Corporate Tax Overhaul Could be in Fiscal Cliff Deal
President Obama has suggested that a corporate tax overhaul next year could be included in a larger package to reduce the deficit.
In a recent congressional call, two small-business owners and Sen. Carl Levin (D-MI) urged the president not to revive his proposal to reduce the corporate tax rate from 35 percent to 28 percent and instead increase the effective tax burden on large corporations by curtailing offshore tax avoidance.
The call was arranged by Americans for Tax Fairness, a group that has been advocating for a more progressive tax code in large part by highlighting wealthy individuals and business owners who support its cause.
“Congress is considering major cuts in education, Medicare, national defense and a whole lot of critical programs, and at the same time corporate taxes, effective tax rates, are continuing to go down,” Levin said.
Levin, chairman of a subcommittee of the Senate Homeland Security and Government Affairs panel that has conducted several investigations of corporate tax avoidance, has long been a thorn in the side of multinational businesses.
His comments Friday followed news this week that Obama is interested in tying a revenue-neutral corporate tax overhaul to a broader fiscal package that would raise taxes by $1.4 trillion on upper-income earners.
Obama has proposed paying for a reduction in the corporate tax rate by scaling back tax breaks available to businesses and imposing a minimum tax on their offshore profits. A blueprint for achieving his goals that was released in February received a lukewarm reaction from business groups. But it was also criticized by some liberals such as Levin who see no reason to lower the corporate tax rate in the first place.
Although the U.S. corporate tax rate is the highest in the industrialized world, many businesses are able to pay a lower rate by shifting their profits overseas and claiming various deductions and credits.
Although a corporate tax overhaul holds some bipartisan appeal, a plan that would not raise additional revenue could be controversial, especially if it is linked to legislation that raises taxes and cuts benefits for individuals.
“For the sake of even more dollars in their already bulging pockets, these corporate giants are willing to be a part of the first generation since World War II to hand the next generation a worse infrastructure, worse education systems and worse social safety net than the previous generations left us,” said Lew Prince, the managing partner of a St. Louis music store.
“Shame on them. Now their lobbyists in Congress are fighting to lower corporate tax rates and allow these companies to continue to stash trillions of dollars earned in the U.S. offshore tax-free,” he said