January 24, 2011
By Drew Pierson and Meg Shreve
Leaders of 17 organizations representing higher education institutions, public policy advocacy groups, and industry associations met with Treasury Secretary Timothy Geithner on January 21 for a closed-door meeting on corporate tax reform.
“I think there is a consensus [in America] we need to do something about the high corporate tax rates relative to the rest of the world,” said Tax Foundation tax counsel Joe Henchman, who attended the meeting.
With Japan recently announcing plans to lower its corporate tax rates, the United States will have the highest corporate income tax rates among the 34 wealthy nations in the OECD, at 40 percent (combined with state taxes) in 2010, according to the Cato Institute.
Participants involved with the discussion at the Treasury Department said the focus was revenue-neutral corporate tax reform. Although both Henchman and Robert McIntyre, director of Citizens for Tax Justice, declined to offer many details because Treasury had asked that no specifics from the meeting be discussed, they said they had offered varying suggestions as to the feasibility and scope of such reform.
For example, McIntyre said he advocated corporate tax reform that was not revenue neutral, but rather would increase revenue to address the nation’s rapidly mounting debt. Henchman noted the difficulty of reforming corporate tax rates by only eliminating expenditures because of the relatively limited number of them on the corporate side of the tax system. He said it might be wise to consider larger reform that takes on personal income tax as well.
“It doesn’t get you very far down,” Henchman said of lowering the rates by eliminating corporate tax expenditures.
National Economic Council deputy director Jason Furman on January 21 reiterated the Obama administration’s preference for revenue-neutral corporate tax reform at a conference in Washington.
Tax reform has been a frequent topic of discussion in both major parties during the early weeks of the 112th Congress. House Majority Leader Eric Cantor, R-Va., said January 4 that tax reform could boost U.S. competitiveness and that he expects Obama to discuss reform during his State of the Union address on January 25.
But lately the focus on reform has shifted from both corporate and personal income taxes to mostly only the corporate side. The day before the meeting, on January 20, the House Ways and Means Committee held the first in a series of hearings on corporate tax reform, at which invited business leaders argued for a lower rate.
Not everyone is convinced a corporate-only focus on tax reform is the best approach. Federal Reserve Chair Ben Bernanke testified before the Senate Budget Committee January 7 that he hoped Congress would undertake a tax reform effort to reduce the deficit and encourage economic growth, and said that individual and corporate taxation should be treated “as a holistic, single part of policy.” Senate Budget Committee member Ron Wyden, D-Ore., echoed those remarks.
The meeting was the third on corporate tax reform between Geithner and community leaders. On January 14 the Treasury secretary held a closed meeting with the chief financial officers of many high-profile businesses, including Coca-Cola and the Walt Disney Co., to discuss such efforts, and he met with business leaders again on January 20.
Henchman said he thought the January 21 meeting was “a good discussion.” Although he declined to say whether Geithner had indicated if more such meetings would be held, Geithner has said previously he expects to participate in a series of these meetings. Besides Henchman and McIntyre, Rosanne Altshuler of Rutgers University was in attendance, as was Maya MacGuineas, president of the Committee for a Responsible Federal Budget, and Daniel Shaviro of the New York University School of Law, among others.
Other organizations represented at the meeting included the American Enterprise Institute, the Center for American Progress, the Center for Budget and Policy Priorities, the Business Roundtable, the Service Employees International Union, Columbia Law School, the American Action Network, the Brookings Institution, the U.S. Chamber of Commerce, the AFL-CIO, the National Association of Manufacturers, and the University of California, Berkeley.