By Bernie Becker - 11/17/11 06:46 PM EST
Revenues in general have proven a particular sticking point for the supercommittee, which has discussed giving the regular tax-writing committees parameters and a deadline for a tax overhaul.
As have other close observers of tax reform, Tiberi said it would be too much to expect the supercommittee to get into the nitty-gritty of tax reform, given the short time the panel has to craft its deficit-reduction recommendations.
“The good news is we’ve been at this for 11 months on this committee,” Tiberi said. “So we’ve already laid the groundwork.”
Meanwhile, congressional Republicans and Democrats, as well as the Obama administration, have broadly called for reducing tax rates while eliminating some tax credits and deductions — in part to help U.S. companies, who have seen other countries reduce their corporate tax rates in recent years.
Camp, one of the 12 lawmakers on the deficit-reduction panel, has called for reducing the top individual and corporate tax rates from 35 percent to 25 percent without adding to the deficit.
But Democrats on the Revenue Measures subcommittee gave a nod toward studies that have questioned whether there are enough tax breaks to eliminate to get rates that low.
“When it comes to lowering the top corporate rate to 25 percent on a revenue-neutral basis, Chairman Camp has given us a map without street signs,” said Rep. Richard Neal (Mass.), the ranking Democrat on the subcommittee.
Camp’s draft proposal to shift to a so-called territorial tax system would exempt 95 percent of a U.S. corporation’s offshore profits from American taxation. Such a move, supporters say, would help combat the so-called “lockout effect,” in which multinationals keep profits abroad instead of paying the taxes needed to bring them to the United States.
The New Democrat Coalition, a centrist, business-friendly group, also announced tax-reform principles Thursday that called for encouraging companies to invest their offshore profits in the United States, while also pushing for lower rates and a tax overhaul that gives a boost to manufacturing.
Corporations currently have to pay the full U.S. tax rate on profits made all over the world, but get credits for taxes paid to foreign governments.
Camp’s proposal comes not long after other major market economies, including Great Britain and Japan, have switched to a territorial system.
“I think when international tax reform is finally enacted, and hopefully that’s sooner rather than later, we will see the introduction of this bill as one of the key milestones,” said Paul Oosterhuis of Skadden, Arps, Slate, Meagher & Flom, one of the witnesses at Thursday’s hearing.
But Martin Sullivan, a contributing editor at Tax Analysts, also noted that a reform push could end up hurting U.S. manufacturing, noting that tax incentives for research and development and capital investments help that sector.
And Sullivan pointed out that other countries that have reduced corporate tax rates in recent years have helped offset those costs with such policies as consumption taxes or increases in capital-gains taxes — ideas that have been loudly opposed by many Republicans.
“These are non-starters in today’s political environment,” Sullivan said. “But if we’re talking about a 25 percent rate, that’s where the numbers lead.”