Geithner Says Republicans Walked Away From U.S. Tax Overhaul
(Updates starting with Geithner comments in 14th paragraph and comments on medical device tax starting in 16th paragraph.)
Feb. 15 (Bloomberg) -- The Obama administration isn’t proposing a comprehensive rewrite of the U.S. tax code because Republicans in Congress aren’t ready to discuss it, Treasury Secretary Timothy F. Geithner said.
A necessary, inevitable tax overhaul can’t be achieved because discussions with Republicans last year on deficit reduction proved “impossible,” Geithner said today in an exchange with Republican Representative Dave Camp, the chairman of the House Ways and Means Committee, at a panel hearing.
“Your side walked away from the table three separate times,” Geithner said. “You guys were not ready.”
Camp, of Michigan, disputed Geithner’s characterization, saying it was unfair to compare private meetings to consideration of a public tax overhaul proposal.
“Why isn’t there a comprehensive reform plan coming from this administration?” Camp asked. “What we’re asking is for some sort of public leadership stand on this issue.”
Camp has released a discussion draft on parts of a tax-code rewrite, and he said to Geithner that Republican proposals on the deficit-reduction supercommittee last year included some higher revenue.
In later comments, Geithner said he would speak “carefully” to avoid provoking Camp.
‘Too Far Apart’
“We found, frankly, that we were too far apart,” Geithner said. “We’re just so far apart on these core priorities.”
Camp criticized President Barack Obama’s fiscal 2013 budget plan because it includes tax increases that he said would put U.S. companies at a “competitive disadvantage” around the world.
“The budget is replete with proposals that will take more money away from employers, investors and savers,” Camp said.
In Obama’s budget plan, released Feb. 13, the top tax rate on ordinary income would increase to 39.6 percent from 35 percent while the top rate on capital gains would rise to 20 percent from 15 percent. Dividends would be taxed as ordinary income instead of at a 15 percent preferential tax rate.
The hearing demonstrated the gaps between Republicans and Democrats on tax policy and on whether tax increases should be used to reduce the budget deficit.
‘Top 2 Percent’
“Focusing these revenue proposals on the top 2 percent, those who have fared the best in the last decade of financial excess, is far better for the economy and more fair for the American people than cuts of equivalent magnitude” to Medicare and other programs, Geithner said.
The Treasury secretary said the administration will release a framework for changing the corporate tax code this month. That framework will suggest a lower tax rate and fewer tax breaks while retaining some incentives, he said, citing what he called the test he is using.
“Are we making it more likely that that next factory by a U.S. company or a foreign company is built here?” Geithner said.
Republican Representatives Jim Gerlach of Pennsylvania and Erik Paulsen of Minnesota questioned whether a 2.3 percent medical-device excise tax scheduled to take effect in 2013 would cause job losses.
“It’s a time bomb out there,” said Paulsen, citing concerns from device companies in his district.
Geithner said he disagreed, because the expansion of access to health insurance would create more opportunities for device companies.
“On balance, it is a good package for people in the health care business,” he said.
--Editors: Jodi Schneider, Justin Blum
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