Corporations shouldn’t be able to dodge taxes: Rep. Levin

New tax bill much like Obama's proposal: Rep. Levin

Corporations should not be able to dodge taxes by moving oversees, Rep. Sander Levin, D-Mich., told CNBC's "Closing Bell" Wednesday, a day after legislation to combat the issue was introduced in both houses of Congress.

"They can't just easily just renounce their citizenship, keep major activities here and essentially pay very low taxes in same tax haven," said Levin, a co-sponsor of the House bill. "Individuals can't really do that and I think the public thinks it isn't fair for corporations to do that."

It's a move that not only erodes the nation's tax base, but kills American jobs, he added.

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The bill would restrict corporate tax inversions, where U.S. multinational companies typically merge with a foreign company and then restructure and relocate their tax domiciles to the lower-tax country.

Rep. Sander Levin, D-Mich.
Bill Clark | CQ Roll Call | Getty Images

The trend has increased in recent years as corporations look for ways to lower taxes. A review by Reuters showed approximately 50 inversion deals over the past 25 years, with half occurring after the 2008-2009 credit crisis died down.

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There has been a "doubling in the last 7 or 8 or 9 years of companies that are essentially saying we're going to give up our citizenship but not our major activities so we can pay less taxes someplace out. That's tax avoidance," said, Levin, a ranking member of the House Ways and Means Committee.

Recently, Walgreen has been under pressure to buy the rest of Alliance Boots Holdings in order to move to Europe, and Omnicom and Pfizer have proposed relocating to Britain.

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However, critics say the U.S. tax code needs to be lowered in order to keep companies on American soil. That's a notion Levin doesn't necessarily disagree with.

"I'm in favor of tax reform. I think we need to lower the corporate rate," he said. "It isn't so easy to get down. We need to move in that direction but carefully."

—By CNBC's Michelle Fox. Reuters contributed to this story.