Paul Ryan on Sunday laid out a plan for tax legislation this year that reflects the diminishing expectations for tax reform in the 114th Congress. Republicans in Congress will try to work with the Obama administration for deals on international taxation and temporary tax breaks for business, and not broader tax reform, he indicated.
Ryan, the Republican chairman of the important tax-writing House Ways and Means Committee, said in an interview with the Wall Street Journal‘s Kimberley Strassel published Sunday night that there was an “impasse” between the GOP and Obama on a large-scale tax reform bill.
Instead, he suggested, Republicans will focus this summer and fall on smaller aspects of tax reform that “gets us a step in the right direction.”
Ryan has sought to make tax reform part of his legacy. He and other Republicans, however, have said all along that it will likely take a Republican president in office to reach their goal.
For now, he will focus on changing the system of U.S. international taxation and re-upping expired temporary tax breaks for corporations known as “extenders.” The extenders include a number of provisions that are re-extended every year, and Ryan would like to make some of them permanent.
The Wisconsin Republican indicated that he is in talks with the Obama administration on changing the U.S. government’s international taxation system, which is unusual for a developed nation and hated by corporations.
Currently, the Treasury taxes U.S. corporations on all income earned worldwide, granting a credit for taxes paid to foreign governments.
That is one of the provisions of the corporate tax code that has led to some executives trying to move U.S. companies’ headquarters out of the U.S.. They have done so in recent years through foreign buyouts and through tax maneuvers known as inversions, in which companies merge with foreign businesses and make their new headquarters in the other corporation’s home country.
Ryan said that one of his priorities was fighting back against an international effort to develop rules between companies to prevent tax competition from undermining governments’ revenues.
With Senate Finance Committee Chairman Orrin Hatch, he said, he comes “from the school of thought which believes in tax competition, not tax harmonization, which means we want to see countries compete for more free-market lower barriers, not trying to harmonize everybody’s taxes up.”
The two Republicans have tried to sway Treasury Secretary Jack Lew to take their view of international tax competition as the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project moves to make recommendations for the U.S. and other countries.
