Washington, DC – With Tax Day looming, Senator Sheldon Whitehouse (D-RI) has called on Senate Majority Leader Mitch McConnell (R-KY) to bring up legislation that would give the American people greater confidence in their tax system. In a letter sent to Leader McConnell today, Whitehouse wrote:
“As millions of Americans prepare to submit their 2015 tax returns, support for our nation’s tax system may be at an all-time low. From reports on corporate inversions to the publication of the Panama Papers, the headlines are filled with stories that show that the wealthy and well-connected can avoid paying the taxes they owe. I write to urge you to bring up a trio of bills that together would restore the American public’s confidence in our tax system.”
The three bills, all of which Whitehouse has championed in the Senate, include the Paying a Fair Share Act (also known as the Buffett Rule), which would require multi-million-dollar earners to pay at least a 30 percent effective federal tax rate; the Stop Tax Haven Abuse Act, which would close offshore tax loopholes, eliminate many tax incentives for U.S. companies to move jobs and operations offshore, and modify rules on corporate inversions for businesses dodging taxes; and the Incorporation Transparency and Law Enforcement Assistance Act, which would help protect against tax evasion by requiring states to track who really owns shell corporations formed under state law.
Full text of the letter is below.
April 14, 2016
Mitch McConnell
Majority Leader
United States Senate
Washington, DC 20590
Dear Leader McConnell:
As millions of Americans prepare to submit their 2015 tax returns, support for our nation’s tax system may be at an all-time low. From reports on corporate inversions to the publication of the Panama Papers, the headlines are filled with stories that show that the wealthy and well-connected can avoid paying the taxes they owe. I write to urge you to bring up a trio of bills that together would restore the American public’s confidence in our tax system.
While our tax system is nominally based on progressive rates, the carried interest loophole and other special provisions allow some of the highest-earning Americans to pay lower effective tax rates than millions of middle-class families. In fact, the top-earning 400 taxpayers in 2013—making an average of $264 million each—paid an average effective federal tax rate of just 23%. That’s close to the effective rate paid by typical middle-school teachers and restaurant managers in Rhode Island. The Paying a Fair Share Act (S. 161) would address this inequity by requiring multi-million-dollar earners to pay at least a 30% effective federal tax rate.
With frequent reports of companies using international mergers and other offshore strategies to cut their American tax bills, it’s no wonder that corporate income tax receipts as a share of GDP have fallen from 4.6% in the 1950s to just 1.8% over the past ten years. According to an estimate by Oxfam, offshore tax dodging costs the United States over $100 billion each year. With a record national debt and the constraints of the Budget Control Act, we cannot afford to ignore this lost revenue. Plus it’s just wrong. The Stop Tax Haven Abuse would close numerous tax loopholes that encourage companies to shift property, profits, and jobs overseas.
Finally, we should consider legislation to address tax evasion facilitated by anonymous shell companies. As we saw in the Panama Papers—a trove of recently uncovered documents from a law firm specializing in tax shelters for wealthy clients—tax evaders can use shell companies, including ones formed in the United States to hide assets from the IRS and law enforcement. The Incorporation Transparency and Law Enforcement Assistance Act (S. 2489) would ensure that the fifty states keep track of who really owns the shell corporations formed under state law. States would periodically update this information and make it available to law enforcement agencies.
I thank you for your consideration of this request and would be happy to speak with you about these bills or other ideas for sensible tax reforms.
Sincerely,
Sheldon Whitehouse
United States Senator
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