The Obama administration is exploring ways to boost tax incentives for corporate investment in the United States, Treasury Secretary Timothy Geithner said on Wednesday, ahead of his meeting with chief financial officers from some of America's biggest companies.
We're examining whether we can find political support for a comprehensive tax reform -- revenue neutral -- but that would improve incentives for investing in the United States, Geithner said in comments after a speech at Johns Hopkins University's School of Advanced International Studies.
Geithner is expected to meet with CFOs of major U.S. companies including Microsoft Corp and Cisco Systems on Friday to hash out ideas for simplifying and trimming the corporate tax -- nearly the highest in the industrialized world.
Corporate tax reform is the starting place for a conversation about broader tax reform, administration officials have said. However, a divided Congress will make it difficult to pass any meaningful reform over the next two years.
Several White House officials have said they agree with companies' main gripe that the federal corporate tax rate -- topping out at 35 percent -- is too steep. Both sides also say the tax code is way too voluminous and cumbersome.
At the same time, administration officials and others note that deductions and loopholes make it rare for companies to pay a 35 percent rate.
Geithner made the distinction between effective tax rates -- what companies actually pay -- and statutory tax rates -- what the law says they should pay.
Although our effective tax rates for corporates are roughly even, our rates are roughly the average of the other major economies, our statutory rates are much higher, Geithner said.
He acknowledged that the high rates on the books may influence corporate decisions about where to invest.
There are limits we can do in terms of how we can go about reform without taking .... that into consideration, he said.
Dorothy Coleman, vice president of tax and economic policy at the National Association of Manufacturers, said cutting the corporate tax rate is a huge issue for the group's members, several of who will attend the Friday meeting.
We're viewing this as a beginning of a debate and a sign that the administration is serious, Coleman said.
(Additional reporting by David Lawder)
(Reporting by Kim Dixon and David Lawder; Editing by James Dalgleish and W Simon )