(Original post)
2011-01-21
By Kim Dixon
WASHINGTON, Janp 21 (Reuters) - U.S. companies are not overtaxed on average, but trimming the highest corporate tax rate could help raise U.S. business global competitiveness, a top economic adviser to President Barack Obama said on Friday.
Obama officials have been listening to major U.S. companies gripe about the top 35 percent marginal corporate rate as the president mulls whether to tackle reform of the tax code -- a mammoth task by all accounts.
Obama president also faces the challenge of a divided Congress where it could be tricky to pass sweeping initiatives in the next two years, which lead up to his re-election campaign.
A top economic adviser told corporate tax officials that Obama is open to all ideas as he considers a law rewrite.
'The high top marginal rate is an indicator that reform could have meaningful benefits, especially in an increasingly global economy where business activity responds to tax rates,' Jason Furman, deputy director for Obama's National Economic Council, told executives at an event on tax policy.
Still, he noted the impact of the high rate is sometimes overblown, citing loopholes and tax preferences in the code.
'The high top marginal tax rate is not evidence that American companies are on average overtaxed compared to historical averages of other countries,' Furman said. For a comparison of international tax rates, see:
For an overhaul of the tax system, Obama needs to take the lead, analysts and observers said. Many are looking to the State of the Union speech on Tuesday for a sign of his commitment.
'We're in the second inning; we'll know a lot more after the State of the Union,' said a tax official at one of America's biggest companies, who spoke on condition of anonymity.
Secretary Timothy Geithner last week met with chief financial officers with America's biggest companies and on Friday met with academics and policy officials to gather ideas.
Many believe the politics of taxes make substantive changes unlikely in the next two years, especially with Republicans in control of the U.S. House of Representatives and a looming presidential campaign.
'I'd be shocked if anything could pass in the current Congress,' said Bob McIntyre, president for Citizens for Tax Justice and a participant in Friday's meeting with Geithner.
He said the president and lawmakers need a mandate from the public to move forward.
Two participants at the meeting, who did not want to be identified, said it didn't appear Treasury had a clear plan yet on a way forward.
RAISING REVENUE?
Furman said any revamp must not result in a loss of revenue, given the near $14 trillion federal debt.
'The president isn't looking to the corporate sector to help solve this fiscal challenge,' Furman said. 'What he is asking is that in the process of doing any reforms to the tax code we don't make these fiscal problems any worse.'
A top Procter & Gamble official told Congress this week that Congress shouldn't get hung up on ensuring that any tax cuts are fully offset by spending cuts.
McIntyre said he told Geithner that any corporate tax overhaul should raise money to chip away at the deficit.
The 1986 tax overhaul signed by President Ronald Reagan raised money on the corporate side to account for cuts in individual tax rates.
One meeting participant, speaking on the condition of anonymity, said the administration appeared to be in the early days of thinking on the matter.
'To be honest, I was more optimistic that this might be a 2011 issue before I got the call to come to this meeting,' the person said. 'I'm not convinced that this is going to be his No. 1 agenda item when they are now having feel-good meetings with think tank folks,' the person said.
(Reporting by Kim Dixon; Editing by Andrew Hay and Leslie Adler)