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Levin: Corporate tax reform could help void sequester cuts

Aug. 11, 2013 - 02:13PM   |  
By JOHN T. BENNETT   |   Comments
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Sen. Carl Levin, D-Mich., believes that closing corporate tax loopholes could help the political parties reach an agreement on avoiding the sequester. (Mike Morones / Staff)

WASHINGTON — Sen. Carl Levin on Friday revealed he is working with a senior Republican on a plan to close corporate tax loopholes, aiming to find up to $100 billion for a sequestration-addressing fiscal package.

The Michigan Democrat said he and Sen. John McCain, R-Ariz., are examining ways to prevent firms from directing billions in revenues to offshore tax havens, dollars the bipartisan duo believes should be taxed by Washington.

Levin wants any tax revenue generated by closing loopholes to be part of the kind of $1 trillion “grand bargain” needed to turn off sequestration.

“One key part of that package is ending some of the outrageous loopholes in our tax code, and using the revenue as part of a balanced deficit-reduction plan to replace sequestration,” Levin said at a conference here.

“For more than a decade, we have shown how international corporations exploit unintended loopholes in the tax law,” Levin said. “We estimate that tax avoidance abuses cost the Treasury [Department] $100 billion a year or more.

“That money is one essential ingredient to the balanced deficit-reduction package we need to end sequestration,” he said. “It is unconscionable that we would allow large and highly profitable multinational companies to continue these tax avoidance schemes while sequestration denies the men and women who protect us the training and support they need.”

Levin and McCain have been studying the corporate loophole issue as part of their work as the chairman and ranking member of the Senate’s Permanent Subcommittee on Investigations.

GOP senators and White House officials have begun fragile talks about finally striking the grand bargain fiscal pact necessary to lessen or replace twin $450 billion cuts to planned national defense and domestic spending. But the sides remain far apart on key issues, lawmakers and insiders acknowledge.

Some longtime Washington budget analysts, like the Stimson Center’s Gordon Adams and Stan Collender of the Capital Gains and Games blog, say there are too many political and ideological hurdles to clear, making any kind of fiscal deal unlikely this year.

Levin said he remains hopeful a big deal can be reached. Lawmakers technically have until the new fiscal year begins Oct. 1 to address sequestration before another $50 billion cut to planned Pentagon spending kicks in.

“There are some Republicans in the Senate who, I believe, are willing to participate in a compromise approach to this budget problem we have,” he said, before highlighting one of the major obstacles to sending a Senate-approved deficit-reduction plan to the president for his signature.

“That’s less true in the House of Representatives, where the line has been drawn against any additional revenues,” said Levin, who also chairs the Senate Armed Services Committee, “including the types of revenues that I have described.

Conservative House Republicans, especially tea party members, are ideologically opposed to any Americans — even the most wealthy — sending another penny to Washington. That goes for some of the most pro-defense members.

“We raised taxes. We had a big tax increase in January,” House Armed Services Committee Chairman Rep. Buck McKeon, R-Calif., told Defense News last week. Defense News is a sister publication of Federal Times. “Now, before we do any other further talk of more tax increases, we need to get back to what we all know is the real problem, and that is the mandatory spending.”

Levin, the White House and most Democrats in both chambers want what they long have called a “balanced approach” as the basis for a grand bargain. Such an approach would focus on more spending cuts, new revenue from tax hikes on the richest Americans and savings generated by reforming domestic entitlement programs.

“I’ve been working closely with Sen. McCain on this. He’s very interested in ... ending those loopholes,” Levin said Friday. “I’m very hopeful that Sen. McCain and others will support a balanced approach. That could really break a logjam.”

The White House for months has conducted an on-again-off-again courtship with more than a dozen Senate Republicans who Obama administration officials believe will support a so-called balanced approach.

Senate Republicans with whom the president has met since March include McCain, Sens. Lindsey Graham of South Carolina, Kelly Ayotte of New Hampshire, Tom Coburn of Oklahoma, Bob Corker of Tennessee, Dan Coats of Indiana, Richard Burr of North Carolina, Mike Johanns of Nebraska, Pat Toomey of Pennsylvania, Ron Johnson of Wisconsin, John Hoeven of North Dakota and Saxby Chambliss of Georgia.

Levin, a veteran of the inside game of legislating, has picked a loophole-closing partner that many in Washington see as the single most important player in fiscal talks that will heat up when Congress returns after Labor Day.

Norm Ornstein of the American Enterprise Institute, in a column this week, used a “Star Wars” reference to underscore McCain’s importance.

“There is at least a chance that a deal could be forged in the Senate,” he wrote for The Atlantic. “To paraphrase Princess Leia, Obi-Wan McCain, you are our only hope.”

The way Ornstein sees it, if the White House can get McCain to sign onto a grand bargain, he’ll bring along the support of his “Rat Pack.”

In addition to the GOP senators with whom Obama has dined or golfed this year, Ornstein says fiscal watchers can “add institutionalist Susan Collins of Maine” who he says is “now furious with” Senate Minority Leader Mitch McConnell, R-Ky., “for actively undermining her after she worked overtime to craft a bipartisan transportation bill.”

Ornstein says McCain’s “Rat Pack” likely would include GOP Sen. Lisa Murkowski of Alaska — “more independent after her near-political death experience in the Senate primary in the last cycle.” Ornstein also labels these GOP senators as gettable: Roy Blunt of Missouri, Johnny Isakson of Georgia and Mark Kirk of Illinois.

“Together,” Ornstein wrote, “they could bump the numbers in the Senate for a deal to break the impasse close to the magic 70 that would force the House to act.”

Aaron Mehta in Washington contributed to this report.

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