WASHINGTON Jan 30 U.S. corporations fear they
will be the main course on a menu calling for hundreds of
billions of dollars in new tax revenue that President Barack
Obama is expected to seek in his annual budget proposal,
expected within weeks.
Fresh off a political win that raised tax rates on the
affluent and averted the so-called "fiscal cliff," Obama is not
likely to back away from past proposals he has sought to close
tax loopholes and raise taxes on many big companies, said former
advisers to the president.
Indeed, some lobbyists who represent Corporate America said
they fear Obama could ask for even more than in past years.
"I expect President Obama to add new revenue from business,"
said Cathy Schultz, a lobbyist with the National Foreign Trade
Council, which represents global companies such as Caterpillar
Inc and General Electric Co.
The White House last year sought to raise at least $150
billion from multinational companies by closing tax breaks.
Obama has long called for curbing tax benefits for oil and gas
companies and singled out the industry in recent weeks.
Other moves against big corporate tax benefits he has
favored in years past were tightening rules on deferral of taxes
on corporate profits earned abroad and restricting companies'
flexibility to combine foreign tax credits in ways that save on
The deal a month ago that averted the automatic steep tax
hikes and spending cuts known as the "fiscal cliff" also
permanently raised the ordinary income tax rate to 39.6 percent
from 35 percent on household income above $450,000.
Jared Bernstein, a former Obama economic adviser, now at the
Center for Budget and Policy Priorities, a think tank, said he
doubts the president will tamper with the new tax rate.
Instead, he will likely focus on curbing deductions for
wealthier individuals. Obama has for years proposed capping the
value of deductions and exclusions at 28 percent of income.
For example, individuals subject to the 39.6 percent rate
now get a $3,960 tax break for every $10,000 in tax exclusions
and deductions. Under a cap favored by the president, they would
get only a $2,800 break on that same amount.
For corporations, "the question is whether they're looking
at revenue neutral or revenue positive tax reform," said
Bernstein, who was among the more liberal of Obama's advisers.
"I hope the latter."
The White House typically releases a budget plan on the
first Monday in February. It is essentially a wish list to
Congress, which is responsible for drafting and voting on
federal budgets. The budget this year will be delayed for
several weeks because of the last-minute "fiscal cliff" deal,
the White House has said.
Obama has called for a revamp of the tax code in several
venues. Last year he unveiled a plan to rewrite corporate tax
rules. But he has not used much political muscle on the issue,
in contrast to what he has done on health reform, immigration
and gun control.
The president's annual State of the Union speech on Feb. 12
may show where taxes rank on a crowded White House agenda.
"If they really want to make a push on tax reform ... The
State of the Union is where they would kick it off," said Marc
Gerson, a former Republican counsel on the tax-writing House of
Representatives Ways and Means Committee and now a tax attorney
at law firm Miller & Chevalier.
Tax-writing lawmakers in the House and Senate have held
hearings for more than a year on potential reforms. Ways and
Means Chairman Dave Camp, a Republican, has issued two drafts on
corporate taxation, most recently on financial derivatives.
While individual tax rates have been hotly debated recently,
there may be more consensus over corporate tax changes. For
instance, both Obama and Camp support cutting the corporate tax
rate. They disagree on how low it should be, but not by much.
The business community itself is divided. Some businesses
benefit greatly from current tax breaks and effectively pay far
less than the 35 percent top rate, while others benefit less.
"The issue to me isn't tax reform or not tax reform," said
Neera Tanden, another former Obama adviser who is now president
of the Center for American Progress think tank.
Rather, she said, it is about whether Republicans will agree
to raise revenue. "Obviously a lot of Democrats support revenue
on the corporate side," she said.