Tax incentives, tax cuts on Geithner's agenda
Tax incentives, lower corporate taxes, and tax simplification will be subjects that Treasury Secretary Geithner and corporate executives talk about Friday.
U.S. Treasury Secretary Timothy Geithner meets with chief financial officers and other officials Friday to hash out ideas for simplifying and trimming the corporate tax -- nearly the highest in the industrialized world.Skip to next paragraph
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It would require a major effort to overhaul the corporate tax code, which is packed with tax incentives favoring certain industries and even specific companies, experts say.
``The U.S. tax code is the most politicized law in the entire world,'' said Jonathan Blattmachr, a tax lawyer for the wealthy based in New York. ``Everything is driven by politics; not by what is fair or sensible.''
Many analysts believe it could be a multiyear process. Here are some keys to the debate.
WHAT DO PEOPLE MEAN BY TAX SYSTEM ``REFORM?''
Experts across the ideological spectrum say the high corporate rate leads companies to move and keep money abroad. When people talk about an overhaul, they generally mean cutting the rate and ``broadening the base'' of companies paying taxes.
Federal Reserve Chairman Ben Bernanke voiced support for that tack in testimony to Congress last week.
``Lowering rates and closing loopholes is, I think, the best approach,'' in the long term, he told the Senate Budget panel.
``Broadening the base'' means bringing more taxpayers into the system and closing what some call ``loopholes'' -- deductions and other ways companies use to minimize taxes.
That is where it gets tricky.
WHO WOULD WIN, WHO WOULD LOSE?
Big pharmaceutical and technology companies could be among the losers in a rewrite of the tax code that lowers overall rates but also trims loopholes and deductions, according to Anne Mathias, an analyst at MF Global in Washington.
Because of their extensive international operations, they have ``aggressively utilized the existing system'' and have managed to keep their effective tax rates in the low 20 percent range, Mathias said in a recent investor note.
Winners could be companies with mostly U.S. sales, like retail, food service and healthcare companies.
``Somebody is going to pay more; let's get serious,'' said Bruce Josten, executive vice president at the Chamber of Commerce.