions in the trash can. If 
they do, I would also like to put into the trash all the speeches made 
on the other side then about CEO pay.
  I say this because the time for speeches is over. We can take steps 
right now with the tax provisions in the minimum wage bill to deal with 
the tax gap and CEO pay. I have listed these provisions, and as my 
colleagues know, while many of them are good common sense, these 
provisions are also not at all popular downtown on K Street or up the 
eastern coast on Wall Street.
  While the debate has focused on the tax breaks for small business in 
the minimum wage bill--and those are important because they are helping 
small business overcome some negative impact of the minimum wage 
increase--it is also critical we pass a much-needed tax gap and anti-
abuse provisions contained in the minimum wage bill and pass them now. 
Delaying these reforms as some would argue--putting them on another tax 
bill--rewards tax cheats. These reforms are often date and time 
sensitive. Delay only benefits those who are playing fast and loose 
with our tax laws.
  I can't believe the House Democratic leadership wants the first 
action they take in the area of taxes to drop these reform provisions--
these provisions that would close the tax gap--and signal to the tax 
cheats that the door is wide open.
  Senator Baucus and I, working together over the years, have passed 
into law a good many reforms, and we have shut down a number of tax 
scams. However, we have been, at times, stymied in the other body--not 
by Democrats but by Republicans.
  We heard a lot of commentary during the elections and afterwards how 
it was no longer going to be business as usual. My hope is that given 
the rhetoric of the new House leadership, we could finally pass these 
anti-abuse tax reforms in the minimum wage bill. I worry, though, that 
with folks talking about stripping the tax provisions from the minimum 
wage bill, the House leadership may be singing a new song. But

[[Page S1568]]

the results are the same. The House Democratic leadership needs to 
understand that kowtowing to K Street is not a new direction that was 
promised by a new majority in the last election. They can show it is 
not business as usual, as they were condemning Republicans of doing. 
They can show that by passing all the tax provisions contained in the 
Senate minimum wage bill.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Michigan is recognized.

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