Rangel Plans Push to Cut Top Corporate Tax Rate to 28 Percent
By Ryan J. Donmoyer and Peter Cook
Nov. 15 (Bloomberg) -- New York Representative Charles Rangel said he's revising his tax overhaul proposal to reduce U.S. corporate tax rates to 28 percent, down from the current rate of 35 percent.
Rangel, in an interview with Bloomberg Television's ``Money and Politics,'' said he's changing the ``mother of all tax reform'' he unveiled in September 2007 to accommodate President- elect Barack Obama's agenda. That earlier plan would have set the corporate tax rate at 30.5 percent. Rangel is the chairman of the House Ways and Means Committee, which oversees tax policy.
Rangel, 78, said the reduction would be achieved by targeting special-interest provisions that favor some industries and companies over others.
``We can dramatically cut corporate taxes by cutting out the fat out of those industries that have taken an unfair advantage of the tax code,'' Rangel said.
Only Japan has a higher marginal corporate tax rate among developed nations, the Treasury Department said last year. When state taxes are factored in, U.S. corporations pay about 39 percent on their last dollar of profit.
Obama has said that the effective tax rate paid by U.S. companies is much lower once they claim deductions, credits, and other adjustments to taxable income. In 2006, for example, American companies paid an average effective tax rate of about 23.7 percent, according to a study by Ernst & Young LLP.
Cutting Benefits
In July 2007, the Treasury Department said the U.S. could reduce the corporate tax rate to 25 percent by eliminating popular benefits such as a research credit and a deduction for making products domestically.
Rangel two months later also recommended repealing the deduction for domestic production, other incentives that primarily benefit multinational corporations, as well as tax benefits associated with a popular accounting method known as last-in, first-out.
Rangel also has proposed making executives at private- equity firms and other partnerships pay ordinary income-tax rates instead of capital-gains rates on the incentive fees they charge their investors, known as ``carried interest.'' The top ordinary income-tax rate is currently 35 percent; Obama has proposed increasing that to 39.6 percent, and Rangel has proposed imposing an additional surcharge as high as 4 percent for those who make over $200,000.
Rangel didn't say what other benefits he'd eliminate to reduce the corporate rate further.
Tax Credits
Rangel said that Democrats will also move ahead with Obama's proposal to give new tax credits to middle-income workers, provisions that would be paid for in part by the income-tax surcharge.
That, he said, would put money in the hands of people who are struggling to buy necessities, and help the economy.
``This is more than just reform,'' Rangel said. ``It's good common sense and good economic sense.''
Rangel said Congress would take up tax overhaul next year.
``You can bet your life that taxes is going to be a priority,'' Rangel said, citing Obama's desire to focus on overhauling health care as one of his first initiatives. ``It may not fall within the 100 days, but it certainly has to be looked at at the same time we're looking at health care.''
To contact the reporter on this story: Ryan J. Donmoyer at rdonmoyer@bloomberg.net; Peter Cook at pcook6@bloomberg.net
Last Updated: November 15, 2008 00:01 EST |
