President Barack Obama will propose an overhaul of the U.S. corporate tax system in February, his economic advisers said.
The proposal will be released at about the same time as the administration’s fiscal 2013 budget plan, which is scheduled to be sent to Congress on Feb. 13. The administration isn’t releasing details of the comprehensive proposal, such as whether it will include a target for the top corporate tax rate.
“The president is looking to push forward a discussion on a broader corporate tax reform,” Jason Furman, the deputy director of the National Economic Council, told reporters on a conference call yesterday. “We’re going to have more discussion of that broader framework around the time of the budget.”
Obama has said the corporate rate should be lowered from the current maximum of 35 percent in a way that doesn’t add to the federal budget deficit. An overhaul plan probably will encounter opposition in Congress, where Republicans have said a rewrite of corporate tax rules should be paired with changes in the tax system for individuals.
“I don’t think anything is going to happen this session,” said Neal Weber, a tax partner in the Washington office of Cherry Bekaert & Holland LLP. “People are going to posture during the next 10 months through the election.”
One of the biggest obstacles to a corporate tax overhaul is how to pay for it. Obama might seek to raise revenue for lowering the corporate rate by reviving calls to end tax breaks for oil and gas companies or corporate jets. Republicans have blocked such moves in Congress.
Any effort to revise corporate tax laws stands to divide the business community as well. Retail companies, whose assets are mostly inside the U.S., are more focused on lowering the corporate rate. Multinational companies with headquarters in the U.S. are interested in shifting to a territorial tax system, in which only domestically generated income would be taxed.
Over the past year, the tax-writing House Ways and Means Committee has heard testimony on these issues from executives representing companies including the Boeing Co. and Sears Holding Corp.
Procter & Gamble Co. and General Electric Co. are among the companies that have lobbied Congress to move to a territorial tax system.
Ways and Means Committee Chairman Dave Camp, a Michigan Republican, released the first part of his corporate tax overhaul in October. He said the corporate rate should be lowered to 25 percent and proposed a territorial system in which 95 percent of profits earned offshore would be exempt from taxation in the U.S.
The Obama administration announced on Jan. 23 that its budget proposal would be delayed by a week, to Feb. 13. That led some tax experts to question whether the administration would come forward with something significant.
“I think we all thought there was a white paper at Treasury addressing tax reform on a comprehensive basis and that it was controversial,” said Pam Olson, who leads PricewaterhouseCoopers LLP’s Washington National Tax Services practice. “For that reason, we weren’t expecting anything comprehensive in the budget, but it sounds like we’re going to get something that’s more comprehensive than the administration’s previous budgets.”
The Obama administration is pushing tax policies with a populist tilt as part of an effort to revive Obama’s appeal among voters. In addition to the comprehensive overhaul proposal, Obama is backing a measure that would impose a minimum tax on overseas profits.
He sought support for that proposal during a speech yesterday at Conveyor Engineering & Manufacturing, a Cedar Rapids, Iowa, company that makes screw-type conveyors for moving materials.
“We’ve got to stop rewarding businesses that ship jobs overseas,” he said. “We need to make it easier for American businesses to do business here in America.”