Democratic Senator Carl Levin said an overhaul of the U.S. tax code would be difficult to accomplish and instead lawmakers should focus on curbing “unjustified” tax breaks.
“Corporate tax reform is going to be very, very difficult if you’re looking at the legitimate deductions, because there’s a reason for those deductions,” Levin said at a Bloomberg Government breakfast today. “They serve an economic purpose so the economic interests that were able to get those passed, put into law, are going to fight very hard to keep those deductions.”
Levin, of Michigan, said the focus should be on limiting some tax breaks rather than on a tax code rewrite that wouldn’t raise additional revenue.
Levin’s comments follow a hearing this week by the Senate Permanent Subcommittee on Investigations, of which he is chairman, that focused on $102 billion in assets that Apple Inc. (AAPL), the most valuable technology company, has stored in offshore entities.
Executives of Apple, based in Cupertino, California, defended their practices at the hearing. Chief Executive Officer Tim Cook said the company complies with all laws and has no plans to repatriate earnings kept abroad.
“That’s why my focus has been on the ones that are unjustified where it’s pretty hard to defend them,” Levin said. “What’s the answer that we got from Apple? Change the law.”
Cook’s appearance before the panel was intended to draw attention to the flawed U.S. tax system and jump-start discussions about rewriting the tax code, Levin said.
The push to rewrite tax laws has moved out of the spotlight as the pace of deficit growth has slowed and lawmakers focus on other matters. Those include revising immigration law and investigating accusations that the Internal Revenue Service improperly gave extra scrutiny to applications of small-government groups seeking tax-exempt status.
“It is a scandal, as far as I’m concerned, for the IRS to be choosing and picking people to investigate based on ideology,” Levin said.
Levin said the IRS investigation doesn’t mean “the air is out of the room” on rewriting tax laws. Still, he said the IRS matter has put on a “side track” his committee’s investigation into whether the IRS wrongly allowed tax-exempt status for some groups that are primarily political.
Levin is crafting legislation that would end some offshore tax benefits for companies.
Levin, 78, chairman of the Senate Armed Services Committee, said in March that he wouldn’t seek a seventh term in 2014.
His support for business tax changes that would raise fresh revenue sets him apart from others who back a budget-neutral rewrite of corporate taxes. That position has drawn support from President Barack Obama and Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee.
Camp says his committee will pass a bill this year that would lower tax rates for individuals and businesses and remove or curtail tax breaks. He has released draft legislation on international taxation, small businesses and financial products.
The Senate Finance Committee has been holding a series of bipartisan meetings on the issue.
Obama has offered a framework for business tax changes that would reduce the top corporate rate for most companies to 28 percent from 35 percent.
Levin said tax breaks “ought to go” if they “can’t be justified as a way of producing cleaner air, cleaner water, using less energy, building a home through a mortgage” or other economic grounds.
“We shouldn’t even think about using that revenue for anything other than deficit reduction,” he said.
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