Sen. Portman to Propose Corporate Tax Reform Early Next Year
At an American Enterprise Institute event yesterday, Sen. Rob Portman (R-OH) announced that he will unveil a plan to reform the corporate tax code in early 2012. Sen. Portman, a member of the Super Committee, said that he would introduce "pro-growth deficit-neutral corporate tax reform" and that he hoped to get both Republican and Democratic co-sponsors.
According to Sen. Portman's remarks, his proposal would lower the corporate tax rate from 35 percent to 25 percent "primarily by reducing inefficiencies, preferences and exemptions" and move the U.S. to a territorial system. He continued, saying:
"As you know, with the exception of Japan, the United States has the highest corporate tax rates in the developed world — on average a 39.2 percent combined federal and state rate. Over the past 20 years, every one of our major foreign competitors has moved to cut rates. 20 years ago the OECD corporate average rate was 39 percent. Today it is 25 percent. The United States alone has failed to act to make its corporate tax system more competitive, and we are paying for it."
CRFB blogged about corporate tax reform earlier this month. As we stated then, getting the corporate rate down to 25 percent will not be easy -- it would require the removal of basically all the existing tax expenditures in the corporate tax code. Corporate tax reform that lowers rates and broadens the base could provide an important economic boost for the U.S. while making the tax code simpler and easier to comply with.
It's important to remember, however, that while giving the economy a boost is important, such measures should also help to reduce deficits and debt. Incorporated in with entitlement reforms and changes to the individual tax code as well, corporate tax reform that is (at the very least) revenue-neutral could help bring us to solid fiscal ground. We look forward to learning the details of Sen. Portman's proposal.