The Corporate Tax Game
A new coalition called LIFT America started a campaign last month to prevent that from happening. They want the United States to adopt what is called a territorial system, in which companies pay taxes on profits only in the country where they were earned, in line with the practice in many other nations.
"It is not a tax that our competitors pay when they bring profits home to their countries," said Claire Buchan Parker, a spokeswoman for LIFT America, which includes international powerhouses like Coca-Cola and Hewlett-Packard.
Last month, the Business Roundtable, which represents mostly big businesses, started a separate lobbying campaign, called Home Court Advantage, to adopt a territorial tax system as well as a lower rate.
Another coalition, called Reforming America's Taxes Equitably, or Rate, which includes more domestic-oriented companies like AT&T and Macy's, is less interested in getting rid of the United States' worldwide tax system. Instead, it is concentrating on lowering the corporate tax rate, proposing to pay for it by ending many domestic tax breaks. But it will not say yet exactly which loopholes its members would surrender to make up the lost tax revenue.
To make the numbers work, economists say, Rate's plan would inevitably need tax revenue from the multinationals' foreign earnings—revenue that the multinationals are eager to save for themselves, of course.
"We have different coalitions with different interests," said Edward D. Kleinbard, former chief of staff of Congress's Joint Committee on Taxation. "That makes it difficult for the coalitions to speak with one voice."
In Congress, Mr. Camp, the Michigan Republican who runs the Ways and Means Committee, favors a 25 percent corporate tax rate and elimination of the worldwide system. He wants to pass a bill out of the committee this year, and Speaker John A. Boehner says he will give priority to any debate about rewriting the tax code.
"Companies have testified before the committee that they are willing to put everything on the table in tax reform," Mr. Camp said in an e-mailed response to questions, suggesting there would indeed be enough revenue generated by closing loopholes and generally tidying up the tax code. But companies and trade groups are bombarding the committee with outside comments, underlining the difficulties of getting everyone to agree on a formula for change.
For example, the Retail Industry Leaders Association wants to eliminate all loopholes, because retailers benefit from few tax breaks. But the Chamber of Commerce and the National Association of Manufacturers are fighting to preserve many of them, including the research and development tax credit, which yielded $8.3 billion in tax savings in 2011, according to the G.A.O.
The National Association of Water Companies wants to protect the tax deduction on borrowing, another preference that saves companies billions. And a trade association for oil and gas suppliers, Western Energy Alliance, is defending tax subsidies for fossil fuels against Mr. Obama's budget proposal to end them, potentially raising $44 billion over 10 years.
Another powerful constituency—made up of businesses that are not organized as corporations—is preparing to fight for its turf, adding to the opposition to an overhaul. After the previous tax reform in 1986, thousands of companies shifted to this status; these pass-through entities still benefit from many corporate tax breaks but often pay a lower personal rate of taxation. Their numbers have increased so much that they now account for more than half of net business profits, according to the Tax Policy Center.
They are now worried that they will be singled out to help pay for a corporate tax overhaul.
According to a study last year by the Joint Committee on Taxation, even if Congress eliminated many corporate tax deductions, it could not push the official rate below 28 percent. (At the time, Mr. Camp described the study as incomplete, and some analysts say there may be loopholes to close beyond the official list.) Still, given corporations' opposition to getting rid of their panoply of cherished tax breaks, any rate cut could be vanishingly thin, undermining the whole point of the exercise.
Robert S. McIntyre, director of the left-leaning Citizens for Tax Justice, says he thinks most of the interest in changing the corporate tax system is actually being driven by entrepreneurial lobbyists who sense an opportunity to generate extra business from various interest groups. If any bill managed to get through Congress, he argues, it would happen only because lawmakers had ignored the prescription to keep the overhaul from losing revenue.
"They don't care about the deficit," he said. "They just care about their own corporate taxes."