WASHINGTON — President Obama is considering whether to push early next year for an overhaul of the income tax code to lower rates and raise revenues in what would be his first major effort to begin addressing the long-term growth of the national debt.
While administration officials cautioned on Thursday that no decisions have been made and that any debate in Congress could take years, Mr. Obama has directed his economic team and Treasury Department analysts to review options for closing loopholes and simplifying income taxes for corporations and individuals, though the study of the corporate tax system is farther along, officials said.
The objective is to rid the code of its complex buildup of deductions, credits and exemptions, thereby broadening the base of taxes collected and allowing for lower rates — much like a bipartisan majority on Mr. Obama's debt-reduction commission recommended last week in its final blueprint for reducing the debt through 2020.
Doing so would offer not only an opportunity to begin confronting the growth in the national debt but also a way to address warnings by American business that corporate tax rates and the costs of complying with the tax code are cutting into their global competitiveness.
Mr. Obama signaled his inclination in off-the-cuff remarks on Wednesday as he was defending the tax cuts deal negotiated with Congressional Republicans this week. "We've got to have tax reform," he said.
Economic and political advisers say the process is in its early stages, and Mr. Obama ultimately could decide against such action, given the pitfalls, both political and substantive. In the past, any effort to alter the tax code has provoked powerful opposition among interest groups, and the picking of winners and losers.
Yet proponents within the administration and among some outside advisers say that Mr. Obama, by putting tax reform atop the national agenda, could seize an opportunity to take the offensive in dealing with the newly empowered Republicans in Congress, repair his strained relations with business and embrace a potentially powerful theme heading into his re-election campaign.
Democrats have long struggled to define battles over taxes on their terms. The revolt by many members of the president's party in Congress over his deal with Republicans, which would extend the Bush-era tax cuts for the rest of his term and create his own tax cuts for lower-income people and for businesses, has underscored anew the deep ideological divisions in Washington on the subject. Should that deal be enacted, it could add to pressure for simplifying the tax system because its mix of breaks for taxpayers of all incomes would further complicate the tax code, at least for the next year or two.
Administration officials and lawmakers in both parties also took note last week of the bipartisan show of support within the fiscal commission for changes of the type being considered by Mr. Obama. That suggested a potential break in the long-solid Republican wall of opposition to anything that smacked of a tax increase.
Rather than increase individual and corporate tax rates to raise more revenues, a majority of the panel proposed eliminating or reducing many of the popular tax breaks for businesses and individuals that cost $1 trillion annually and using the additional revenues to lower rates and reduce deficits. The majority included five Republicans, among them two of the Senate's most conservative members, Tom Coburn of Oklahoma and Michael D. Crapo of Idaho.
According to commission officials, the Treasury secretary, Timothy F. Geithner, expressed interest in the panel's approach. With tax breaks ended or restricted in return for lower rates, businesses and individual taxpayers would know that for each credit or deduction they wanted put back into the code, their marginal tax rates would go up by an amount sufficient to make up the revenues that would be lost.
rest at http://www.nytimes.com/2010/12/10/us/politics/10tax.html?_r=1&hp
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