Lew still sees US corporate tax reform prospects
23 January 2015
Posted by: Author: Mike Godfrey
Author: Mike Godfrey (Tax-News.com)
Jack Lew still sees the possibility of bipartisan United States corporate tax
reform, even though it was not mentioned in President Barack Obama's State of
the Union address.
In his speech at
The Brookings Institution on January 21, Lew said the US federal tax code
"needs to be overhauled. … While our views on individual tax reform may be
far apart [as was borne out by hostile Republican reaction to the President's
proposed personal tax changes], there is a broad set of business tax reforms on
which we should be able to agree."
He stated his
belief that "the best way to achieve comprehensive tax reform today is to
start with pro-growth business tax reform that lowers rates, simplifies the
system, levels the playing field, and eliminates unfair and inefficient
Lew pointed out
that the US has "one of the highest corporate income tax rates in the
world, but in practice, there is a wide disparity in effective corporate tax
rates. Some corporations pay little or no income tax at all, while others pay
the highest rate in the developed world."
our tax code has become increasingly loaded down with special interest
loopholes, deductions, and assorted tax subsidies," he added. "Some
were good ideas whose time has now passed; others were special-interest
giveaways from the beginning. The end result is a system rife with
industry-specific tax breaks and widely disparate effective tax rates from one
sector to the next."
He also concluded
that "the current tax system makes it too hard for US businesses to
compete with companies headquartered overseas," such that it has
"driven" companies to engage in the corporate inversion strategies
being used by US multinationals to move their tax residences abroad.
Administration's view is that "many companies that invert want to take
advantage of US infrastructure, education, and rule of law, but avoid paying
their fair share of taxes," which is why Treasury took non-legislative
action in September last year to "strip away some of the economic benefit
of inversions." However, Lew also admitted that the longer-term solution
to inversions could only be through overall corporate tax reform.
He claimed that
that there is "a great deal of overlap" between the President's
corporate tax reform framework and recent Republican proposals, including the
one advanced by former Chairman of the House of Representatives Ways and Means
Committee Dave Camp. He said that is particularly the case with the proposed
reductions in the corporate tax rate, from 35 percent to 28 percent; the
proposed 25 percent rate for manufacturers; and the proposal to move away from
the current US "worldwide" international tax code.
However, in a
remark that will be disputed by leading Republican lawmakers who wish to see
complete "revenue neutrality" in corporate tax reform, Lew supported
the President's view that any additional transitional revenue should be spent
on infrastructural investments, rather than providing further tax cuts.
remained convinced that "we will get this done. … To that end, I look
forward to continuing conversations with [the leading Republican and Democrat
lawmakers on the House Ways and Means and Senate Finance Committees] to make
progress on reform."
This article first appeared on tax-news.com.