By Stephen Joyce and Aaron Lorenzo (Washington)
NEW YORK — The Obama administration intends to push for corporate tax reform before the 2012 presidential elections, but any tax reform plan will not be linked to ongoing discussions about raising the debt limit, Treasury Secretary Timothy F. Geithner said May 17.
He flatly rejected the idea of a flat corporate tax rate as part of a tax reform proposal. “No, I don't think so. I don't think there is a realistic prospect of that,” he said.
Though solving the debt limit ceiling may seem politically impossible to some, Geithner said his discussions with Republicans and Democrats make him confident the issue will be ironed out before the government formally defaults on its debt Aug. 2.
Corporate Tax Reform
In response to another question after his speech, Geithner said the “central rationale for corporate tax reform should be to lower the statutory rate to a level more in the range of our major trading partners and to make that possible by dialing back, reducing, the range of tax expenditures that now, I'll say, litter the corporate tax code. And that's a sensible thing to try to do.”
“It's a very hard thing to do because it will change the relative effective tax rates for different companies, different industries, but it's an essential thing to do. Why should we want to live with a tax code where every year people don't know what is going to be the tax preference for a certain activity? Why would we want to live with a tax code where ultimately it's the quality of your lobbyist that determines a key part of the economics of your business? It makes no sense for the country,” Geithner said.
“This is worth trying to do. It's going to be politically difficult to do, but I think it's a sensible thing to do,” he said.
Geithner said any push for corporate tax reform would have to wait until a debt limit agreement is reached, which would rule out any proposal for the next two months. “I think we'd like to take a run at doing this ahead of the election, that means we have to start, but we also need to get this fiscal stuff in a better trajectory,” he said.
Speaking one day after Treasury employed tools to prevent a default on U.S debt until Aug 2, Geithner said there is general agreement among congressional leaders to raise the debt ceiling, adding that it is better to raise the ceiling sooner than later to mitigate any concern Congress will ultimately not act.
He said the deal to raise the debt limit likely to be agreed upon by congressional leaders “should have a basic frameworks that locks in a declining path for deficits … with as large a down payment of specific savings across the core of government functions as we can, with an enforcement mechanism—a trigger—that will force the remaining balance of choices.”
Under the trigger outlined by the secretary, beginning in 2013, the U.S. administration would set a reduction target for the year and Congress would have approximately nine months to enact legislation to meet that fiscal target. If Congress cannot agree on legislation, then automatic cuts in spending and tax expenditures would go into effect for the following year.
The complete text of this article can be found in the BNA Daily Tax Report, May 18, 2011.