Rent-Seeking Companies Derail Tax Reform

March 27, 2006

Retiring House Ways and Means Committee Chair Bill Thomas levels a scathing critique of corporate lobbyists in today’s MarketWatch. His critique? Companies’ narrow-minded focus on preserving targeted tax preferences—rather than broad-based federal tax reform—has helped derail the momentum for fundamental tax reform:

American businesses have spent too much time lobbying for the preservation of narrow tax breaks, and they may have lost the opportunity for overhauling an inefficient U.S. corporate tax code as a result, the House’s top tax writer said Monday.

“One of the things I want to talk to you about today is how you blew it,” House Ways and Means Committee Chairman Bill Thomas told a meeting of the Tax Executives Institute, a group that represents corporate executives who deal with tax-related matters.

Thomas, R-Calif., has chaired the powerful tax panel since 2001, serving as a key legislative architect for major tax cuts passed in 2001 and 2003, as well as a major corporate tax bill that President Bush signed into law in 2004. Thomas announced earlier this month that he won’t seek re-election in November.

Thomas complained that corporations and their lobbyists pay only “lip service” to the notion of lower corporate tax rates, while pushing hard to preserve items like the research-and-development tax credit and other narrow provisions that add to the complexity of the tax code. “Tax accounting won out over tax reform,” Thomas said.

Meanwhile, the window for overhauling the corporate tax code will effectively close late this year or early in 2007, Thomas said. After that, lawmakers will be dealing with the expiration of individual income-tax cuts passed in 2001 and 2003.

At that time, “tax reform could very easily be raising taxes on corporations to pay benefits to individuals,” Thomas said.

Read the full piece here.


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