[Congressional Record Volume 154, Number 102 (Thursday, June 19, 2008)]
[Senate]
[Pages S5835-S5836]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. VOINOVICH:
  S. 3162. A bill to amend the Internal Revenue Code of 1986 to provide 
relief to improve the competitiveness of United States corporations and 
small businesses, to eliminate tax incentives to move jobs and profits 
overseas, and for other purposes; to the Committee on Finance.
  MR. VOINOVICH. Mr. President, when the Senate reconvenes in January 
2009 for the 111th Congress, we will have an historic opportunity, 
through fundamental tax reform, to transform the U.S. economy in a 
manner that will make our nation stronger and more prosperous for 
generations. A number of factors make the 111th Congress the occasion 
for a perfect storm for the Tax Code. At the beginning of the next 
Congress, a new President will take office and will be looking to enact 
major tax changes. At the end, the 2001 and 2003 tax relief will 
expire, resulting in an unprecedented tax increase on the American 
people. And in between, the reach of the deeply flawed alternative 
minimum tax--or AMT--will threaten to hit tens of millions of middle-
class Americans unless Congress enacts major tax legislation. Finally, 
the competitive pressures of a global economy will force us to change 
our uncompetitive and inefficient methods of business taxation, 
including one of the highest corporate marginal rates in the world.
  I am not proposing today a comprehensive tax reform bill that would 
touch every part of the Tax Code, but I am introducing legislation that 
addresses one large piece of tax reform, in the hopes of starting a 
conversation that will inform policymakers as we develop a more 
comprehensive reform in the next couple of years. Today, I am 
introducing the Manufacturing, Assembling, Development, and Export in 
the USA--or MADE in the USA--Tax Act. The purpose of my legislation is 
to provide tax relief to improve the competitiveness of U.S. 
corporations and small businesses and to eliminate incentives that 
favor foreign competition and encourage companies to move jobs and 
profits overseas.
  A number of factors contribute to a company's decision about where to 
locate activity and jobs, including wages, workforce skills, 
transportation costs, and local regulations. But there is no doubt that 
taxes are an important factor. Recent economic research concludes that 
in a global economy, workers bear the brunt of higher corporate tax 
rates, through lower wages and fewer jobs. Therefore, it is imperative 
that we have a Tax Code that makes the United States an attractive 
place to locate production, research, and other activity. While the 
MADE in the USA Tax Act would not address the ``wage pull'' that sends 
jobs to places like China and India, it would deal with the ``tax 
push'' that encourages jobs to leave the United States.
  The MADE in the USA Tax Act would eliminate tax breaks that encourage 
companies to move jobs overseas or that benefit foreign competitors and 
then use that revenue to cut tax rates on large and small businesses 
that invest and create jobs in the United States. The centerpiece of 
the legislation is a one-fifth reduction in the Federal corporate rate, 
to 28 percent from 35 percent. Of the 30 member countries of the 
Organization for Economic Co-operation and Development--which includes 
the major industrialized nations of North America, Europe, and Asia--
the United States has the second highest combined Federal-State 
corporate tax rate at 39.3 percent, lower only than Japan's rate of 
39.5 percent. The average is 27.6 percent, and Ireland has the lowest 
rate at 12.5 percent.
  Even Communist China, our biggest economic rival in the 21st century, 
recently cut its corporate tax rate to 25 percent. It will be that much 
harder to compete with China for jobs and investment when businesses 
operating in the United States have to pay a tax rate 15 percent higher 
than they would have to pay in China.
  In fact, a constituent of mine from Norwalk, OH, Tom Secor, who owns 
his

[[Page S5836]]

own small business, came to my office and told a story about a business 
trip he made to China. He said that he saw an editorial in a Chinese 
newspaper that was discussing all the concerns that Americans have with 
Chinese competition. The conclusion of the editorial was that the 
Americans could solve most of their problems with Chinese competition 
if they would just reform their own Tax Code. Imagine that: even 
Communist China knows that the United States needs tax reform to stay 
competitive, but for some reason we refuse to learn that lesson 
ourselves.
  In addition to slashing the corporate rate on U.S. production, my 
legislation would also take steps to make small businesses more 
competitive and simplify the tax rules for individuals operating in the 
global economy. Specifically, my legislation would increase the 
domestic activities deduction for partnerships, S corporations, and 
sole proprietorships to 12 percent from 9 percent; make permanent the 
2003 expansion in small business expensing; simplify the international 
tax rules for Americans working abroad by repealing complex and 
punitive rules enacted in 2006; and repeal the burdensome 3 percent 
withholding requirement for contractors, also enacted in 2006.
