12/03/2015 — 

WASHINGTON, DC – Today, U.S. Senator Jack Reed and four Senate colleagues urged the Chairman and Ranking Member of the Senate Finance Committee to offset the cost of the “tax extenders” legislation pending in Congress by closing tax loopholes that benefit hedge fund managers and corporate CEOs.

The “tax extenders” bill is an annual package of tax breaks, deductions, credits, and other provisions that affect tax treatments for both businesses and some households.  The final package is still being debated in Congress, but is likely to include tax breaks for large corporations that are not paid for and will significantly add to the deficit.

“We need to prioritize tax breaks that grow our economy and strengthen the middle class.  If Senators also insist on tax cuts that help big business, those cuts should be treated the way investments in our infrastructure and student loans have been, and be paid for by closing some of the egregious loopholes in our tax code that Wall Street and big corporate CEOs are already exploiting.  We need to break free of the approach in this Republican Congress where tax cuts for the wealthiest and big business are mindlessly added to the deficit, but investments in the middle class have to be paid for or force cuts elsewhere,” said Senator Reed, a senior member of the Senate Banking Committee.

Reed and his colleagues, U.S. Senators Tammy Baldwin (D-WI), Angus King (I-ME), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI), sent the letter to Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) to highlight a persistent double standard in the Republican-controlled Congress whereby tax cuts that largely benefit businesses are allowed to drive up the deficit, while investments in infrastructure, medical research, education, and job training must be offset with budget cuts or increases in revenue.

“[A]s you work to finalize a tax extenders package, we urge you to also close tax loopholes to help pay for this bill so that we can give both businesses and middle class families the certainty they deserve, while eliminating some of the inequity in the tax code,” the senators wrote.  “In October, Congress enacted legislation—the Bipartisan Budget Act of 2015—that included spending cuts and revenue increases to help pay for national defense and investments in healthcare, education, medical research, homeland security and the economy.  If Republicans believe that we must pay for sequester relief and offset these critical investments that support the middle class, then Republicans should also work with Democrats to close egregious loopholes to pay for extending expired tax cuts.”  

The senators called for closing the carried interest loophole and tax write-offs for executive compensation over $1 million.  The carried interest loophole allows many of the highest earners to pay a lower effective tax rate than nurses, first responders, truck drivers and teachers.  The Carried Interest Fairness Act (S. 1686) was estimated by the Joint Committee on Taxation to raise $15.6 billion over ten years.  The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S. 1127), which Reed introduced in April, was estimated to raise $50 billion.  Reed and his Senate colleagues encouraged the Finance Committee leadership to consider closing these and other loopholes, both to help pay for the pending tax extenders legislation and in an effort to restore some measure of fairness in the U.S. tax code.

Read the full text of the letter below:

December 3, 2015

Dear Chairman Hatch and Ranking Member Wyden,

We appreciate your continued efforts on the issue of tax extenders. As you work to finalize a tax extenders package, we urge you to also close tax loopholes to help pay for this bill so that we can give both businesses and middle class families the certainty they deserve, while eliminating some of the inequity in the tax code.

In October, Congress enacted legislation—the Bipartisan Budget Act of 2015—that included spending cuts and revenue increases to help pay for national defense and investments in healthcare, education, medical research, homeland security and the economy.  If Republicans believe that we must pay for sequester relief and offset these critical investments that support the middle class, then Republicans should also work with Democrats to close egregious loopholes to pay for extending expired tax cuts.  

We strongly support extending tax provisions that support the middle class and grow the economy.  However, the Senate Finance Committee passed a bill earlier this year extending tax cuts and credits for two years that would add $96 billion to the deficit.  Furthermore, reports indicate that House and Senate negotiators are considering making some corporate tax provisions permanent, which would cost the government hundreds of billions of dollars. 

Last month, Republicans and Democrats were able to come together in a bipartisan manner to pass legislation preventing harmful cuts to federal programs for two years.  However, that legislation also included a variety of spending cuts and revenue increases to ensure that the federal spending would not add to the deficit.  Therefore, extending expired tax breaks, or making them permanent, without offsetting the cost is a troubling double standard whereby tax cuts and credits don’t need to be paid for but investments in education, job training, infrastructure, research and innovation must be paid for.  Not requiring the same standard for these mostly business tax cuts is not only unfair, it would also add to the deficit and increase pressure to make additional cuts to domestic programs.

Instead of passing tax cuts and credits that increase the deficit, we urge you to offset the cost of extenders by closing loopholes in the tax code.  There are a number of unfair tax loopholes that should be closed to help pay for tax extenders legislation including the carried interest loophole and tax write-offs for executive compensation over $1 million.  The carried interest loophole allows many of the highest earners to pay a lower effective tax rate than nurses, first responders, truck drivers and teachers.  The Carried Interest Fairness Act (S. 1686) was estimated by the Joint Committee on Taxation to raise $15.6 billion over ten years.  The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S. 1127) was estimated to raise $50 billion. We encourage you to consider closing these and other loopholes to both help pay for tax extenders and make our tax code more fair.

Sincerely,

Jack Reed

Tammy Baldwin

Angus King

Elizabeth Warren

Sheldon Whitehouse

 -end-