Treasury Secretary Jack Lew made the case for a bipartisan push for corporate tax reform Wednesday morning, narrowing in on one of the major goals laid out by President Obama in the State of the Union address Tuesday night.
“There is a growing bipartisan consensus in Washington on how to achieve business tax reform, and we have a unique opportunity now to get this done,” Lew said in a speech delivered at the Brookings Institution Wednesday.
Lew’s comments reinforced the case for reform Obama made Tuesday night, with added detail about the specific provisions and a direct entreaty to the top congressional leaders on tax matters.
“I have remained in close touch with the chairs and the ranking members,” Lew said, referencing Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Paul Ryan. “I’m encouraged that there’s the broad interest in pursuing a bipartisan discussion in tax reform,” he added.
There is not enough agreement between the parties on individual tax rates to address the overall tax code, Lew acknowledged.
But he claimed that there is significant “overlap” between recent GOP corporate tax plans and Obama’s own priorities.
The White House’s stated desire to work with Republicans also may be driven by the surge of corporate inversions that threatens to reduce future business tax revenues.
Inversions are tax maneuvers in which U.S. businesses buy companies in low-tax jurisdictions and then move their headquarters there. Lew took administrative action to undercut the tax benefits of such deals last fall, but said Tuesday that reform was also needed. “We need to fix the tax code so companies will have neither the incentive nor the ability to invert simply to avoid taxes,” he said.
Although most involved in tax legislation see high barriers to any deal in 2015, Republicans have signaled openness to working with Obama on tax reform in recent days.
Nevertheless, Lew acknowledged a few areas of disagreement that would have to be navigated to reach a deal, including tax credits for low-income families and what to do with the roughly $2 trillion in profits held by U.S. businesses overseas that would be repatriated and taxed in a reform scenario. Obama wants to use those tax revenues to spend on infrastructure products.
He also criticized Republicans’ move to use “dynamic scoring,” a budgeting convention that estimates revenues taking into account the macroeconomic growth from tax cuts.
It’s “very dangerous to use scoring methods that may in the end overstate what your savings are,” Lew said. He added that he “cannot let us slip into a place where we look the other way” and let tax cuts increase deficits.
