Main Street

White House to Overhaul the Corporate Tax Code

In last night’s State of the Union, President Obama briefly mentioned the problems with America’s current corporate tax code. Most notably, the code is packed with so many loopholes and tax breaks for specific industries like the Oil Industry and Big Banks, that a large chunk of the tax code burden falls to small businesses. Misguidedly, businesses are given incentives to ship jobs overseas, instead of hiring struggling Americans.

It is time for a change. The National Journal reports:

The issue could offer a rare opportunity for collaboration with Republicans in Congress. But while there is considerable consensus about the appeal of reform, the administration doesn’t want the effort to widen the deficit. Some officials said they are worried that bringing any tax reform proposal would end up more as tax cuts than tax reform.

“That was a big point of debate and pushback,” explains a source familiar with a meeting between Geithner and a number of corporate CFOs on January 14. “A number of the CFOs said, ‘If you want to achieve objective No. 1, which is developing a competitive system, there shouldn’t be a heavy emphasis on doing so in a deficit neutral and deficit reducing fashion.’”

White House officials say the annual cost of “tax expenditures” — special tax breaks — is already $1.1 trillion. That’s more than the government actually collects in personal and business taxes under the current code. “It’s more holes than cheese,” one White House official said last week. Given the challenge of taming the government’s trillion-dollar budget deficit, Obama’s team isn’t willing to make the problem even worse while Republicans clamor for deep spending cuts.

Rather, the administration seems to prefer a strategy akin to its approach to health care reform: By convincing concerned private interests to buy into the White House approach, or at least not oppose it publicly, officials hope the political lift will be easier. During the health care fight, insurers gained millions of new customers while agreeing to restrictions on their behavior. Now, the administration is offering support for a variety of corporate tax reforms in exchange for backing on fiscal responsibility.

America needs a corporate tax structure without loopholes for irresponsible businesses like the Big Banks, which caused the current economic meltdown, or the Oil Industry, who was responsible for the BP spill last April. We need a tax structure that provides incentives for hiring Americans, not for shipping jobs overseas. Hopefully, President Obama and the current Congress will work to make this a reality.

Tags: taxes