By Jim Puzzanghera
April 17, 2015
Despite optimistic talk from Democrats and Republicans about overhauling the tax code, General Electric Co. recently showed that corporate executives aren’t holding their breath for a bipartisan deal any time soon.
GE said last week that as part of a major restructuring, it would bring back $36 billion in overseas cash and pay $6 billion in taxes to do it — even though changes long under discussion in Washington could have significantly reduced that tax bill.
“It’s a clear indication that corporate America isn’t waiting for D.C. to make the tax code any simpler,” said Chris Krueger, a policy analyst at financial services firm Guggenheim Partners in rate, which at 35% is the highest among industrialized nations, needs to be lowered to make American companies more competitive with foreign firms and that loopholes need to be eliminated to make the code simpler and more fair.
Given that President Obama and congressional Republican leaders want to show that they could work together in the aftermath of last fall’s elections, both sides have made a tax overhaul a top priority.
The desire to find a way to lower the corporate tax rate also was fueled by a rash of so-called inversion maneuvers last year by U.S. companies to re-incorporate abroad to lower their tax bills.
But the devil is in the details, and major differences remain in how to reform the code, particularly whether individual tax rates should be revised along with those paid by corporations.
There isn’t much time left to gain momentum.
With elections looming again in 2016, it’s unlikely Congress could pass something as controversial as tax reform next year. And obstacles are mounting to getting anything passed this year.
The two tax-writing committees in Congress are focused now on so-called fast-track trade legislation, another contentious issue that would speed a deal on a 12-nation Pacific Rim free trade agreement. Meantime, Republican presidential candidates have begun rolling out their own tax plans, further complicating the process.
“We really desperately need pro-growth tax reform, but that said, there are real political obstacles,” said Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce. “We are very hopeful for more progress … but you’ve got to be realistic.”
For multinational companies, loopholes and the ability to stash profits overseas help lower their overall tax rate to well below the 35% level. A study by the Government Accountability Office found that the average effective tax rate for profitable U.S. corporations was 16.6% in 2010.
This week, politicians and officials at the White House and on congressional committees working on a tax overhaul said passing a bill still is possible this year.
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