Sen. Chuck Grassley, R-Iowa, has written a letter to President Obama disagreeing with the president’s definition of the term “tax reform.”

In a speech Monday, Obama remarked on the need to combine the spending cuts included in the debt ceiling deal with “tax reform that will ask those who can afford it to pay their fair share.” However, Grassley pointed out that Obama did not mention lowering tax rates, broadening the tax base, or transitioning to a territorial tax system.

Grassley said Obama should instead adopt a definition of tax reform that would make U.S. employers more competitive around the world and encourage job creation at home.

“Tax reform in a global economy is a serious task,” Grassley wrote to Obama. “There are complex issues to be considered. These include a comparison of the rates and incentives provided by the countries we are competing with for jobs. A serious task needs serious leadership.  Demagoguery of tax incentives may provide good political sport, but it does not provide the strong leadership needed for the serious task of reforming the tax code to secure America’s competitiveness in the global economy.”

Grassley noted that Obama and others define “tax reform” as closing “tax loopholes” and the President said tax reform should “ask those who can afford it to pay their fair share.” Grassley argues that to create jobs, tax reform should involve tax simplification and make U.S. businesses more competitive with their counterparts abroad.

Grassley urged Obama to “… take responsibility for the tone and tenor of the tax reform debate you are setting.” 

He added, “With unemployment and growth rates where they are, the country cannot afford the kind of ‘tax reform’ you are promoting.”

Grassley also took exception to statements by Sen. Bill Nelson, D-Fla., in which Nelson called for closing tax loopholes and special interest tax breaks for oil companies and businesses that ship jobs overseas.

"I fear many people have been intentionally conflating tax expenditures with tax loopholes in order to score cheap political points," he wrote. "Tax expenditures are defined in the Congressional Budget Act of 1974 as lost federal income due to provisions in the tax code that exempt or reduce taxes for certain groups, products or activities. Unlike tax loopholes, which provide unintentional benefits and are used to game the system, tax expenditures were intentionally passed by Congress to further certain policy goals, such as encouraging employer-provided health insurance or home ownership, so they are also called tax incentives. Since they help achieve goals set by Congress, they are not loopholes."

Grassley is the former chairman and ranking member of the Senate Finance Committee. and is currently a senior member of the Finance Committee, which has exclusive Senate jurisdiction over taxes and has been holding hearings on tax reform. He is currently the ranking Republican member of the Senate Judiciary Committee, while his colleage Orrin Hatch, R-Utah, is the ranking member of the Finance Committee.

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