Geithner Says No Corporate Tax Reform, Repatriation in FY 2012 Budget
By Brett Ferguson, Heather M. Rothman, and Jonathan Nicholson
Publication Date: 02/10/2011
The president's fiscal year 2012 budget proposal will not include any plans for corporate tax reform or incentives to encourage corporations to bring foreign earnings back into the United States, Treasury Secretary Timothy Geithner said Feb. 9.
Geithner, speaking at a forum sponsored by The Atlantic, said the administration is still trying to “shape consensus among the key people in Congress” about the concepts for tax reform. The president wants to ensure that any efforts to broaden the tax base and reduce corporate tax rates are done in a revenue-neutral way, he said.
“We're not going to put a detailed plan in the budget,” Geithner said. “Let's just be realistic. You know, we're not going to ask Americans to pay higher taxes so we can lower taxes on businesses,” he said.
Speaking to reporters, House Minority Leader Steny Hoyer (D-Md.) said he did not think comprehensive tax reform could occur without bipartisan cooperation and strong direction from the White House. “You need presidential leadership and you need buy-in by both parties,” Hoyer said at his weekly news conference.
Geithner also dismissed suggestions that the administration could propose a “repatriation holiday” that would offer corporations a tax incentive to bring offshore earnings back into the country for reinvestment.
“We are not going to look at a repatriation holiday outside the context of comprehensive reform,” Geithner said.
Repatriation Still Hot Topic
As part of the American Jobs Creation Act of 2004 (Pub. L. No. 108-357), lawmakers enacted a repatriation holiday that cut the 35 percent tax rate that U.S. multinationals pay on their foreign earnings to 5.25 percent.
Testifying before the House Budget Committee Feb. 9 on the state of the U.S. economy, Federal Reserve Chairman Ben Bernanke said that, during that period of repatriation, a lot of money did come back into the United States. “Some of it went to dividends and that sort of thing. Some of it probably went to investment,” he said. “It's a little hard to tell how much would go in each direction.”
Bernanke said if lawmakers were considering enacting a repatriation measure, they should consider something more permanent, which is move from a worldwide system of taxation to a territorial basis for taxation.
Currently, the United States has a worldwide system of taxation, which means U.S. companies pay tax on the business they do in other countries as well as domestically. Under a “pure” territorial system, they would be taxed only on business activities conducted within U.S. borders.
Budget Hearing Schedule Beginning to Unfold
President Obama will release his budget blueprint Feb. 14, and congressional hearings will begin the following day, with Geithner appearing Feb. 15 before the House Ways and Means Committee.
The complete text of this article can be found in the BNA Daily Tax Report, February 10, 2011. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2011, The Bureau of National Affairs, Inc.