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Labor Unions, Nonprofits Seek Curbs on Corporate Tax Breaks

U.S. labor unions and nonprofit groups, including the Service Employees International Union and the National Education Association, called on Congress to raise corporate taxes by eliminating “tax subsidies” and to resist calls by business groups to reduce the corporate tax rate.

That position puts the groups in opposition to the Obama administration, which is seeking an overhaul of the corporate tax code that would remove deductions and credits and cut the top corporate rate of 35 percent.

“In contrast, we strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go towards deficit reduction and towards creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive,” wrote the groups, which included the Children’s Defense Fund and Citizens for Tax Justice.

Lawmakers are considering a broad overhaul of the U.S. tax code. Last week, chief financial officers from Caterpillar Inc. (CAT), Zimmer Holdings Inc. (ZMH), United Technologies Corp. (UTX) and Kimberly- Clark Corp. told the House Ways and Means Committee that the top 35 percent rate and the U.S. tax on repatriated offshore profits hamper them against foreign competition.

In today’s letter, the groups wrote that competitiveness depends more on public investments in education and infrastructure than on tax policy. They urged Congress to examine the ways in which companies often pay less than the 35 percent rate.

‘Tax Loopholes’

“These tax loopholes often subsidize corporations for engaging in activities that do not make economic sense and some may even subsidize corporations for moving jobs offshore,” wrote the groups, which include the AFL-CIO and the National Low Income Housing Coalition. “Some U.S. corporations use these loopholes to avoid U.S. income taxes entirely.”

The Treasury Department is working on a corporate tax overhaul proposal. Secretary Timothy Geithner said yesterday that he hoped to make progress on the issue this year or next.

“We’d like to take a run at doing this ahead of the election,” he said in response to questions following a speech at the Harvard Club in New York.

Labor unions, which have supported President Barack Obama, have resisted some Democratic tax proposals, including attempts during the health care debate in 2009 and 2010 to impose a tax on the most expensive health care plans. Their efforts led Congress and the administration to scale back the proposal.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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