By Jennifer Merritt
The Wall Street Journal’s David Wessel spoke to Treasury Secretary Timothy Geithner about corporate tax reform after the State of the Union speech earlier this week. (Read the entire Q&A here.)
For the most part, Geithner emphasized the administration’s insistence on offsetting the corporate rate, now 35%, by eliminating deductions, credits and incentives, not by raising revenues with higher taxes on businesses.
According to the story, “He wouldn’t say if the administration wants to move from taxing multinational corporations’ global profits and instead tax only domestic profits, as most other countries do and as U.S. business wants. But he said a “level playing field” is a major goal.”
Echoing Tax Guy Bill Bischoff’s recent blog post about how lower corporate tax rates would boost business, Geithner said he believed that lowering rates and eliminating the distortions in the present system, would help fuel growth because “it allows business to compete on the basis of performance and return rather than on their ability to get or protect special provisions in the tax code.”
Some experts believe that reforming the corporate tax system by reducing the overall corporate tax rate is exactly what’s needed to get more American companies to locate facilities in the U.S. and not move them overseas. (Bischoff recently wrote that corporate tax rate cut would spur job growth.)
Geithner wouldn’t say whether there was any willingness consider a shift away from the current system, in which multinationals are taxed on their world-wide profits, to one where they’re taxed only on their U.S. profits, according to the Q&A. The key here is that U.S. companies are only taxed on that profit now if they bring profits from those offshore operations back to the U.S. Geithner said there was a desire to reduce the incentive to invest overseas and increase incentives to invest in the U.S.–and overall, to put U.S. firms on a level playing field with foreign competitors.
Readers, what kind of corporate tax reform do you think we need? And what do you think will actually happen?