Despite their end-of-year push to overhaul the U.S. corporate tax code, Senators Max Baucus (D-Mont.) and Dave Camp (R-Mich.), who chair the tax-writing committees in Congress, appear to have missed their window of opportunity to implement any significant reforms prior to the mid-term elections in November 2014.
As the Financial Times reported, citing a number of Beltway insiders, the tax reform agenda will likely be sidelined by Baucus’ recent nomination as the next U.S. ambassador to China. Chris Krueger, a policy analyst at Guggenheim Securities in Washington was quoted:
“If tax reform was going to happen, Max wouldn’t be leaving to go to Beijing. He’s going about as far away as you can humanly go. That was it for me.”
Remy Farag, senior tax analyst with Thomson Reuters who follows the reform debate closely said he thinks the delay in any substantial corporate tax reform has less to do with Baucus’ move to China and more to do with partisan politics. He explains: “Despite all of the rhetoric on Capitol Hill about tax reform being around the corner, the prospects for reform have been slim due to the political makeup of the House. The truth is, we are likely at least one congressional election season away from any kind of meaningful tax reform.”
An article in the Columbus Dispatch echoed Farag’s sentiment by diving further into the political ramifications Baucus’ move could have on the bipartisan legislation. Quoting Rep. Pat Tiberi (R-Ohio), a member of the House Ways and Means committee, the Dispatch wrote:
“Tiberi worries that politics will quickly eclipse any progress. He said that despite years of work, a bill runs the risk of becoming the House Republican bill as soon as Camp introduces it, meaning it would be immediately politicized. It will take far more than the two congressional committees, he said, to get a bill passed.”
Adding to the complexity facing lawmakers are lobbying efforts by large U.S corporations who’ve had decidedly mixed reviews on the proposed corporate tax legislation. As I wrote in December, the Alliance for Competitive Taxation (ACT), which is made up of dozens of multinational corporations who support tax reform, has been critical of the Baucus/Camp plan. Upon its proposal, the organization released the following statement:
“While we are encouraged by Chairman Baucus’ continued commitment to pass comprehensive tax reform, we are concerned that the international reform ideas in the staff draft undermine the stated goals of creating jobs, generating growth, and making America more competitive around the world. The Chairman has recognized how today’s uncompetitive tax code is already leading to the loss of U.S. companies. Unfortunately, many of these proposals would put the U.S. tax system even more out of line with the rest of the world.”
Could Congress surprise us and hammer out a corporate tax reform law in the first quarter? It’s certainly possible. House Budget Committee Chairman Paul Ryan (R-Wis.) has suggested that we may see a tax reform bill in early 2014. But we’re still nowhere near the finish line. To get there, Congress will need to get past the rigid partisanship that defined 2013 while also carefully weighing the concerns of big business.
Source: Forbes Business