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Obama, Ryan Agree: Business Tax Codes Need Reform

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Obama, Ryan Agree: Business Tax Codes Need Reform

Obama, Ryan Agree: Business Tax Codes Need Reform

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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This is WEEKEND EDITION from NPR News. I'm Scott Simon.

This week President Obama and the Republican chairman of the House Budget Committee were on opposites sides of a heated debate over the federal deficit. But there's one thing the president and Congressman Paul Ryan agree on - they both want to reform the corporate tax code.

NPR's Scott Horsley reports.

SCOTT HORSLEY: Many Americans will spend this weekend cursing the complexity of the federal tax code, as they struggle to complete their 1040s before tomorrow's deadline. Many businesses are just as frustrated.

President Obama told the U.S. Chamber of Commerce earlier this year the corporate tax system should be smarter, simpler, and fairer.

President BARACK OBAMA: You've got too many companies ending up making decisions based on what their tax director says instead of what their engineer designs or what their factories produce. And that puts our entire economy at a disadvantage.

HORSLEY: Business leaders often point out that America's top corporate tax rate 35 percent - is the second highest in the world. That overstates the case somewhat since the U.S. also offers a lot of tax breaks.

But a study released by the Business Roundtable last week showed even when those tax breaks are factored in, corporate taxes here are the sixth highest in the world. What's more, Mr. Obama complains the tax breaks are not shared equally.

Pres. OBAMA: You know how it goes. Because of various loopholes and carve-outs that have built up over the years, some industries pay an average rate that is four or five times higher than others.

HORSLEY: Last month, The New York Times reported that General Electric - the nation's biggest company - paid no taxes last year, despite more than $5 billion in U.S. profits. GE called the story misleading, but it was potentially embarrassing for Mr. Obama, since GE's chief executive chairs his business advisory board.

White House spokesman Jay Carney said the president sees the issue as bigger than just GE.

Mr. JAY CARNEY (White House Press Secretary): It is part of the problem of the corporate tax structure. Companies hire, you know, armies of tax lawyers to understand how it works and take advantage of the various loopholes that exist that are legal in order to reduce their tax burden. And he thinks for the purpose of greater competitiveness and job creation we have to address our corporate tax structure.

HORSLEY: This is one place where the president and Republican Congressman Paul Ryan are on the same page. Ryan, who chairs the House Budget Committee, spoke about his interest in corporate tax reform at a politico breakfast last month.

Representative PAUL RYAN (Republican, Wisconsin; Chair, House Budget Committee): We all, I think, are beginning to get a consensus that this corporate tax system we have is terribly uncompetitive. It pushes jobs overseas. It locks up capital overseas. And so - and that's one thing were I'm hoping we got some chance of a compromise with the White House.

HORSLEY: But it won't be easy. Mr. Obama says changing the corporate tax code can't make the deficit worse. So any reduction in tax rates would have to be offset by doing away with some of those tax breaks.

Donald Marron, who heads the Tax Policy Center here in Washington, says if lawmakers decide to do that, there are plenty of breaks to go after.

Mr. DONALD MARRON (Director, Tax Policy Center): The way I refer to it is we have a lot of Swiss cheese, right? There are a lot of holes from the tax base. And it would be much healthier from an economic point of view to have lower rates and a more filled in tax base. You know, more of a parmesan and less of a Swiss.

HORSLEY: But Marron adds, every one of those holes in the tax cheese has some corporate mouse nibbling around it.

Mr. MARRON: Every one of those holes favors somebody. They're going to be winners and losers from any reform. And the typical dynamic is that the potential losers often do a better job of organizing.

HORSLEY: Businesses that would lose if their tax breaks are eliminated will lobby hard to protect them.

Still, in the Washington of the moment, any policy that appeals to both President Obama and Congressman Ryan is worth at least a second look.

Scott Horsley, NPR News, the White House.

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