( CNN ) -- The Capitol Hill hearing on the IRS scandal this week upstaged another Senate investigation into how U.S. technology companies shelter earnings from domestic taxes . That was just as well , since the real culprit here is n't tax-dodging corporations ; it 's America 's absurd corporate tax code . The Senate Permanent Subcommittee on Investigations had hoped to make a media splash by landing a big fish rarely seen in Washington : Apple CEO Tim Cook . It released a 40-page report on the eve of the hearing , excoriating Apple 's use of `` gimmicks '' to avoid paying U.S. taxes on $ 44 billion in offshore income between 2009 and 2012 . Chaired by Sen. Carl Levin , D-Michigan , the subcommittee has been investigating the tax avoidance strategies of major U.S. tech firms . Last year , Microsoft and Hewlett-Packard were in the dock ; Tuesday , it was Apple 's turn . `` Apple was n't satisfied with shifting its profits to a low-tax offshore tax haven , '' Levin told the New York Times . `` It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere . '' At issue are foreign subsidiaries that U.S. multinationals use to manage their overseas operations . The subcommittee report says that tech companies can shuffle their intellectual property as well as earnings among such entities to shield them from America 's steep corporate tax rates . Cook , however , denied that Apple funnels any of its U.S. profits into offshore tax havens . The company has amassed more than $ 100 billion in foreign earnings , he said , because international sales of iPhones and other products account for 61 % of its revenues . Apple pays taxes in the countries where its products are sold , he told the panel , adding that it is probably also America 's largest corporate taxpayer , with expected 2013 liabilities of $ 7 billion . The Senate inquisitors are n't accusing the tech companies of doing anything illegal but of cleverly exploiting loopholes in U.S. tax laws that allow them to shelter income overseas . Lawmakers want the firms to `` repatriate '' their overseas profits so that they can be taxed here . But the companies say that would be tantamount to taxing them twice , putting them at a disadvantage with foreign competitors who pay taxes only where their products are sold . At a time when America urgently needs to rebuild its revenue base and continue unwinding its public debts , it 's little wonder that lawmakers cast a covetous eye on the overseas profits of U.S. firms . But while grilling CEOs may make for good political theater , it does n't get to the heart of the problem : America 's outdated and dysfunctional corporate tax code . How flawed is it ? Let us count the ways . First , it subjects U.S.-based corporations to a top marginal rate of 35 % , among the highest in the world . Designed at a time when U.S. companies competed mainly with each other , the code now hobbles them in global competition . Second , the code is riddled with special tax deductions , credits and exemptions , which make it both fiendishly complicated and economically inefficient . As economist Robert Shapiro noted in a recent Progressive Policy Institute study , these provisions entail significant administrative and compliance costs and , more damagingly from the standpoint of economic growth , undercut markets ' ability to allocate capital to its most productive uses . They also make the code highly inequitable as some companies get breaks while others do n't with little rhyme or reason other than how effective their lobbyists are . Third , the United States is one of the few remaining countries ( PDF ) that has a `` worldwide '' tax system , meaning that we apply the 35 % top rate to the worldwide profits of U.S-based companies : that is , on the profits made by foreign subsidiaries as well . Almost every other major economy has a territorial tax system , which taxes only the business profits earned in that country . While U.S. companies get a credit for the taxes they pay overseas , they are still liable for the difference between what they pay abroad and the higher U.S. marginal tax rate . These glaring defects have engendered a rare bipartisan consensus in Washington for sweeping reform of the corporate tax code . The basic idea , endorsed by the Obama administration and House Ways and Means Chairman Dave Camp , is to radically simplify the code by phasing out special preferences and using some or all of the revenues to cut the tax rate . ( Progress toward reform is snagged , however , on a dispute over whether any of those revenues should be used for deficit reduction . ) More controversial is adopting a territorial system . Some progressives are leery of this approach , since it would put the foreign earnings of U.S.-based companies forever beyond Washington 's reach . But as Progressive Policy Institute economist Michael Mandel notes , those foreign profits are already taxed by the countries in which the money is earned . In today 's increasingly globalized economy , it makes sense to move toward a simpler system that is easier to enforce . Unlike Apple , U.S. lawmakers have the power to fix our broken corporate tax system . That 's probably a better use of their time than villainizing America 's most innovative and successful companies . The opinions expressed in this commentary are solely those of Will Marshall .
Apple committee strongly criticized Apple 's handling of taxes . Marshall : Do n't make Congressional the scapegoat for a flawed corporate tax code . He says corporations face world 's highest rate and a dysfunctional system . Will Marshall : Washington corporate tax code should empower firms in global competition .