Senate Dem Pitches Tax Haven Abuse Bill As Deficit Reduction
Levin is hoping that Washington's deficit fever will give his perennial proposal to stop offshore tax haven abuses the impetus it hasn't had the last four times he introduced it.
The basic fairness aspects of the bill "will get it to the goal line," Levin said at a press conference where he unveiled his Stop Tax Haven Abuse Act. The focus on deficit reduction in Washington will "take it over the goal line," he said.
The Senate's Permanent Subcommittee on Investigations, which Levin chairs, has calculated that offshore tax abuses cost the Treasury $100 billion a year in lost revenue, or about $1 trillion over the course of a decade [pdf].
White House and congressional negotiators have been arguing over whether their 10-year deficit reduction target should properly be $2 trillion or $4 trillion.
"This is a big chunk of whatever that goal is," Levin said.
For 10 years now, Levin has been proposing to close tax loopholes that let multinational companies and hedge funds shelter enormous sums by creating offshore identities and using tax-haven banks. This time around, there are some new features to his bill.
One measure would tax payments on credit default swaps that currently escape taxation because they are technically sent to offshore shell companies. "If you have a credit default swap -- a bet -- and you are making payments on that swap to a foreign corporation, that payment is considered as being sourced where it's received," Levin said. "That's absurd."
Another measure would require all domestic and foreign companies listed on U.S. stock exchanges to publicly disclose the extent of their offshore operations as a way of spotting tax haven abuse. The companies would be forced to disclose the number of employees, amount of sales, how much tax they owed and how much tax they paid for each country where they do business.
And yet another measure -- there are 18 in the bill -- would attempt to recover taxes on money that is deposited in unaccountable offshore banks but then redeposited into "correspondent accounts" in U.S. banks.
"The fiction that a lot of this offshore money is kept offshore would be punctured," Levin said, "because a lot of the money is not kept offshore, but in fact is in correspondent accounts here in the United States where it has the protection of United States banks, the security of United States banks and can be invested at the direction of the owner of that money."
Closing tax havens may sound like common sense, but on Capitol Hill, money talks. Big business tends to dominate tax reform talks, and groups that represent huge multinationals -- particularly in the pharmaceutical, technology and financial industries -- that use these tax havens insist that closing them would make American companies less competitive globally, causing dire consequences domestically.
"There's a lot of verbal support for closing down tax havens," Levin said of his congressional colleagues. "People say they're in favor of it. But there's a whole bunch of big companies that use those tax havens for their financial benefits."
"When the rubber hits the road, there will be opposition to this."
But Levin also said the bill could run into problems because of the subject matter. "These are complicated things. And anytime you're trying to address things that are complicated, where people's eyes glaze over when you're trying to explain what you're talking about, you're starting with one hand tied behind your back," he said.
Levin has four cosponsors for his bill, and Senate Budget Committee Chairman Kent Conrad (D-N.D.), who has also been pushing to close tax havens for years, made closing the loopholes a key part of the deficit-cutting proposal he made on the Senate floor on Monday.
"The Democrats on the Budget Committee said: 'We have had it. We are going after those people. We are going to insist they pay their fair share just as the vast majority of Americans already do,' " Conrad said. "So we are saying:' We are coming after you. If you have a tax haven down in the Cayman Islands, we are coming after you. If you have an abusive tax shelter, we are coming after you because it is not fair to all the rest of us who are paying what we owe.' "
Levin said the amount of support the White House gives his bill will be a major factor in whether it passes. President Obama has often spoke of ending tax breaks "for companies that ship jobs overseas." And as senator, Obama twice supported Levin's previous attempts.
"Hopefully President Obama will be one of those who really puts his shoulders behind this effort," Levin said.