[Congressional Record (Bound Edition), Volume 149 (2003), Part 4]
[House]
[Pages 5052-5053]
[From the U.S. Government Publishing Office, www.gpo.gov]




                  CORPORATE ACCOUNTABILITY TAX GAP ACT

  The SPEAKER pro tempore. Pursuant to the order of the House of 
January 7, 2003, the gentleman from Texas (Mr. Doggett) is recognized 
during morning hour debates for 5 minutes.
  Mr. DOGGETT. Mr. Speaker, an old maxim ``the more you know, the 
better your decision,'' underlies my introduction of the ``Corporate 
Accountability Tax Gap Act.'' We need this legislation because of the 
growing gap between what corporate America claims as giant profits to 
lure investors--called ``book'' profits and what it reports as little 
income to the Internal Revenue Service--called ``tax'' profits.
  While not compelling closure of this gap, this bill would require 
publicly traded corporations to report, and in some cases, to explain 
the discrepancy. Like the canary in the coal mine, a little bit of 
transparency in accounting would be a ``WorldCom,'' ``Enron,'' and all 
those other corporate scandals ``early warning system'' to avoid a 
repeat of this past three long years of stock market losses and to root 
out abusive tax shelter schemes.
  To those who say ``what you don't know can't hurt you,'' I submit as 
Exhibit A a new 2,800-page report on the Enron scandal that has been 
reviewed before the Senate Finance Committee.
  Those 2,800 pages represent essentially about 2,800 reasons why 
``trust'' is no longer a substitute for ``verify'' when it comes to 
corporate income. This report on Enron's financial and tax shenanigans 
is longer than any Charles Dickens novel but no less bleak.
  This report released by the Joint Committee on Taxation documents 
that in four years Enron glowingly bragged of $2.3 billion in income to 
its

[[Page 5053]]

shareholders, while at the same time it was reporting $3 billion in 
losses, not income, to the IRS.
  The $5 billion Enron credibility gap is not unique. In the last year 
for which we have data, there was an estimated $159 billion gap between 
book earnings that corporations report to investors and taxable 
earnings reported to the IRS.
  Too often investors read a rosy earnings report, while at tax time, 
Uncle Sam hears only regrets written in red ink. In the words of Wall 
Street Journal columnist Alan Murray, ``it's increasingly clear that 
lying to shareholders and lying to the IRS are just opposite sides of 
the same coin.''
  The ``Crooked E'' had many enablers, but ultimately much of the blame 
belongs right here in this Congress, which was unwilling to make the 
changes necessary to prevent Enron-type debacles. Last year, the Senate 
Finance Committee demanded the Enron report and held hearings. In the 
House, unfortunately, the Committee on Ways and Means washed its hands 
of the entire matter. It was not interested in inspecting the Enron 
reports. It refused to hold a hearing, much less report a bill out of 
committee. The Republican leadership feared that if we lifted that rock 
just a little, the public would be outraged by what crawled out 
concerning corporate misconduct.
  I ask today that my colleagues help me lift the rock, just a little, 
by supporting the ``Corporate Accountability Tax Gap Act.''
  In this Enron report, one tax promoter touts itself as an ``Architect 
of value.'' This architect, though, only built facades, created only 
virtual value to defraud investors and the government alike.

                              {time}  1245

  This report shows that Enron patterned some of its tricks after what 
other corporations were doing. Indeed, in only the last few days we 
have had a spate of corporate scandals, including the grocer Ahold and 
the phone company Sprint, which indicates that much more work remains 
to be done.
  Certainly not all of the book/tax gap comes from accounting gains, 
but a Harvard Business School study last year determined that more than 
half of the gap could not be explained by common tax deductions. Tricky 
leasing games and off-balance sheet transactions can hide financial 
difficulties while artificially inflating earnings.
  If a corporation's biggest profit center is its tax department, the 
investors need to know it.
  Under my bill, publicly-traded companies would disclose the bottom-
line net income tax that they paid as well as the federal income tax 
expense they reported to the Securities and Exchange Commission. The 
gap between the two would be exposed for all to see and to explore.
  Continued secrecy is not in the public interest. A host of Enron 
executives have demonstrated the truth of former Chief Justice Earl 
Warren's remark that ``it would be difficult to name a more efficient 
ally of corruption than secrecy.''
  Finally, my bill would commit the Treasury Department, working 
together with Congress, to report promptly on a study of this troubling 
book/tax gap and recommend further appropriate changes. The scope of 
the problem and the harm it can inflict on hard-working investors, 
especially seniors with limited retirement income, have motivated 
strong public interest and an endorsement from Citizens Works and 
Taxpayers for Common Sense.
  Allowing a few to dodge their fair share of support for our national 
security and other needs means increasing the burden on honest 
Americans. Restoring investors' confidence in the market means arming 
them with more than glossy, self-serving, shareholder reports. 
Protecting hard-working Americans' investments means approving the 
``Corporate Accountability Tax Gap Act'' to assist the public in 
deciding whether financial reports are based on facts or fairy tales.

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