The U.S. tax systems for individuals and corporations should be revamped together, said the top Republican tax writer in Congress, resisting President Barack Obama’s call for a business-only approach.
Representative Dave Camp, chairman of the House Ways and Means Committee, plans to advance legislation through his panel by the end of the year that would lower tax rates for individuals and companies to 25 percent, he said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.
To pay for those changes and produce a revenue-neutral bill, Camp said he’s considering altering the deductions for mortgage interest and charitable contributions. Camp said he’s still determining whether to tax capital gains as ordinary income, which he said would help cover the cost of rate cuts. He ruled out a carbon tax and a value-added tax.
“Another layer of taxation only complicates the code,” he said. “And actually, those are taxes that are very easy to raise.”
Camp, a 60-year-old Michigan Republican, said he would decide by January whether to run for the U.S. Senate. Republican rules will require him to give up the Ways and Means chairmanship at the end of 2014 unless he receives a waiver to continue, which he said would affect his thinking about his political future.
Signaling a potential change in his international tax plan, Camp said he was considering accommodating companies with illiquid assets overseas.
Under Camp’s plan to reduce future taxation of U.S. companies’ overseas profits, he has proposed a 5.25 percent tax on the approximately $2 trillion of accumulated foreign profits that haven’t been taxed -- regardless of whether the companies bring the money back.
Companies such as Corning Inc. (GLW:US) and 3M Co., which have significant portions of their overseas profits invested in facilities, active businesses and other illiquid assets, have warned Camp of potential hardships.
“This can be a harsh result for a capital-intensive company like Corning that often must put its manufacturing facilities in the same country as its customers,” Susan Ford, a Corning vice president, wrote in a letter to Ways and Means this year.
Camp said he recognized that there was a difference between liquid and illiquid assets.
“We do need to get those dollars that are trapped overseas flowing back on a regular basis, so they’re not invested over there and become hard assets,” Camp said. “We would give a break to recognize there’s a difference between what’s liquid and illiquid that’s trapped overseas.”
Obama said earlier this week that Congress should consider a business-only approach to a tax-code rewrite that would devote one-time revenue toward spending on infrastructure. Camp said more spending was “not the approach I would take.”
Camp also said that Obama’s proposed 28 percent rate for corporations wasn’t low enough, compared with other industrialized countries.
“We need to make sure that our businesses are able to be competitive as they go around the world, so 28 would put us out of that range,” he said.
Camp, who has been working closely with Democratic Senate Finance Chairman Max Baucus, said he recognized that a final bill would have to be bipartisan, meaning that he will need to grapple with Democrats’ demands that a tax rewrite raise new revenue of as much as $975 billion over 10 years.
The only way to generate that revenue would be “to raise taxes on the middle class,” he said. “That would be the wrong approach. That would be something that would actually hurt the few bright spots we have in the economy.”
Camp also criticized the Internal Revenue Service for what he called the slow pace in producing documents for his investigation into the scrutiny of Tea Party groups applying for tax-exempt status.
“We only have about 3 percent of the documents that we’ve asked for,” he said, saying what committee staffers “really need” are e-mails.
Representative Darrell Issa, chairman of the House Oversight and Government Reform Committee, issued a subpoena yesterday to Treasury Secretary Jacob J. Lew to produce the documents, maintaining that the IRS chief counsel’s office was compromised.
“You are slow-rolling us,” Issa said to acting IRS commissioner Danny Werfel.
Werfel said Issa’s charges were untrue and that the agency was working as quickly as it could.
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