Levin goes after corporate tax loopholes, havens

U.S. Sen. Carl Levin on Monday introduced the Cut Unjustified Tax Loopholes Act along with Sen. Sheldon Whitehouse, D-R.I. The bill would raise more than $189 billion for deficit reduction.

Loopholes and tax havens emerged as a major target for the Detroit Democrat several years ago and the fiscal cliff quandary facing the Congress afforded Levin another chance to raise the issue.

Here is a portion of the veteran senator’s floor statement upon introduction of the bill:

“One significant factor in our revenue shortfall is a massive plunge in the share of the tax burden borne by corporations. Corporate tax revenue amounted to as much as 7 percent of GDP in the 1950s, and 2.7 percent of GDP just seven years ago. In 2012, it amounted to just 1.2 percent of GDP.

“Corporations today pay an average tax rate of just 12 percent. How is that possible, when the statutory tax rate on corporations is 35 percent? Through loopholes in the tax code.

“One of the key abuses is when companies use various gimmicks and tax loopholes to shift their assets and profits offshore. The Permanent Subcommittee on Investigations, which I chair, has spent more than a decade investigating offshore loopholes. We have shown how companies such as Enron used offshore schemes to avoid billions of dollars in taxes. Just last year, we showed how companies such as Microsoft and Hewlett-Packard exploited tax rules to avoid taxes on billions of dollars in income – income even on products developed in the United States and sold in the United States to U.S. customers. They often do so by transferring intellectual property rights and other intangible property developed in the United States to wholly owned subsidiaries in tax havens, thereby avoiding U.S. tax.

“How big is the problem? According to the Congressional Research Service, American multinationals in 2008 claimed to have earned profits in Bermuda amounting to 1,000 percent of Bermuda’s GDP. Multinationals reported earning more than 40 percent of their offshore profits in five tax haven countries, despite the fact that just 4 percent of their overseas workforces and 7 percent of offshore investments were located in those five tax havens.”

The entire text of Levin’s remarks and a summary of thebill are available online.