No laughing matter

29 March 2011 By James Pethokoukis

When Japan cuts the rate companies pay on April 1, America’s will be the highest among advanced economies. Even its effective tax rate is way above average despite the likes of GE spending billions to game the labyrinthine code. A smarter approach would be to substitute a VAT.

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President Barack Obama and lawmakers are exploring an overhaul of the tax code, which all sides agree is exceedingly complex and lengthy at more than a million words.

Obama has begun specifically talking about trimming the top marginal corporate rate, now at 35 percent, among the steepest in the industrialized world. On April 1, Japan will reduce its rate, giving the United States the highest corporate tax rate among advanced economies.

U.S. Treasury Secretary Timothy Geithner said in February his goal would be to get the corporate rate closer to that of major trading partners, around the high 20 percent level.

Obama wants to pay for the cuts by paring sections of the law that companies use to minimize their tax bill, a move expected to create a frenzy of lobbying among businesses wanting to preserve their favored breaks.

The chief Republican taxwriter in the House of Representatives, Ways and Means Committee Chairman Dave Camp, says he's aiming to cut the top rate for individuals and corporations to 25 percent, in what could start a yearslong effort to overhaul the tax code.

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