[Congressional Record (Bound Edition), Volume 157 (2011), Part 10]
[Senate]
[Pages 13786-13787]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           DEFICIT REDUCTION

  Mr. LEVIN. Mr. President, yesterday I spoke on the floor about the 
need to restore revenue as part of our deficit reduction efforts. I 
explained that I have sent a letter to the members of the Joint Select 
Committee, now crafting a deficit reduction plan, with seven ideas on 
how to address our revenue shortfall in ways that reduce the deficit, 
protect economic growth, and ensure that the sacrifices which are 
necessary to achieve our budget goals are shared broadly among the 
American people. Together, these proposals would reduce deficits on the 
order of $1 trillion over 10 years.
  Today I want to go into greater detail on two of those ideas to 
address loopholes and tax breaks that are as damaging to our budget as 
they are unfair to working families. One proposal would stop 
corporations and individuals from using offshore tax gimmicks to dodge 
the taxes they owe. The other proposal would close a loophole that 
gives corporations a huge tax break when they award stock options to 
their executives, effectively using the hard-earned tax dollars of 
American families to subsidize the paychecks of CEOs and other top 
executives.
  Let's begin with the goal here, deficit reduction. Budget experts 
tell us we cannot close our budget gap with spending cuts alone. 
Revenue must play a role. These two proposals can help. The Permanent 
Subcommittee on Investigations, which I chair, has estimated that the 
use of offshore tax havens by wealthy U.S. taxpayers costs our Treasury 
around $100 billion a year. I believe the legislation to address that 
issue can recover a significant portion of that loss. The Joint 
Committee on Taxation estimated that a previous version of the 
legislation would recover nearly $30 billion over 10 years, but new 
provisions that we have included should raise that figure 
significantly. Closing the stock option loophole would save $25 billion 
over 10 years, according to the Joint Committee on Taxation. This 
revenue would help the Joint Committee in its difficult task of 
achieving at least $1.2 trillion in deficit reduction and it would help 
restore fairness to the Tax Code without penalizing activities that 
contribute to economic growth or raising taxes on middle-income 
Americans.
  Our work on the Permanent Subcommittee on Investigations has, for 
more than a decade, exposed the ugly truths of tax haven abuse. A 
single building in the Cayman Islands called the Ugland House serves as 
the mail drop for nearly 19,000 companies incorporated there for tax-
dodging purposes. Of the 100 largest publicly traded corporations in 
America, 83 have subsidiaries in tax havens. Hedge funds, whose 
employees live right here in the United States, pretend to be based in 
tax havens to dodge U.S. taxes. An army of lawyers, bankers, and 
accountants helps U.S. taxpayers use offshore abuses to avoid taxes. 
All of this shifts the tax burden of these tax dodgers onto the backs 
of honest taxpayers.
  Yesterday, the Internal Revenue Service announced that they have 
recently completed an offshore program where they give a degree of 
amnesty to people who are willing to come in and pay their taxes. 
Thirty thousand such people have come in since 2009, and that is the 
tip of the iceberg, as our Permanent Subcommittee on Investigations 
disclosed.
  How do we combat this? Several colleagues and I have introduced 
legislation called the ``Stop Tax Haven Abuse Act,'' S. 1346. Our bill 
will authorize the Treasury Secretary to take special measures against 
foreign jurisdictions or foreign financial institutions that impede 
U.S. tax enforcement by prohibiting U.S. financial institutions from 
doing business with those foreign financial institutions in 
uncooperative jurisdictions. It will help the IRS identify ownership 
and control of offshore entities. It would stop corporations whose 
management and control are located primarily in the United States from 
claiming foreign status to dodge taxes. It would prevent businesses 
from dodging taxes by claiming that assets physically held in the 
United States should be treated as offshore assets for tax purposes. 
And it would treat derivatives payments sent from the United States to 
offshore entities as taxable income. Enacting this legislation and 
ending these offshore abuses would penalize tax dodging, not legitimate 
economic activity, and it will help to bring down the deficit.
  Similarly, closing the stock option loophole would not penalize 
productive economic activity. It would, instead, end an unaffordable 
Federal subsidy for corporate executive pay. Today, under tax rules for 
reporting stock options, corporations report stock option expenses on 
their books when those stock options are granted, but they use another 
method to claim a different--and usually a much higher--expense on 
their tax returns when the stock options are exercised. The result is 
that corporations can usually claim far larger tax deductions for stock 
options pay on their tax returns than the actual expense they show on 
their books for those same options. They get a much bigger tax 
deduction for exactly the same tax option expense as they show on their 
books. Stock options are the only type of compensation for which the 
Tax Code allows a corporation to deduct as an expense for tax purposes 
more than what they show on their books for that same expense. IRS data 
shows that from 2005 to 2009, this loophole allowed companies to claim 
between $11 billion and $52 billion each year in excess tax deductions.
  Legislation I have introduced with Senator Sherrod Brown and Senator 
McCaskill would end these excess deductions by requiring corporate 
stock option tax deductions to equal the stock option expense shown on 
the corporate books for those same options. It would not affect the 
taxes paid by individuals who receive the stock options--their taxes 
would not be affected, as now they pay for the actual sales price minus 
their cost. It would not affect so-called incentive stock options, 
often used by startup companies. It would make stock option pay subject 
to the same $1 million cap on corporate tax deductions that applies to 
other forms of executive pay. These proposals alone will put a major 
dent in the deficit. They would ensure that multinational corporations 
and wealthy individuals pay the taxes they owe, just like working 
Americans. If we are to seriously reduce the deficit, these kinds of 
tax reforms and the resulting added tax revenues must be part of the 
discussion. I urge my colleagues, especially those on the Joint Select 
Committee, to embrace these ideas.
  Again, I sent a letter yesterday to the members of the joint 
committee, all the members, laying out these seven ideas which together 
will raise over $1 trillion in 10 years.
  I am going to return to the floor in the days ahead to discuss 
additional reforms, with the resulting revenues, that were set out in 
my letter to the Joint Select Committee. These changes, these reforms, 
this loophole closing, will help to close the gap between spending and 
revenues that all of us I know want to close.
  I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.

[[Page 13787]]

  The bill clerk proceeded to call the roll.
  Mr. WYDEN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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