Treasury releases corporate taxes report

The Treasury Department released a long-awaited study Thursday on overhauling the corporate tax code that detailed several options but made no recommendations, possibly signaling the Bush administration's intention to not push for changes in the president's final year.

The 116-page report laid out broad approaches to policy and discussed advantages and shortfalls to various corporate tax proposals.

Treasury officials, however, said they did not expect any legislation to get through Congress next year given the complexity of the issue and the fact that President Bush will be in his final year in office.

One of the approaches discussed in the report would lower the current corporate tax rate of 35 percent to 28 percent by eliminating various business tax breaks. The study said the rate could be lowered to 31 percent if a decision was made to retain the current tax break for accelerated depreciation of business investments.

Another approach examined in the report would replace the current corporate income tax with a business activity tax which would be similar to a consumption tax on businesses. The report also devoted attention to looking at how specific questions could be addressed such as the current system of taxation of corporate profits.

The review of corporate taxes was launched earlier this year by Treasury Secretary Henry Paulson, who has complained that current corporate tax rates are too high and are hurting the competitiveness of U.S. firms in the global economy.

President Bush, meeting with reporters in August, suggested that his administration might try to win approval in Congress for legislation to cut corporate tax rates. However, Treasury's decision to put forward a report with no specific recommendations was viewed as a strong signal that the administration has given up on reforming the corporate tax code before Bush leaves office.

Eric Solomon, Treasury's assistant secretary for tax policy, said in releasing the report that the administraiton believed it would "provide significant substance for discussion and will further the effort to inform the public policy debate."

Bush and other Republicans have vowed to reject any tax increases for individuals and corporations while fighting to make President Bush's first term tax cuts permanent. Those reductions are scheduled to expire at the end of 2010.

Democrats, including many of the presidential candidates, contend that Bush's tax cuts were heavily skewed to the wealthy. They have vowed to roll back the tax cuts received by taxpayers in the top brackets while retaining tax relief for low and middle-income taxpayers.

House Ways and Means Committee Chairman Charles Rangel in October introduced a major tax overhaul bill which would shift $1 trillion of the tax burden over 10 years. The proposal would permanently repeal the alternative minimum tax while reducing taxes on 90 million mostly lower and middle-income taxpayers. It would raise taxes on the wealthiest taxpayers.

Rangel said Thursday he still believed reform of the corporate tax code was possible next year. "I cannot think of a reason why congressional leadership — Republicans and Democrats alike — cannot work with the administration to make our corporations more competitive internationally," Rangel said.