US Tax Reform To Await Debt Ceiling Resolution
Wednesday June 22 2011 | 04:16 AM

The United States Treasury Secretary Timothy Geithner, at a conference, has said that the government would propose comprehensive tax reform proposals later this year, but only after the present debt ceiling and fiscal deficit discussions have been resolved.

His opinion was that the more pressing need was to resolve the wider programme of deficit reduction within the bipartisan debt ceiling talks, currently being chaired by Vice President Joe Biden, before the particulars of tax reform could be focused on.

After the Treasury’s recent confirmation that the US government had reached its statutory debt limit, although its borrowing authority is likely to extend until the beginning of August, Geithner stated that all available political energy should currently be allocated to resolving the differences between the Democrat and Republican parties on how the country’s fiscal deficit can be reduced.

Leading Republican politicians remain insistent that the containment of the fiscal deficit should be resolved through reduced government spending, and not by increased taxes. On the other hand, Democrats, while agreeing to certain reductions in spending, have pointed, for example, to the significant tax breaks currently being provided to the oil sector as a possible area of increased revenues, while the Democrat-controlled Senate has also recently passed a bill to cancel ethanol tax credits.

During his remarks to the conference, Geithner therefore considered that a tax reform package should wait, but could still be formulated in the autumn this year, and that, while he was unable to give details of what that package would contain, it was apparent that the government should take the lead and actively promote the reforms it would propose.

He did, however, indicate that a corporate tax reform package would initially be put forward, to be followed by individual tax reform proposals. This is at odds with others, who have pointed out that corporate and individual tax reforms should be taken together, as many unincorporated businesses are individual, rather than corporate, taxpayers.

He added that the government has already undertaken much internal work on corporate tax reform, which should be aimed at providing additional incentives for investment. While reform of the corporate tax code, he said, should be revenue-neutral, he has pointed to the internationally-uncompetitive 35% US corporate tax and the possibilities for its reduction through the cancellation of a range of tax credits, deductions and exemptions.