House-Senate Tax Agreement Leaves Grassley Scratching Head

by Mike Godfrey, Tax-News.com, London

25 April 2007

Given their near daily rhetoric concerning the need to narrow the tax gap between legally-owed and collected taxes, the decision by Congressional Democrats to omit provisions from tax cut legislation moving through Congress that would have closed tax shelters and offshore tax abuses is "a real headscratcher," says the Republicans' senior Senate tax writer.

"Tax gap measures are yesterday’s news. Corporate inversion and leasing deal crackdowns are in the dust bin," Grassley remarked in response to Friday's House-Senate tax agreement, which aims to provide tax relief to small businesses affected by the proposal to increase the federal minimum wage to $7.25 per hour from $5.15.

"It’s a real headscratcher. The Democratic leaders say they want to shut down tax shelters but when they have a chance to do it, we get a package that’s the toast of tax shelter hucksters," he added.

Included in the pre-conference Senate bill, which Grassley was instrumental in drafting, were offset provisions which would have closed loopholes, shelters and offshore arrangements such as sale-in lease-out (SILO) shelters on foreign properties. It also included measures against offshore corporate inversions, and a doubling of some fines, penalties and interest on underpayments related to certain offshore financial arrangements. However, these have been omitted from the provisions agreed by the leaders of the Senate Finance Committee and the House Ways and Means Committee as part of a military spending package last Friday.

Grassley was also scathing about the $4.84 billion worth of tax relief measures in the bill, almost half the amount proposed in the original Senate package.

“The point of this package was to give tax relief to small businesses to counteract the effects of the minimum wage increase and otherwise boost the economy. The relief was supposed to be contemporaneous with the wage increase so small businesses wouldn’t cut jobs," Grassley observed.

"The Senate package was barely adequate. I called it peanuts. The House package was puny. I called it a peanut shell. Now we have a single shriveled peanut," he added.

"This package is stripped of a lot of meaningful tax relief. And missing are many of the tax abuse crackdowns from the Senate bill. Apparently the lobbyists’ crocodile tears over those crackdowns were effective," Grassley contended.

Recommended