“For business, the most important postelection question is simple: Will there be corporate-tax reform or not?” Dennis K. Berman reports for The Wall Street Journal. “Top lawmakers in Washington are talking about a nine-month ‘window’ to make a deal. The nine months is a political marker, the interval in which both sides might have at least some repose before the tumult of the 2016 election begins.”
“Listen to the words of Paul Ryan, who just might be the future chairman of the House Ways and Means Committee: ‘If I could make just one change in Washington, it would be to fix the tax code,'” Berman reports. “Republicans are attached to ‘comprehensive tax reform’ which typically means overhauling much of the approach to personal taxes, including those for small business. For Democrats this amounts to tax cuts for the wealthy, a nonstarter. Expect Democrats to be focused on the ever-divisive question of ‘territoriality,’ another way of saying that overseas profits are taxed in their country of origin, not by the U.S.”
“Chief executives have been consistently pressing for change, especially in light of the corporate ‘inversions’ that are relocating U.S. companies—and their tax dollars—abroad,” Berman reports. “They rightfully point out that inversions are a symptom, not a cause, of a system that encourages overseas profits never to make their way back home.”
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. — Apple CEO Tim Cook, May 21, 2013
Berman reports, “The odds of tax reform could well increase if the Republicans take the Senate. ‘That moves the game from whether Congress could produce a unified proposal to whether Congress and the president are interested in striking a bargain,’ says Linda Swartz, who chairs the tax group at law firm Cadwalader. ‘I suspect the president is, and the Senate is. I’m less certain whether the Senate can deliver the House.'”
Read more in the full article here.
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