Lawmaker, budget agency spar over taxing corporate profits

House Ways and Means Committee Chair Dave Camp (R-MI) questions U.S. Secretary of the Treasury Timothy Geithner in Washington February 15, 2012.

WASHINGTON (Reuters) - A top Republican lawmaker has challenged the widely respected congressional forecaster on budget issues, the Congressional Budget Office, accusing it of a slanted report on taxing corporate profits, according to documents released on Friday.

A 36-page January CBO report concluded that tens of billions of dollars in new government revenue could be raised over a decade by limiting corporations' ability to defer taxes on foreign profits, a tax change favored by President Barack Obama.

The change, which would raise companies' tax bills, would boost efficiency and raise about $114 billion over 10 years, CBO estimated.

The prediction didn't sit well with Dave Camp, the Republican chairman for the U.S. House of Representatives' tax-writing Ways and Means Committee, who backs moving to a territorial tax system and is working on legislation to overhaul the entire U.S. tax code.

Under the territorial approach companies could bring foreign profits home with little or no corporate income tax imposed on a permanent basis, not just during a temporary, one-year holiday.

In an unusual move, Camp wrote to non-partisan CBO requesting an explanation of the report's methods, calling it "heavily slanted and biased in favor of one particular approach," according to a copy of the letter dated January 24 and released by Camp's office on Friday.

The Michigan lawmaker released his original letter after the CBO released an official response on Friday.

CBO director Douglas Elmendorf said he believes the report presents "key issues fairly and objectively and that its findings are well grounded in economic theory and are consistent with empirical studies in this area."

Still, the CBO director said that "because of the complexity of the subject and the diverse views of experts in the field, we agree that it would have been desirable to seek comments from more outside reviewers."

One of the experts cited by CBO was a former Obama administration official. Another academic has written critically of corporations skirting taxes abroad.

CBO said new revenues generated by the White House's approach would exceed new revenues available under the territorial system, favored by many corporations.

The territorial system, as promoted by corporate lobbyists and Republicans in Congress, would raise $76 billion over a decade, under one estimate cited by the CBO.

(Reporting by Kim Dixon; Editing by Todd Eastham)