Portman tax plan to cut interest, write-offs

WASHINGTON (Reuters) - Senator Rob Portman, a potential vice presidential pick by presumptive Republican nominee Mitt Romney, said his plan to revamp corporate taxes includes limits on investment write-offs and interest deductibility.

"That includes a lot of controversial stuff," Portman said at the Reuters Washington Summit. "You have got to look at everything."

Portman, a senator from Ohio, said the Obama Administration has failed to lead on overhauling corporate taxes in the United States, which has among the steepest corporate tax rates among its industrialized peers at 35 percent.

The Treasury Department had talked about a corporate tax reform plan, but has only released general principles.

Democrats and Republicans alike back trimming the corporate tax rate below 30 percent, but disagree on how to get there, including whether new revenue is needed as the tax code is scrubbed of hundreds of deductions, credits and breaks that benefit favored industries over others.

U.S.-based companies in different sectors pay wildly different tax rates - some pay far above 35 percent, while others benefit from a myriad of complicated deductions and breaks and can bring their tax rates below zero.

Under corporate tax law, interest paid on debt is tax deductible, a feature of the U.S. tax code that is often abused and that critics say unwisely favors debt over equity. Reformers say this so-called debt bias could be limited in any attempt to revamp corporate taxes.

Accelerated depreciation, a provision of the tax code that lets companies increase deductions in the early years in the life of an asset, is another big corporate tax break that should be examined, Portman said at the summit, held at the Reuters office in Washington.

Portman, a former budget adviser to Republican presidents, said four or five of his Democratic colleagues in the Senate have expressed interest in his draft legislation.

Historically low individual tax rates expiring at the end of the year and automatic spending cuts could push the U.S. economy into recession, congressional budget estimators have said.

Still, action is not expected until after the November 6 elections, and a revamp of the tax code is expected to be pushed back until next year.

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(Editing by Anthony Boadle)

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