Former White House economic adviser Lawrence Summers said uncertainty over the future of the corporate tax code is creating a drag on the U.S. economy by making businesses hesitant to invest.
Summers, the former director of President Barack Obama’s National Economic Council, said in an interview on CNN that the question of whether Congress will overhaul the nation’s tax rules has brought about uncertainty for businesses, including whether they should reinvest overseas profits in the U.S.
“Washington absolutely should provide clarity or certainty this year,” Summers said on CNN’s “Fareed Zakaria GPS” airing today, according to a transcript. “It should do whatever it’s going to do on corporate tax reform and then it should make clear that those rules are going to be in place for the next five years. And that will contribute to bringing money home and getting it reinvested in the U.S. economy.”
Representative Dave Camp, the Republican chairman of the House Ways and Means Committee, is seeking to pass broad tax changes this year, and some in Congress have sought to give businesses a tax cut on profits brought back from overseas. Obama this week called for “comprehensive tax reform,” including cuts for companies that create jobs in the U.S.
Such moves to revamp the tax system have failed to advance in recent years as Congress focuses on ways to lower the federal budget deficit. Federal spending cuts caused the economy to shrink during the last three months of 2012 as defense outlays dropped by the most in four decades.
Summers said the federal government needs to keep working to foster the economic recovery and should prevent across-the-board spending cuts -- known as the sequestration -- from beginning next month. He said faster economic growth would help close the federal budget deficit by boosting tax revenue.
“It would be madness to let the sequester go brutally into effect a month from now and slash federal spending quickly,” he said. “Spending, taxing, it all does have to be adjusted over time, but not immediately.”