Opening Statement of the Hon. Michael McNulty,
a Representative in Congress from the State of New York

Testimony Before the Subcommittee on Select Revenue Measures
 of the House Committee on Ways and Means

Hearing on the Extraterritorial Income Regime

May 9, 2002

The Select Revenue Measures Subcommittee is holding its second in a series of hearings on replacement of the "Extraterritorial Income" (ETI) regime which the World Trade Organization (WTO) ruled to be a prohibited export subsidy.

Our hearing focus today will be on whether "fundamental corporate tax reform" provides a viable option for replacing the ETI. I look forward to receiving the testimony of experts on proposals for a flat tax, a national retail sales tax, and various European-style value-added taxes.

For most of us the debate over fundamental corporate tax reform is a very familiar one. This Committee spent many hearing sessions exploring the issue as part of former Chairman Archer’s unsuccessful search for a viable legislative reform proposal to bring to the Congress. Many others have introduced reform plans over the past decade, each proposal differing in form and advantages and disadvantages.

Today, we are reviewing tax reform in the context of promoting U.S. exports. There is no question that the Administration must respond to the WTO ruling in a way that does not harm the overall competitiveness of American businesses in the global marketplace. However, it is unlikely that our future response can be found in a massive overhaul of our current corporate tax system. Fundamental tax reform is not something that can be done quickly. Also, the idea of fundamental reform often sounds very simple. It can be, in theory. Further insight will show that most proposal reforms are regressive, very complex to administer, and often create new openings for tax sheltering activities and tax evasion.

I know that all the Subcommittee Members will want to join me looking beyond theoretical approaches and discuss realistic alternatives. I want to thank Committee Chairman McCrery for scheduling this important hearing.