A Deep Divide Over Corporate Tax Reform


While the debate over reforming the nation's tax code will continue when Congress returns after Labor Day, over the past few months the momentum has slowed significantly because of the hardened positions of the Senate Republican leadership and the President. Comprehensive tax reform may not be possible at a time of such highly charged partisanship and lack of genuine consensus.

The best example of the growing divide between the President and Senate Republicans is their positions over corporate taxes. America's corporate tax rate is the highest in the world, and while the business community defends its own tax breaks, no one defends the tax code. A few weeks ago, President Obama pledged to lower the corporate rate to 28 percent, from 35 percent, with a lower rate for manufacturing jobs, but only if the additional revenue is used to fund new jobs and infrastructure improvements.

Senate Republicans have insisted that any tax reform legislation not only reduce the corporate rate but be revenue neutral and not raise additional revenue. Not everyone was pessimistic. The chairmen of the tax writing committees, Rep. Dave Camp (R-MI) and Sen. Max Baucus (D-MT), issued an unusual joint statement, saying they welcomed "the president's recognition that our broken, outdated tax code is making it harder for U.S. companies to compete and American families to get ahead." In spite of their optimism, Republican Senate leaders quickly dismissed the president's offer. Sen. Orrin Hatch (R-UT), the most senior Republican on the Finance Committee, called the proposal "unserious."

By Michael A. Andrews


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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