WASHINGTON (Reuters) - An overhaul of the voluminous and complex U.S. tax code can not be tackled piecemeal, the Republican chairman of the tax-writing committee in the U.S. House of Representatives said on Tuesday.
“There is quite a bit of groundwork that needs to be done,” Representative Dave Camp, chairman of the House Ways and Means Committee, told Reuters before starting a congressional debate on a tax code revamp with a hearing on Thursday.
“The concern about addressing certain issues that affect larger business is you leave out small businesses or others, which is much of our economy,” said Camp, who became chairman of the powerful committee when Republicans took control of the House this month.
Big multinational companies say the top 35 percent corporate tax rate hamstrings them competitively against foreign-based rivals, most of whom are subject to far lower rates.
Camp said a reworking of the tax code must address the individual and corporate tax rates together because so many businesses are organized as “pass through” entities that allow them to pay the individual tax rate, which also tops out at 35 percent but gives them other tax advantages.
It took several years to cement a deal that led to the last major tax reform act, brokered in 1986 between then-President Ronald Reagan, a Republican, and a Democratic-led House.
President Barack Obama, a Democrat, has said he wants a rewrite of the tax code, and started a debate on the corporate tax rate.
Treasury Secretary Timothy Geithner met with chief financial officers from big corporations like General Electric Co and Microsoft Corp last week to begin talks.
Republicans and Democrats agree the top corporate rate may hurt U.S. competitiveness but Democrats want the myriad of deductions and credits in the code — many of which they dub as “loopholes” — trimmed to fund any corporate tax cut.
There is less consensus on the personal tax rate.
In December, both sides agreed to extend for two years the top 35 percent rate but that was fervently opposed by many Democrats who say wealthier individuals can afford to pay more, especially in an age of deficits topping $1 trillion.
Procter & Gamble board chairman Robert McDonald will be among the witnesses at the Thursday hearing.
“This is going to be the first step in a long debate and discussion,” Camp said.