In his State of the Union address, President Obama called for a reduction in the U.S.’s high corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. . Treasury Secretary Tim Geithner has had a series of roundtable discussions on the topic, although emphasizing that reform needs to be revenue-neutral and not involve the individual taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. side. Members of Congress and the Bowles-Simpson Commission report have echoed these calls for reform, emphasizing more the importance of dramatically reducing the rate.
Yet, no action has happened. A new poll of 1,400 senior business executives conducted by KPMG may provide more information:
Nearly half of these executives don’t expect corporate tax reform until 2013 at the earliest, after the next election. Most of the executives who think corporate tax reform will be enacted expect only a modest reduction in the tax rate, from the current 35 percent to somewhere between 30 percent and 34 percent.
When asked if Congress would offset the cost of a rate reduction by going after corporate tax breaks, 34 percent said they expect the domestic manufacturing deduction, accelerated depreciationDepreciation is a measurement of the “useful life” of a business asset, such as machinery or a factory, to determine the multiyear period over which the cost of that asset can be deducted from taxable income. Instead of allowing businesses to deduct the cost of investments immediately (i.e., full expensing), depreciation requires deductions to be taken over time, reducing their value and discouraging investment. , and the use of foreign tax credits would be reduced or eliminated. About 15 percent said Congress would leave the foreign tax credits alone and offset the cost of a rate reduction only through the domestic manufacturing deduction and accelerated depreciation.
More on corporate tax reform here.
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