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Twenty-Five Years Since Last Revision

By Children’s Home Society of Florida Foundation

On February 22nd 2012, Treasury Secretary Timothy Geithner spoke to Congress and outlined the White House proposal for corporate tax reform. Geithner noted that there has not been a comprehensive corporate tax reform for 25 years. Since the last major corporate tax reform, there have been many significant events. These include the following changes.

1. Internet is widely used.
2. Cell phones are now common place.
3. China and India have become significant economies.
4. Global trade has greatly expanded.
5. Nearly all other industrial societies have lowered their corporate rates.

The Five Elements of Reform

1. Reduced Rates – The elimination of tax loopholes and subsidies will permit a reduction of the corporate tax rate from 35% to 28%.
2. Manufacturing Incentives – The effective tax rate for manufacturing companies will be reduced to 25% through incentives.
3. International Taxation System – Companies could pay penalties for shifting income overseas.
4. Simplification – Small businesses would benefit from reduced complexity in the Tax Code.
5. Revenue Neutrality – The reduced rates are achieved through eliminating various tax deductions.

Assessment

Treasury Secretary Geithner indicated that he plans to meet with Senate Finance Chair Max Baucus (D-MT) and House Ways and Means Chair Dave Camp (R-MI). He hopes that it will be possible to build a bipartisan consensus for corporate tax reform.

Editor’s Note: Sen. Baucus and Chairman Camp have been holding hearings and proposing corporate tax reform for the past year. With the White House announcement, that the President, the House and the Senate agree that there should be simplification and a lower corporate top rate. The challenge will come when the government grapples with the question of which major corporate deductions (such as bonus depreciation) will actually be removed in order to lower rates. Because of the magnitude of major tax reform, it is not likely that an actual bill could be passed before 2013.

Conclusion

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Filed under: Taxation | Tagged: Dave Camp, IRS, Max Baucus, obama, tax reforn, Timothy Geithner, Treasury Secretary, White House, White House Proposes Corporate Tax Reform | 4 Comments »