The top taxwriter in the House called Monday for cutting the corporate tax rate to under 20 percent.
Rep. Kevin Brady, chairman of the Ways and Means Committee, said a “bold” reduction in the corporate tax rate from its current 35 percent was necessary for the U.S. to remain competitive with other nations.
“I’m convinced that for us to make the changes to really be competitive, it needs to be a bold number and a bold approach,” the Texas Republican said Monday evening at an event hosted by Politico in Washington.
Citing former Apple CEO Steve Jobs, Brady said it isn’t sufficient to merely catch up with the competition. Instead, it’s necessary to “leapfrog” them. The average industrialized nation in the Organization for Economic Cooperation and Development has a 25 percent corporate tax rate.
For that reason, Brady suggested that the tax reform plan drawn up by his predecessor, Rep. Dave Camp, R-Mich., did not go far enough in reducing rates. Camp in early 2014 announced a draft reform that would have cut the corporate tax rate to 25 percent. To prevent those rate cuts from expanding the federal deficit, Camp’s plan called for cutting corporate tax breaks. His plan created enough losers who would have seen their breaks eliminated that it failed to gain support in the lower chamber.
Brady acknowledged that it would be difficult to lower the rate even further.
“To do that we need to think fresh, to look at all these issues anew,” he said, referring to possibilities for broadening the tax base.
Brady’s goal is in line with the tax reform proposal laid out by Republican presidential hopeful Jeb Bush, who also aims for a 20 percent rate in his plan. Other candidates have identified different goals: Marco Rubio’s campaign reform plan envisions a 25 percent rate, while Donald Trump aims for 15 percent. Ted Cruz and Rand Paul woud eliminate the corporate income tax entirely for a business transfer tax, considered a form of value-added tax.
House Speaker Paul Ryan has called on GOP committee chairmen to roll out reform proposals laying out the Republican vision for policy before the presidential nominee is chosen, to define the agenda for the next Congress. Brady declined to commit to passing comprehensive tax reform legislation in his committee this year, saying that the process will be driven by committee members.
Brady, however, who succeeded Ryan as the panel’s chairman after Ryan was elected speaker, said the committee would pass narrower legislation aimed at international tax reform. The issue of taxation of overseas income has become more pressing in the face of a wave of corporate tax “inversions” in recent years. Inversions are a maneuver in which U.S. companies avoid U.S. taxes on international income by combining with a company in a low-tax jurisdiction and then placing the headquarters of the newly formed company in the low-tax country. Such deals have become more tempting to businesses as the amount of earnings held overseas to avoid paying U.S. taxes has eclipsed $2 trillion.
