Amid record corporate profits and a raging debate in Washington about how to close the country’s budget deficit, the Treasury Department has finished drafting a plan to reform the taxes companies pay.
A major goal: lowering the tax rate for businesses.
Faced with a fledgling economic recovery, the Obama administration sees an overhaul of the corporate tax code as a way to spur growth. But the Treasury plan, which is being reviewed by the White House, could be a political minefield for the president and lawmakers who are occupied with questions about the country’s debt and deficit.
“I find it amazing,” said Ken Kies, a longtime corporate tax lobbyist. “I wouldn’t be surprised if the [White House] political types are going, ‘Are you guys nuts?’ ”
The administration has been wary of discussing the Treasury plan, which would be paid for by closing various loopholes — each of which could unleash its own lobbying storm. And while a senior administration official said a “white paper” laying out the proposals could be released as early as this month, he also warned that disagreements on Capitol Hill could delay any rollout.
The timing is up to the White House, which has many priorities to weigh, the official said, speaking on the condition of anonymity so he could discuss the matter freely.
So far, lawmakers involved in the discussions with Treasury say they have not broached the grittier details of which industries will give up which tax breaks. And some expect the plan will not include specifics.
“There was no discussion of details,” said Rep. Sander M. Levin (D-Mich.), ranking member of the Ways and Means Committee, who twice met with Treasury Secretary Timothy F. Geithner on the matter along with Sen. Max Baucus (D-Mont.), Sen. Orrin G. Hatch (R-Utah) and Rep. Dave Camp (R-Mich.).
Levin said that a major goal of any reform must be to encourage firms to create jobs in this country, noting that Geithner seemed to agree.
Not agreed on the basics
The U.S. corporate tax rate of 35 percent is one of the world’s highest. But subsidies and breaks have created a wide variation in what companies pay. Retailers tend to pay more than technology and pharmaceutical companies, for instance, in part because they do not benefit from credits for research and development.
Industry groups such as the Business Roundtable, a coalition of chief executives of major U.S. multinational companies, argue that lowering the rate would make domestic firms more competitive — and help the U.S. economy.
Yet as a percentage of overall taxes collected, corporations paid 8.9 percent in 2010, compared with about 25 percent in the 1950s.
Even among Democrats, there is disagreement over whether to squeeze more taxes out of corporations as a way of closing the budget deficit. Polling shows that Americans want taxes raised on corporations before they are raised on individuals.
“It’s the low-hanging fruit. To throw it away is weird,” said Bob McIntyre, director of the left-leaning Citizens for Tax Justice.
Levin and Geithner want to keep the the overall amount corporations pay at the same level.
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