WASHINGTON – U.S. Senator Mike Crapo (R-Idaho), Ranking
Member of the U.S. Senate Finance Committee, delivered the following remarks at
a hearing entitled, “How U.S. International Tax Policy Impacts American
Workers, Jobs and Investment.”
The text of Ranking Member
Crapo’s remarks, as prepared, is below.
“Mr.
Chairman, thank you for holding this hearing today. Thank you to our panelists for joining us
today.
“Before
the Tax Cuts and Jobs Act (TCJA), we shared a common concern for the many
threats to the U.S. corporate tax base and the collateral threats to
U.S.-centered economic activity, including investment, growth and jobs.
“Corporate
inversions were on the rise as a defensive strategy adopted by U.S. businesses
to ward off foreign takeovers.
“The
combination of one of the world’s highest corporate tax rates of 35 percent and
the disadvantages of the U.S. worldwide deferral system made it a losing proposition
to be a U.S.-based company when competing in overseas markets.
“That
environment led this Committee’s bipartisan working group chaired by Senators
Portman and Schumer to conclude that our international tax system was ‘clearly
broken.’
“I
challenge anyone to reasonably argue that we should return to the pre-TCJA
international tax landscape.
“Our
shared view was not limited to the state of our flawed system, there was also
bipartisan agreement on the optimal path forward.
“President
Obama, then-Senate Finance Committee Chairman Baucus and then-House Ways and
Means Committee Chairman Camp all proposed lower tax rates with minimum taxes
on foreign earnings.
“There
is nothing controversial about the problems that plagued our international tax
system or our collective acknowledgment of the fundamental changes that needed
to be made.
“Consistent
with these bipartisan objectives, TCJA reduced the corporate tax rate, ended
the deferral system and introduced a new minimum tax on foreign earnings of
U.S. companies, as well as other anti-abuse rules to prevent base erosion.
“While
the reduced corporate rate moved the United States more in line with the rest
of the world, the anti-base erosion measures that were enacted into law are the
most robust in the world.
“Indeed,
they are prompting other countries, through the OECD, to consider similar
measures.
“The
goal of our new system was to both ensure the United States, and U.S.
companies, are competitive in the global marketplace and to protect the U.S.
tax base.
“TCJA
is a vast improvement over the prior system.
Since TCJA, the flood of inversions has ceased entirely, and U.S.
companies are no longer easy targets for takeovers.
“Prior
to the pandemic, U.S. companies were sharing their business stories of
increased investment, wages paid to workers, and jobs in the United States –
outcomes I expect to resume once our economy can reopen completely provided
adverse changes are not made to the tax rules.
“It
is, of course, healthy to deliberate and consider refinements to allow U.S.
companies to further invest and expand in the United States without harming
their ability to compete, especially considering the precarious environment
many businesses find themselves in as they recover from the pandemic.
“Markets
abroad are vast, and we want U.S. companies to be competitive in their ability
to serve those markets and not be hamstrung by uncompetitive taxation.
“What
we should not do is hastily change the system purely for purposes of raising
revenue, bringing inversions and foreign takeovers of U.S. companies right back
to the forefront.
“Unfortunately,
that may be the misguided direction in which the Administration wishes to
proceed.
“Let
us not forget, those inversions and foreign takeovers were real, and not just
academic estimates from certain questionable studies we have seen in the area
of international effects of taxation.
“Some
of those studies, dealing with so-called stateless income, profit shifting, and
base erosion, play very fast and loose with data and methods.
“Sometimes,
in those analyses, politics and advocacy for political position overcomes
rigor, and it shows.
“Under
President Biden’s proposed corporate rate increase, which would result in a
combined U.S. rate of nearly 33 percent, we again would have one of the highest
combined statutory tax rates among developed countries.
“Worse,
the President’s proposed 100-percent increase in the GILTI rate, one current
provision of the international part of the tax code, would put the United
States at an even greater disadvantage, as no other country taxes foreign
earnings at even close to that rate.
“America’s
future jobs, income growth and prosperity will depend on how well U.S.
businesses compete, in this country and in foreign markets. American headquarters, research and other
domestic jobs depend on U.S. firms’ viability here and abroad.
“Strong
U.S. companies mean financial security for millions of Americans who need look
no further than their 401(k) accounts and IRAs, which hold the largest
plurality of publicly-traded stock.
“As
the Schumer-Portman working group said, ‘When U.S. businesses can compete and
win in this growing global market, the real
winners are U.S. workers.’
“As
we examine proposals that would dramatically alter TCJA’s international
provisions, we should test the potential outcomes against our shared policy
objectives voiced before and since the TCJA.
“Will
the U.S. tax base be strengthened? Will
U.S. growth rise? Will U.S. workers have
better job opportunities and wages? Will
U.S. workers and retirees see their retirement account balances rise?
“Mr.
Chairman, I look forward to hearing from today’s witnesses.”
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