  These tax reforms, which will help create high-paying jobs in the 
United States, will be paid for by repealing a number of existing tax 
breaks that favor foreign competition and that encourage companies to 
move jobs and profits overseas. Among those tax breaks I would 
eliminate are tax shelters that allow foreign competitors to hide their 
U.S. income offshore, creating an unlevel playing field for domestic 
businesses such as small manufacturers and domestic insurance 
companies; tax credits for moving our Nation's technological 
innovation--such as patents, copyrights, and ``know-how''--overseas, 
along with the high-wage manufacturing jobs that accompany that 
intellectual property; tax loopholes that encourage U.S. corporations 
to reincorporate as foreign corporations; a tax exemption for 
executives of offshore hedge funds if the executives put their money in 
certain deferred compensation plans; and tax breaks for foreign oil and 
gas production.
  Reducing the tax rates on corporate and small business income should 
lead to job creation and wage increases for American workers. Paying 
for these tax cuts by eliminating tax breaks for foreign production and 
offshore tax shelters means we can accomplish these goals in a fiscally 
responsible manner. My legislation is intended to be revenue neutral, 
as I believe that we can enact progrowth tax policy without increasing 
the national debt.
  In 1984, President Ronald Reagan declared to the American people that 
the Tax Code was fundamentally unfair and that he was going to reform 
it. President Reagan held his belief in the unjustness of the Tax Code 
deep in his heart. He knew that hundreds of targeted tax subsidies for 
the benefit of powerful interests forced average Americans to pay 
higher marginal rates and reduced economic growth. He saw tax reform 
not as a retreat from his 1981 tax relief agenda but, rather, as a 
logical continuation and enhancement of that agenda. The Tax Reform Act 
of 1986 was the culmination of the quest he began in 1981 to create a 
Tax Code with low marginal rates that raised the necessary revenue to 
fund the government with the least possible interference in our free 
market economy.
  We must enact fundamental tax reform to help make the Tax Code 
simple, fair, transparent, and economically efficient. According to the 
President's Advisory Panel on Federal Tax Reform, headed by former 
Senators Connie Mack and John Breaux, only 13 percent of taxpayers file 
without the help of either a tax preparer or computer software. Since 
enacting the Tax Reform Act of 1986--legislation intended to simplify 
the filing process for taxpayers--over 15,000 provisions have been 
added to the Internal Revenue Code.
  It is not just a matter of saving taxpayers time and effort. This is 
about saving taxpayers real money. The Tax Foundation has estimated 
that comprehensive tax reform could save Americans as much as $265 
billion in compliance costs associated with preparing their returns. 
Now, that would be a real tax reduction that wouldn't cost the Treasury 
one dime.
  I have been working on tax reform for years. In 2003, I attached an 
amendment to the Jobs and Growth Tax Relief Reconciliation Act that 
would have created a blue ribbon commission to study fundamental tax 
reform. The amendment was adopted by voice vote but later was removed 
in conference.
  In the autumn of 2004, I offered my tax reform commission amendment 
again, this time to the American Jobs Creation Act. The Senate again 
adopted my amendment. During conference negotiations, the White House 
contacted me and requested that I withdraw my amendment because the 
President was preparing to take a leadership role by appointing his own 
tax reform panel. I enthusiastically agreed to defer to his leadership, 
and I withdrew my amendment. It seemed to me that the tax reform 
bandwagon was finally starting to roll.
  In January 2005, President Bush announced the creation of an all-star 
panel, led by former Senators Connie Mack and John Breaux, and that 
panel spent most of the year engaging the American public to develop 
proposals to make our Tax Code simpler, fairer, and more conducive to 
economic growth. In November 2005, the panel issued its final report. 
While not perfect in anyone's mind, the panel's two plans provided a 
starting point for developing tax reform legislation that would 
represent a huge improvement over the current system. The panel's 
proposals belong as a key part of the national discussion on 
fundamental tax reform.
  Some of my colleagues will suggest that we can just increase marginal 
rates to raise the revenue we need. But in a competitive global 
economy, I can't understand why we would choose such a self-defeating 
approach. Higher marginal rates on an already-broken tax system would 
only discourage economic ingenuity and reduce U.S. competitiveness.
  Tinkering with the current Tax Code won't get it done. Tinkering is 
what got us into this mess in the first place. It is time to rip the 
Tax Code out by its roots and replace it with something that works. We 
must create a new tax system that is conducive to job creation and 
economic growth. We should start by addressing one of the biggest 
problems with the current code: it rewards moving production activity--
and the good-paying jobs that accompany such activity--overseas. It 
taxes domestic production heavily but taxes foreign production lightly. 
It imposes the second highest corporate tax rate in the developed world 
but collects one of the smallest amounts of corporate tax as a share of 
the economy. Such a system sounds absolutely perverse, but that is what 
we have in the United States. The MADE in the USA Tax Act is intended 
to fix that.
  I know there is bipartisan support in this Chamber to move forward on 
fundamental tax reform. It probably won't happen this year, but that 
doesn't mean that we shouldn't get started right away. We need to start 
setting the table so that a new President and a new Congress can hit 
the ground running in 2009 and enact comprehensive tax reform that 
makes the code simple, fair, and progrowth. I hope my colleagues will 
take a close look at the MADE in the USA Tax Act and join me in trying 
to make it a key part of our future efforts.
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