Co-chairman of debt panel wants to address tax reform

Associated Press

WASHINGTON

The Republican co-chairman of the deficit-fighting “supercommittee” said Thursday he wants to tackle corporate tax reform, a theme the White House has promoted for months. But big differences remain, including on the sticky issue of whether changes should lead to higher overall taxes on businesses.

Limited by a tight deadline, there also is wide disagreement over whether Congress should overhaul corporate taxes without addressing taxes paid by individuals. Millions of business owners pay taxes on business profits on their individual returns.

Tax increases should be off the table, said Rep. Jeb Hensarling, R-Texas, co-chairman of the committee. But, he said, simplifying the corporate tax code by lowering the top rate and reducing tax breaks could help improve the economy, which would lead to more revenue.

“Most Americans agree that there is something fundamentally wrong with our tax code when a small business in east Texas pays 35 percent and a large Fortune 500 company pays little or nothing,” Hensarling said at a committee hearing on tax reform. He said he hopes the committee can agree “that fundamental tax reform, even if limited to just American businesses, can result in both revenue from economic growth for the federal government and more jobs for the American people.”

The top corporate income-tax rate is 35 percent, among the highest in the world. However, many corporations pay a much lower rate because they are able to take advantage of exemptions, credits and deductions.

There is widespread support in both political parties to simplify the entire tax code — for individuals and businesses — by reducing exemptions, deductions and credits and using the additional revenue to lower overall tax rates. But reaching agreement on the details will prove difficult because such an endeavor will create many winners and losers.