Congressional Parents Protective of Tax Exemption ‘Kids,’ Engler Says

Photograph by Andrew Harrer/Bloomberg

Secret service agents and police officers stand outside a Democratic caucus meeting room with Vice President Joe Biden at the Capitol.

John Engler, president of the Business Roundtable and a Republican former governor of Michigan, says he thinks Congress can find a way to lower the corporate tax rate to 25 percent without sacrificing revenue.

The problem: Getting members of Congress to let go of their ‘kids.”

Every tax deduction “has got a father or a mother over there in the Congress looking after their child,” Engler said at a lunch today in Washington, where the association of chief executives of large corporations is based. “You’ve got to go round up all the kids here and see if there’s enough to pay for it.”

The 200-member association says every tax credit or deduction should be “on the table” for review in order to get the overall rate down, Engler said. The top corporate tax rate is 35 percent.

At the lunch, where the Business Roundtable announced its legislative priorities for the year, Engler noted that President Barack Obama is amenable to corporate tax reform — something his defeated Republican challenger, Mitt Romney, had mentioned frequently as a priority during the campaign.

When Obama spoke to the Business Roundtable CEOs in December, Engler said, the president “impressed” them “because he reaffirmed his support for corporate tax reform.” Obama also “acknowledged the importance of dealing with the territorial system,” Engler said.

Such a system would largely exempt U.S. companies from paying taxes on profits they make outside the country.

“There were no specifics, but a favorable impression was left by the president on the comprehensive tax reform topic,” Engler said.

A White House official said today that Obama wants to encourage domestic investment and doesn’t believe that a pure territorial system is the best way to do so. The official said Obama wants to overhaul the corporate tax structure in a way that helps U.S. businesses compete around the world.

Obama’s budgets have all included proposals that would move the international tax code in the opposite direction from territoriality, making it harder for companies to defer paying U.S. taxes on income earned outside the country.

With the more immediate fiscal issues of sequestration and the debt ceiling looming, neither Obama nor Congress is likely to push for any major tax-code changes in the first half of the year, Engler added

With assistance from Richard Rubin.

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