U.S. Senator Tammy Baldwin: Pay for Business Tax Cuts by Closing Loopholes that Benefit Hedge Funds and Corporate CEOs

WASHINGTON, D.C. – Today, U.S. Senator Tammy Baldwin, joined by U.S. Senators Jack Reed (D-RI), Angus S. King, Jr. (I-ME), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI), sent a letter to the Chairman and Ranking Member of the Senate Committee on Finance urging them to offset the cost of potential tax extenders legislation by closing tax loopholes that benefit hedge fund managers and corporate CEOs.  

“If we are going to extend expired tax cuts for businesses and corporations we should pay for them instead of driving up the deficit. It is simply unfair to apply a different standard to these tax cuts than we apply to investments in the middle class,” Senator Baldwin said. “Washington continues to give tax preferences to the wealthy and well connected as household income is falling for middle class families. We need to rewrite the rules by closing tax loopholes for hedge fund managers and corporate CEOs and make those at the top pay their fair share. Middle class families can’t afford to have the deficit placed on their backs alone.”

The letter shines a spotlight on a double standard whereby tax cuts that largely benefit businesses are allowed to drive up the deficit, while investments in healthcare, education, medical research 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) 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.

Read the full text of the letter online or below:

December 3, 2015

Dear Chairman Hatch and Ranking Member Wyden,

We appreciate your continued efforts to draft legislation to extend expired tax provisions, and we are encouraged that the Committee is working to make a number of tax provisions permanent.  However, 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.