Pipeline and financial companies are to blame for the failure of Congress to pass business tax reform, Treasury Secretary Jack Lew argued Monday.
In an interview at the Council on Foreign Relations in New York, Lew said those firms have led the opposition to the Obama administration’s push in the past few years for business tax reform.
Obama’s attempt to pass business tax reform faltered in large part because groups that represented small businesses raised objections. Those groups aired the concern that the Obama plan, in lowering the corporate tax rate, would create a disadvantage for the millions of small businesses that file taxes through the individual side of the tax code. Such “pass-through” companies include sole proprietorships, partnerships, and S-corporations, many of which are mom-and-pop businesses.
On Monday, however, Lew argued that the groups lobbying hardest to lower individual rates as well as business rates were not just small businesses.
The people lobbying against business tax reform, “ostensibly in the name of small businesses, are actually representing rather large interests, whether they’re interstate pipeline companies or large financial firms,” Lew said.
Lew’s unusually direct comments reflected the fact that, while most pass-throughs are small businesses, some are very big businesses that are less likely to get a sympathetic hearing from the administration. Pipeline companies and some financial firms, in particular, can be structured as partnerships.
Lew expressed hope that, despite opposition from those interests, Congress could revive the push for business-only tax reform that didn’t cut tax rates for individuals or large pass-through companies.
The recent European Commission ruling that Apple owes Ireland $15 billion-plus in back taxes, Lew said, could spur Congress to act on reform that lowers corporate tax rates and eliminates the incentive for firms to leave profits overseas to avoid U.S. taxes. That kind of reform would hurt certain companies by taking away loopholes that benefit them, he said, but would improve the U.S. economy by lowering tax rates. “I think we can get to a rate that puts us roughly at the average if we do that,” he said, referring to the corporate tax rates of advanced economies.
This post was updated to correct the location of Monday’s event.
