Daily Tax Update - February 15, 2011: Obama Won't Sign Corporate Tax Reform Bill Unless Revenue Neutral

OBAMA WON’T SIGN CORPORATE TAX REFORM BILL UNLESS REVENUE NEUTRAL:  In a press conference today, President Obama said that he wants corporate tax reform to be revenue neutral.  Obama said, "[W]hat is absolutely true is that it’s going to be difficult to achieve serious corporate tax reform if the formula is, lower our tax rates and let us keep all our special loopholes.  If that’s the formula, then we’re not going to get it done.  I wouldn’t sign such a bill, and I don’t think the American people would sign such a bill.  If you’re a small business person out on Main Street, and you’re paying your taxes, and you find out that you’ve got some big company with billions of dollars in far-flung businesses all across the world, and they’re paying a fraction of what you’re paying in taxes, you’d be pretty irritated – and rightfully so.  And so the whole idea of corporate reform – corporate tax reform – is, yes, let’s lower everybody’s rates so American businesses are competitive with businesses all around the world; but in order to pay for it, to make sure that it doesn’t add to our deficit, let’s also make sure that these special interest loopholes that a lot of lobbyists have been working very hard on to get into the tax code – let’s get rid of those as well."

  • Regarding the Fiscal Year 2012 budget released yesterday, the President said that the budget seeks to end corporate tax breaks that "aren’t contributing to our long-term economic growth."  On the issue of corporate tax increases in the budget, Obama said, "I continue to believe I’m right."  Obama added, "What’s different is that everybody says now they’re really serious about the deficit. . . If we are going to get serious about deficit reduction and debt reduction, then we’ve got to look at all the sources of deficit and debt."  Obama also acknowledged that the budget proposal was the first step in a "negotiation process."
  • The President’s remarks can be accessed here.

TREASURY SECRETARY TESTIFIES ON PRESIDENT'S BUDGET PROPOSAL:  Today, Treasury Secretary Timothy Geithner testified before the House Ways and Means Committee on the Fiscal Year 2012 budget proposal.  Geithner said, "Strengthening our competitiveness and restoring fiscal responsibility will require reforms to our tax system.  Starting with revenue provisions that promote investment in innovation and clean energy, the President’s Budget includes a series of specific tax policy changes that help us move towards a more efficient, fair and competitive tax system that will support economic growth.  Specifically, the Budget proposes making an expanded research and experimentation tax credit permanent, thereby increasing certainty for businesses making crucial long-term investments that will lead to more innovation.  In addition, in order to support investment in clean energy technology, the Budget proposes tax credits for advanced manufacturing facilities, energy-efficient commercial buildings and an improved credit for plug-in vehicles."  Geithner continued, "The Budget proposals also reduce the incentives for multinational firms to shift income and assets to their foreign subsidiaries.  Finally, the Budget proposes a fee on financial firms to recoup the costs of the extraordinary financial assistance the government put in place to resolve the crisis." 

  • On the issue of tax reform, Geithner said, "In addition to these proposals, we must pursue comprehensive corporate tax reform to create a competitive tax system that raises sufficient revenue in the most efficient, simple and fair way.  The current system for taxing corporations and business hurts economic growth by placing burdens on US businesses that negatively affect their investment and employment choices.  Because of various loopholes and carve-outs, some industries pay an average rate that is four or five times higher than others, and although our statutory corporate tax rate is one of the highest in the world, we raise about the same amount of corporate tax revenue as our major trading partners.  Moreover, because of the high rate and because of the various loopholes and carve-outs, too many businesses end up making investments based on what their tax planners recommend, instead of what sound business judgment would suggest.  This puts our entire economy at a disadvantage.  As the President has announced, in consultation with the business community and other stakeholders, the Administration is examining ways to lower the corporate tax rate and to eliminate provisions that negatively affect investment.  By pursuing these two objectives together, we can enact reform that does not add to current or future deficits.  I look forward to working with you on this important endeavor."
  • Regarding the President's FY 2012 budget request, Committee Chairman Dave Camp said, "[I]t would result in record high deficits while pushing the federal tax burden to over 20 percent of our economy, a level never sustained in our nation’s history…Let me be clear Mr. Secretary, Americans are not taxed too little.  What America has had under this Administration is too little job creation.  More borrowing, taxing and spending is certainly not the answer to what ails our economy."  Camp added, "As I look through this budget proposal, I am left wondering if there wasn’t a printing error, because it looks almost identical to last year’s budget.  We again have massive tax increases – now totaling $1.9 trillion – that will hit small businesses, middle-class families, American employers with worldwide operations, and investment income – the very investments we need to jumpstart this economy." 
  • On the issue of tax reform, Camp said, "Even the same things are missing from this budget – there are platitudes about tax reform but tax policy proposals that move in the opposite direction.  There is nothing on entitlement reform, and there is little more than lip service about getting the deficit under control."
  • Geithner's remarks can be accessed here.

TAX BILLS INTRODUCED FEBRUARY 14TH:
1.  [112nd] S.339: A bill to amend the Internal Revenue Code of 1986 to make permanent the special rule for contributions of qualified conservation contributions.
Sponsor: Sen Baucus, Max [MT] (introduced 2/14/2011)    Cosponsors (1)
Committees: Senate Finance
Latest Major Action: 2/14/2011 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.

2.  [112nd] S.340: An original bill to amend the Internal Revenue Code of 1986 to extend the funding and expenditure authority of the Airport and Airway Trust Fund, and for other purposes.
Sponsor: Sen Baucus, Max [MT] (introduced 2/14/2011)    Cosponsors (None)
Committees: Senate Finance
Senate Reports: 112-1
Latest Major Action: 2/14/2011 Placed on Senate Legislative Calendar under General Orders. Calendar No. 10.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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