Chairman Whitehouse, Ranking Member Grassley, Members of the Committee: Thank you for inviting me to share my views on corporate tax avoidance. Simple reforms to our business tax system can improve the system across multiple dimensions: generating more revenue, reducing offshoring incentives, enhancing competition and economic efficiency, and resulting in a fairer tax system. Given the importance of today's high levels of deficits and debt, it is particularly important to reform the tax system in a way that counters systematic sources of tax avoidance.
In my testimony today, I will discuss four crucial flaws in today's corporate tax system. First, current law contains large tax preferences for foreign income relative to domestic income, fueling offshoring and profit shifting. Second, as a consequence of current law incentives, we give up large revenues by failing to reform our tax system. Third, the current system favors a small number of large multinational companies, companies that often wield significant market power; these tax preferences inhibit the ability of smaller businesses to compete in free and fair markets. Finally, tax avoidance reduces the fairness of our tax system, benefiting corporate shareholders at the expense of middle-class taxpayers.