The time-frame for advancing a revamp of the corporate tax code through Congress is a short-one and may ultimately depend on whether President Barack Obama can win authority to negotiate new trade deals, leaders of a top business lobby said Thursday.
A revamp of the corporate tax code has to be advancing through Congress by August or it will get lost in the hoopla surrounding the coming presidential election, according to the Business Roundtable.
“The window is only open for six or seven months,” said Mark Weinberger, tax policy chairman for the group, which acts as the lobby for many major global corporations.
That time-frame echoes the view of Wisconsin Republican Rep. Paul Ryan, the new chairman of the tax-writing House Ways and Means Committee. Ryan told reporters last Friday that he thought a revamp of the tax code is likely to come in phases, the first being corporate taxes.
Ryan and Republicans, along with the Business Roundtable, favor rolling back the current 35 percent corporate tax rate to 25 percent, cutting unspecified tax breaks in the process. Obama has proposed a 28 percent rate for most businesses, 25 percent for manufacturers. The president also wants a one-time tax of 14 percent on foreign earnings parked abroad and brought back home, and then going forward a 19 percent rate on money earned abroad and repatriated.
Versions of this taxation of foreign earnings have been in Republican and Democratic talking points, and Weinberger told reporters that it’s now assumed that it would be in any final compromise.
“What we tell CEOs is this is progress,” said Weinberger, noting that Obama initially wanted to retain the top tax rate and apply it to all earnings.
Whether or not there is a tax deal may depend on whether Obama can convince enough Democrats to work with Republicans and give the White House authority to negotiate trade deals and then have an up-or-down vote in Congress.
“Trade is going to be the canary in the coal mine,” said Weinberger, noting that “success breeds success” and that in recent years precious little has moved through Congress in bipartisan fashion.
The White House has expressed openness for a smaller-scale tax deal, and the chairman of its Council of Economic Advisers told reporters Thursday that there was plenty of room to modify the tax code to help small businesses who pass through their business income on individual tax returns.
“That’s one we can very much achieve,” said CEA Chief Jason Furman, at a breakfast held by the Christian Science Monitor.
Steps could include, he said, expanding the amount small businesses can depreciate when they invest or purchase equipment. Also these firms could be allowed to use cash accounting, which allows them to boost cash flow by recognizing a transaction at the point cash changes hands, versus the current accrual method where transactions are accounted for at the time of the transaction, even if money doesn’t change hands for days, weeks or months.
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