U.S. Treasury Secretary Jacob J. Lew praised a forthcoming congressional proposal to revamp the tax plan as a “constructive step” forward.
Senate Finance Chairman Max Baucus said he will soon release discussion drafts on several portions of the tax code and he is meeting with committee members today. Finance panel member Rob Portman, an Ohio Republican, said last week that those drafts will include international taxation, tax administration and capital cost recovery, all issues with significant implications for businesses.
“I talked with Senator Baucus yesterday and I think it’s a very constructive step that he’s putting forward, a draft,” Lew said at the Wall Street Journal’s CEO Council conference in Washington today. “I look forward to studying the details.”
He continued, “From what I understand, it shares some significant characteristics with the president’s framework, which I actually think has a certain amount of convergence between Democrats and Republicans.”
Baucus, a Montana Democrat, has said he wants to make the biggest tax code changes since 1986 and reduce individual and corporate tax rates. He has released few details of how he would do that, with a little more than a year remaining before he retires.
Baucus has been working with House Ways and Means Chairman Dave Camp, a Michigan Republican. Camp released an international tax draft in 2011 and is planning to release a full tax plan soon. Their efforts have been stalled in part by a partisan dispute over whether the government should collect more revenue.
President Barack Obama’s administration has outlined a framework for corporate taxation that would reduce the rate to 28 percent from 35 percent and set it at 25 percent for manufacturers. The administration’s plan would set a global minimum tax.
The current system imposes the federal rate on income earned worldwide while allowing companies to defer that U.S. tax if they leave money overseas. That system has led companies to hold about $2 trillion outside the U.S.
The individual side of the tax code is more politically charged because many of the possible ways to generate revenue come from closing popular tax breaks for health insurance, mortgage interest and charitable contributions.
“If you can’t do everything, do business tax reform,” Lew said. “Have our statutory rate not become something -- be something that drives business out but that attracts business to the United States, deal with the disparity between U.S. and international tax rates, eliminate some of the tax provisions that skew investment decisions.”
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