Sen Portman To Release Deficit-Panel Corporate Tax Overhaul Proposal
First Published Wednesday, 30th November 2011 06:05 am - © 2011 Dow Jones
--Sen. Rob Portman to introduce corporate tax proposal developed in supercommittee meetings
--Plan would lower corporate tax rate to 25% from 35% and shift to a territorial system
--Portman said Democrats provided input, though a Democratic aide said none have yet formally backed the plan
(Updates with comments from supercommittee member Sen. Pat Toomey in the 13th paragraph.)
By Kristina Peterson
Of Dow Jones NEWSWIRES
WASHINGTON -(Dow Jones)- Sen. Rob Portman (R., Ohio) plans to release a proposal developed in the congressional deficit-reduction committee to lower the corporate tax rate and change how U.S. companies' overseas profits are taxed.
The Joint Select Committee on Deficit Reduction formally ended its attempt to slash the federal budget deficit last week, but a plan developed by some of its members to overhaul the corporate tax code could extend its efforts.
The proposal aims to lower the corporate tax rate to 25% from 35% and move the country to a territorial tax system, Portman said Monday at the American Enterprise Institute, a conservative think tank. The plan will likely be introduced in early 2012, according to his staff.
Portman said many Democrats on the supercommittee and their staff provided input in crafting the proposal. "It was a bipartisan process," Portman told reporters Tuesday. However, a congressional Democratic aide cautioned that no Democrats have yet signed on to formally back the proposal.
Under the current worldwide system used by the U.S., companies generally owe U.S. taxes of up to 35% on profits earned abroad, though they get some credit for taxes paid to foreign jurisdictions. However, U.S.-based multinationals often avoid paying U.S. taxes by leaving the money overseas.
"Some have criticized our current system as allowing big U.S. companies to pay little or no taxes--our base-broadening reform will ensure all companies pay taxes through a more efficient code that creates more jobs," Portman said Monday.
Rep. Dave Camp (R., Mich.), a fellow supercommittee member and the chairman of the House Ways and Means Committee, introduced in late October a draft plan proposing to shift to a territorial system in which U.S.-based companies could deduct 95% of the profits they make abroad when paying U.S. taxes.
Portman said that the nonpartisan Joint Committee on Taxation has analyzed the supercommittee proposal and concluded it wouldn't add to the deficit by bringing in less revenue. That means the lower tax rate would have to be offset by wiping out some current tax breaks and roping more companies into paying taxes. Portman said his proposal manages to bring in the same amount of revenue as the current system "primarily by reducing inefficiencies, preferences and exemptions," but he hasn't released which specific tax breaks would be eliminated.
Those details will be important in securing bipartisan support for the proposal. The Joint Committee on Taxation found this fall in a preliminary analysis that eliminating most major business tax breaks could only offset lowering the corporate tax rate to 28%, prompting Democrats to worry that individual income tax breaks popular with the middle class might be scrapped in an effort to further slash tax rates.
However, Portman said Tuesday that all of the tax breaks targeted in his proposal would come from "the business side." He noted that the proposal also addresses pass-through entities, or companies whose owners report their profits on their individual income tax returns.
The previous JCT analysis didn't incorporate all business tax breaks in its calculations, Portman said.
"They would tell you it's not a comprehensive study," Portman said. "Democrats used that study to say this is impossible and our point was that study was incomplete."
Fellow supercommittee member Sen. Pat Toomey (R., Pa.) said Tuesday that there is "bipartisan acknowledgement that we need to do this kind of corporate tax reform" that would lower the rate and shift to a territorial system without changing how much revenue is raised. "Many of us on the committee spent a great deal of time working on the specifics of what this would look like," said Toomey, speaking at the conservative Heritage Foundation.
-By Kristina Peterson, Dow Jones Newswires; 347-882-7215;email@example.com
--Siobhan Hughes contributed to this article.