Lawmakers from both parties on the deficit-reduction supercommittee said they agree the U.S. corporate tax rate should be lowered from its current maximum of 35 percent.
There was little agreement at the panel meeting today on which benefits in the tax code should be eliminated or curbed to pay for lowering the corporate rate. Also, the lawmakers didn't indicate that the panel would produce legislation by Nov. 23 that would push corporate rates lower.
“Most people do agree that such high tax rates make the United States a less attractive place in which to do business,” said Senator Patty Murray of Washington, the Democratic co-chairman of the panel. “Instead of making and improving their widgets or hiring new people,” she said, businesses “spend too much time and effort devising business strategies aimed simply at tax avoidance.”
The panel's first hearing on tax policy reflected a broader debate between Democrats and Republicans over the role of revenue in reducing the U.S. budget deficit. Representative James Clyburn, a South Carolina Democrat, urged enacting new taxes for millionaires while the panel's Republican co-chairman, Representative Jeb Hensarling of Texas, warned against new taxes.
Tax Increase 'Consequences'
If lawmakers on the supercommittee “choose to solely or primarily address our debt crisis by increasing the nation's tax burden, I fear the consequences,” Hensarling said. “The ability, wisdom and consequences of addressing our debt crisis through tax increases will continue to constitute a rigorous debate by our committee.”
Congress set up the 12-member bipartisan supercommittee in August in legislation that resolved a standoff over raising the federal debt limit. The panel was instructed to create a 10-year plan to cut at least $1.5 trillion from the budget deficit by Nov. 23. The law requires automatic, across-the-board spending cuts if Congress doesn't pass a plan.
The hearing provided a forum to debate raising taxes for the wealthiest Americans. Representative Xavier Becerra, a California Democrat, pressed Tom Barthold, the chief of staff of the congressional Joint Committee on Taxation, on how it was possible under the tax code for billionaire Warren Buffett to pay taxes at a lower rate than his secretary, as he has stated.
Buffett's Taxes
In an essay published last month in the New York Times, Buffett, the 81-year-old chairman and chief executive officer of Berkshire Hathaway Inc., wrote that his federal tax bill last year was $6.93 million, or 17.4 percent of his taxable income. President Barack Obama has asked Congress to enact the so-called “Buffett rule,” which would ensure that those earning more than $1 million a year would pay taxes at a rate similar to what middle-income Americans pay.
Representative Dave Camp, a Michigan Republican, countered that Americans with incomes between $50,000 and $75,000 pay an average tax rate of 12 percent while those who earn more than $1 million pay an average 23 percent rate.
“Frankly, Mr. Buffett needs to give his secretary a raise,” said Camp, who is the chairman of the tax-writing Ways and Means Committee.
Lawmakers also discussed broadly how the tax code could be revised to eliminate tax benefits, also known as tax expenditures. Murray said the panel needs to spend more time discussing whether second homes should be eligible for the mortgage interest deduction and whether some charitable deductions should be curbed.
“We've had an intense discussion here about earmarks,” she said. “We've not had an intense discussion about these tax expenditures.”
Bloomberg News
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