LEVIN: Opening Statement -- Hearing on International Corporate Tax Reform

It is important for us to consider corporate tax reform. It is also important for us to dig beneath the surface of the many issues it presents.

 

International tax issues are inherently complicated. That's an understatement. Some years ago, my colleague Amo Houghton and I sat down with the staff of the Joint Committee on Taxation and essentially had a seminar on international corporate taxation for several days. We introduced a bill with a number of provisions designed to better reflect the realities of international competition, and a number of them became law. It was clear that some of the larger issues like deferral and worldwide versus territorial systems required further consideration and work, because there was no consensus about the effect of potential changes.

Unfortunately in the next years those issues remained dormant. In the meantime the pace of globalization has only increased, heightening the need to re-start the effort.

 

I have said before that tax reform needs to start with an agreement regarding basic principles. When it comes to corporate tax reform, a key principle should be that reform must encourage job creation here in the United States.

 

Over the last 14 months, the economy has created more than two million private sector jobs and economic recovery is slowly taking hold, in part because of the efforts of this Administration and the then-Democratic Majority. But we still have a long way to go before we make up the nearly nine million jobs destroyed by the financial crisis and recession; so we must be extremely sensitive to the effect tax reform has on jobs. I would be concerned about any change to our tax laws that would create new incentives to move corporate profits and American jobs offshore.

 

My staff and I have spoken to many large multinational corporations that are advocating a transition from our present worldwide tax system to a territorial system. We will hear from some of these corporations today.

 

It is important to recognize that there is no pure worldwide system or pure territorial system. The details matter a great deal, and there are many versions of territorial tax systems.

 

We also need to recognize that our current system does include incentives for job creation that we should be sensitive to as we consider reform. The three largest corporate tax expenditures are the Section 199 domestic manufacturing deduction, accelerated depreciation, and the R&D credit. All of these provisions are designed to encourage job creation here at home.

 

Finally, we must remember that there are many other factors that determine where a company does business in a global economy. Taxation is certainly an important factor, but it is just one factor companies use when deciding where to locate production, R&D and even their headquarters. Workforce matters. Infrastructure matters. Rule of law matters.

I look forward to hearing our witnesses' testimony.

 

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