Letter to Senate Finance Committee Urging Caution on Revenue Raisers
The Honorable Chuck Grassley
Chairman, Senate Finance Committee
Washington, DC 20510
Dear Mr. Chairman:
On behalf of the U.S. Chamber of Commerce, the world's largest business federation representing over three million businesses of every size, sector and region, I write to convey our great appreciation for your efforts to maximize the tax relief proposed by the President. At the same time, we ask that you exercise caution during a search for revenue offsets to finance portions of it. Enactment of these "revenue raisers" — also known as tax increases — may cause great damage to some sectors of our economy, and undo vital parts of the good that you seek to accomplish through enactment of the President's proposals.
Several of the offsets that are being discussed are recycled bad ideas that have been the subject of positions that we have previously communicated to Congress. In general, the Chamber does not believe that "to give with one hand while taking with the other" represents good, sound policy. Some examples follow:
Restriction or Invalidation of Corporate Inversions: Some parties in Congress have been levying legislative attacks on U.S. multinational corporations that "invert" — reincorporate their foreign operations in foreign countries — in an attempt to compete on a level playing field with foreign multinational corporations. There have been several recent attempts made to impose moratoriums, contract bars, or other measures to prevent corporations from freely structuring themselves to achieve some measure of parity. Instead, the Chamber believes that the proper response is to fix the underlying cause by undertaking a long-overdue legislative overhaul of the U.S. tax code's antiquated and Byzantine foreign tax provisions that disable U.S. corporations from competing fairly with their foreign competitors.
Disallowance of Tax Deductions for Government Settlements: There have been attempts to modify the tax code to impose strictures on how much, if any, of a government settlement can be deductible for income tax purposes. We believe that the blanket denial of otherwise allowable tax deductions for settlement of potential violations of laws or mere investigations of such is overly broad and unfair, and would impose a chilling effect on the ability and willingness of parties to effect settlements of cases that would not ultimately merit prosecution of a case to its conclusion.
Immediate Taxation of Nonqualified Deferred Compensation: There have been legislative proposals that would subject allowable nonqualified deferred compensation to immediate taxation as a misguided attempt to rein in "executive compensation." However, nonqualified deferred compensation plans may be established by businesses of all sizes, which utilize these arrangements as an effective employee-retention tool and a valuable means of promoting retirement savings for a variety of employees, many of whom are not top executives. These efforts, if successful, would effectively eliminate an important vehicle for retirement savings, and would unjustly tax these retirement benefits regardless of whether the employee ever receives the compensation.
Repeal of Benefits for U.S. Citizens Working Outside the Country: A proposal under discussion would eliminate or curtail the use of Internal Revenue Code Section 911. This important provision allows qualified U.S. citizens residing and working abroad to claim an exclusion from gross income for income earned from those efforts, as well as certain employer-provided housing costs. Taking this step would reduce the incentive for Americans to work abroad and would result in U.S. companies having to hire foreign workers to replace them, thus robbing them of American expertise. At a time when we are searching for ways to encourage and increase employment of U.S. workers, this measure appears to undercut that important objective. In a similar vein, raising income taxes on these workers would be at odds with the income tax cuts that the President wishes to grant them.
Tax Shelter Initiatives: Legislation has been proposed that would expand disclosures of potentially abusive "tax shelters," tighten penalties for those found to be abusive, and codify the economic substance doctrine. While the Chamber understands Congress' concern about bad actors shirking their proper tax obligations through improper device and artifice, we ask Congress to exercise proper caution and restraint should it choose to craft legislative measures to address its concerns. Congress must ensure that such provisions must be clear and reasonable in effect, as well as unambiguous and straightforward to interpret, apply, and enforce. Care must be taken that Congress not pass legislation that is so overly broad, vague, and punitive as to have a burdensome effect on normal, business-motivated transactions of taxpayers.
In sum, we believe that the President's Jobs and Growth Plan is a well-balanced package and that passage of its components, to the greatest extent possible, is critical. Elements such as tax rate reductions and elimination of the double taxation of dividends will leave more money in the hands of those who earned it and, more importantly, will spend it, pumping it through the economy. This will translate into increased demand for services and goods, which will, in turn, reinvigorate production, encourage investment and create jobs. Congress should exercise restraint and refrain from weakening these effects through the adoption of ill-advised revenue offsets.
R. Bruce Josten
Executive Vice President, Government Affairs
U.S. Chamber of Commerce
cc: Republican Senate Finance Committee members