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By Casey Wooten
Feb. 11 — If Congress and the administration can't arrive at an agreement on rewriting the business tax code this year, they must still reach a deal to stop corporate inversions, Treasury Secretary Jacob J. Lew told lawmakers during a hearing.
“If we can't deal with the whole tax code, I don't think that we can justify—I can't justify—doing nothing while another year of inversions goes on,” Lew said during a Feb. 11 House Ways and Means Committee hearing on President Barack Obama's budget proposal for fiscal 2017.
Lew's comments come as Ways and Means Republicans prepare an international tax bill, set to be released later this year. Committee Republicans have criticized the president's international tax proposals in his latest budget, signaling that the gap between both sides remains wide.
Throughout the hearing, Lew and Republican lawmakers agreed on little, though both acknowledged that completing an international tax overhaul bill would be difficult this year.
Still, Lew told lawmakers to hold out hope.
“We've known that conversations over business tax reform are an uphill battle because people always say it's too hard to do,” Lew said. “It can't be too hard to do. We have to make it something we can get done. If it can't happen this year it's going to have to happen sometime soon.”
Committee Chairman Kevin Brady (R-Texas) echoed Lew's sentiments.
“It's encouraging that Secretary Lew knows that we need to act substantively, not simply try Band-Aid approaches,” Brady told reporters after the hearing. “And while he concedes—and I do—that it's a challenging political environment, he certainly seems willing to work on it, so that's a good foundation to begin with.”
Brady and Senate tax writers are discussing ways to rewrite the tax code, but the chairman didn't make any new proposals during the hearing. On the Senate side of the Capitol, Finance Committee Chairman Orrin G. Hatch (R-Utah) touted his corporate integration proposal to Lew during his committee's budget hearing Feb. 10. Lew told senators he would welcome the discussion (see related story in this issue).
The administration's budget calls on a new, $10.25-per-barrel-of-oil tax that would go toward funding infrastructure projects. The plan also includes a 19 percent minimum tax on overseas earnings and a one-time, 14 percent repatriation tax on accumulated earnings parked offshore.
Brady remained opposed to using revenue from an international tax overhaul to fund infrastructure projects and said instead the money should go to lower tax rates.
What to do with revenue left over from a tax overhaul is a discussion for later, Brady said.
“My strong view is that dollars that are generated be invested back into the tax code to lower those rates, but we will have that discussion after we finish the policy,” Brady said after the hearing. “We need to be open to discussing how those revenues might be invested, but for now you've got to get the policy right.”
Subcommittee on Tax Policy Chairman Charles Boustany Jr. (R-La.) called on Lew to work with the committee to address issues related to base erosion and profit shifting, state aid, hostile tax environments, adverse mergers and acquisitions, and inversions.
Boustany is taking the lead on drafting an international tax bill for the committee.
“It's time for action and we need a commitment from you to work on with this committee to do this,” Boustany said to Lew.
Lew said the administration would work to lower the statutory rate and close inadequacies, but the White House would oppose other parts of the upcoming international tax bill.
“I'm not going to pretend we love the patent box idea,” Lew said.
Ways and Means ranking member Sander M. Levin (D-Mich.) praised Lew and his efforts to combat corporate relocations for tax purposes, adding that he will introduce a bill the week of Feb. 15 that would work to prevent earnings stripping, in which companies move profits to lower-tax jurisdictions. Levin didn't provide details on his upcoming bill.
“Just standing still and saying that we are going to have to do something bigger and letting this continue is a serious mistake,” Levin told reporters later in the day.
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Text of Lew's opening statement and a video archive of the hearing are at http://src.bna.com/cCe.
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