By Bernie Becker - 10/26/11 12:36 PM EDT
Rep. Dave Camp, the chairman of the House Ways and Means Committee, is set Wednesday to release his plan to exempt most corporate foreign income from taxation, pushing the discussions over tax reform another step forward.
The Michigan Republican’s plan to move the country to a territorial system, according to lobbyists and media reports, would except 95 percent of a corporation’s offshore profits from U.S. taxation.
Camp, in an interview with CNBC on Wednesday, signaled that mandating companies repatriate profits stashed abroad would help pay for the shift to a territorial system. According to K Street sources and reports, that repatriation rate would be 5 percent.
“That’s what I’m actually doing on this proposal today is, how do we get our U.S. economy moving again?” Camp said. “That’s bring our international tax laws, which have not been revised for about 50 years, up to the modern world.”
Camp’s territorial plan is set to be a draft proposal, not fully fleshed-out legislation, to allow stakeholders to weigh in on the plan.
The Michigan Republican hopes to include the framework in a broader tax reform package that lowers tax rates while eliminating many credits and deductions. Camp also has long said that he wants to reduce the top corporate and individual tax rates to 25 percent, down from their current 35 percent, and that a tax overhaul should be revenue-neutral.
Under the current tax regime, U.S. multinationals are taxed at that full corporate rate on profits made anywhere in the world. The corporations are given credits for taxes paid to foreign governments and can defer paying the U.S. tax until the funds are brought to this country.
The proposed shift to a territorial system would put the U.S. more in line with other major industrial economies, with Great Britain and Japan among those who have made the switch in recent years. Gov. Rick Perry of Texas, a GOP presidential candidate, also called for the U.S. to move to a territorial system.
For their part, Democrats have long looked at territorial systems with a wary eye, concerned that the regime would encourage corporations to keep jobs and profits out of the U.S.
Rep. Sandy Levin (D-Mich.), the Ways and Means ranking member, also said in his own CNBC interview on Wednesday that he was concerned about whether Camp’s plan would be revenue-neutral.
“I’m for corporate tax reform,” Levin said. “But we need more than a wish list. We need a plan, and we need to answer questions.”
Camp’s plan reportedly would also propose changes to capitalization rules and tax royalties at 15 percent.
The proposal comes as a prominent lobbying coalition has been pressing policymakers for a corporate tax holiday, which would temporarily allow multinationals to bring offshore profits back to the U.S. at a drastically reduced rate.
Camp and other prominent officials have said they want a more permanent policy for dealing with offshore profits, a stance the Michigan Republican reiterated on Wednesday.
The Ways and Means chairman is also one of the 12 members on the debt-reducing supercommittee, which is discussing tax reform.