Geithner says tax reform must wait until after debt-ceiling talks

Treasury Secretary Timothy Geithner said Tuesday that he thought corporate tax reform was achievable, but would have to wait until after the current debt-ceiling talks run their course. 

Geithner told a conference of business executives that the administration had toiled hard to create a framework for an overhaul of the corporate tax system. But he added that, though revenues have to play a role in the deficit-reduction discussions led by Vice President Biden, those talks were not the place to push forward on the issue of broader reform. 

"The current tax system in the United States is not something we should be living with for any longer,” the secretary said at the conference sponsored by The Wall Street Journal. “It’s a politically driven tax system that fails that basic test of letting the markets and the economics of business allocate investment. So we should change it.”

In a wide-ranging talk, Geithner also touched on the current fiscal instability in Europe, saying that the continent needed to speak with a unified voice on Greece, and expressed confidence that a trio of pending trade pacts would soon make their way through Congress. 

As for tax reform, Geithner continued to stress that any revamping of the corporate tax code should be revenue-neutral, and said he believed Washington could deal with the issue even as the 2012 presidential election started to heat up. 

But he declined to go into detail on what rate a corporate tax overhaul should shoot for, whether he thought the U.S. should move to a so-called territorial system and what role the repatriation of offshore profits should play in the reform discussions. 

And he added that he believed corporate tax reform could proceed ahead of an overhaul of the individual code, a statement that puts him at odds with other key tax policymakers. 

“The risk for the American business community is that that’ll just consign you to unnecessary delay,” Geithner said, noting that the comprehensive tax overhaul that occurred during President Reagan’s tenure took years. 

Rep. Dave Camp (R-Mich.) is among the Washington officials who have said the two codes need to be tackled together, pointing out that many businesses pay taxes as individuals. 

That is only one of the challenges officials would have to examine in tax reform, along with how international profits are dealt with and how much revenue a plan should bring in also potential trouble spots. 

Camp, who is scheduled to make a lunchtime address to the conference, and others have also called for the U.S. to move to a territorial system, which would essentially mean that American multinationals would only be taxed on profits made in the U.S. Currently, U.S. multinationals can defer paying taxes on offshore profits until they try to bring that money into the country.

With the Greek government, which is trying to avoid default, set to get a confidence vote in the coming hours, Geithner said European governments had the tools at their disposal to deal with the issue but needed to speak more as one voice. Other European governments have said that Greece would need to pass more austerity measures to potentially get another loan package. 

“The simple rule of crisis management is you want to have a simple, clear, unified, declarative strategy,” Geithner said.

The Treasury secretary also said he believed all three languishing trade deals — South Korea, Colombia and Panama — would be ratified by year’s end. 

The agreements are currently hung up over a dispute over the Trade Adjustment Assistance program, which helps workers displaced by foreign trade.

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