The Obama administration is preparing a comprehensive proposal for corporate tax reform in an effort to kick-start the legislative process in Congress, US Treasury Secretary Timothy Geithner said on Tuesday. For months, the administration and lawmakers have been exploring an overhaul of the tax code, which all sides agree is exceedingly complex and lengthy at more than a million words.
"I'm actually quite optimistic we're going to be able to start that process with a very strong pro-investment, pro-growth, pro-competitiveness proposal," Geithner told a Senate Appropriations subcommittee. Given the country's fiscal challenges, Geithner said the proposal would have to be revenue neutral, so that a cut in the corporate tax rate would have to be offset by new revenue from the elimination of special preferences.
He did not say whether the administration would introduce the plan in the form of a legislative proposal or when it would be unveiled. But the administration has been closely watching the action in Congress to determine the best way to move forward. A Treasury spokeswoman had no further details on timing. "We've been consulting closely with your colleagues in the tax-writing committees on how to design that, and the business community," Geithner told the subcommittee.
In February, a group of business executives, including the CEOs from General Electric and Intel Corp, met with the administration to discuss ways to trim the US corporate tax rate, which at 35 percent is one of the highest in the world. The top Republican tax-writer in the House of Representatives is aiming to cut the top rate for individuals and corporations to 25 percent. Geithner has told lawmakers that his goal would be to get the corporate rate closer to that of major US trading partners, around the high 20-percent level.
Regardless of the administration's intentions, the legislative calendar is tight with President Barack Obama and Democrats gearing up for the 2012 presidential election. It is unclear whether Congress has the appetite to revamp the corporate tax code after Democrats were skewered in the November election for supporting the administration's health care and Wall Street reform bills.
Most observers believe a corporate tax overhaul before the 2012 elections is very unlikely, in particular because many businesses file through the individual tax code. Some lawmakers have sought a corporate tax repatriation holiday that would allow companies to bring home billions of dollars of overseas profits tax-free, which would help boost investment and economic activity inside the United States.
Geithner said the administration would oppose that unless it were part of an overall reform plan, adding that such repatriation holidays in the past had failed to produce enough investment and job creation in the United States to justify their hefty cost to taxpayers. "We would not support it outside the context of corporate tax reform," the Treasury chief said. "But in the context of comprehensive corporate tax reform, we think there may be a way to try to do that to do that in a way that would be responsive to this broader interest to try and get more of those resources now overseas, to bring them back."
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