Treasury Secretary Jack Lew: 'Our Entire Federal Tax Code Needs To Be Overhauled'

U.S. Treasury Secretary Jack Lew spoke at the Brookings Institution Wednesday about the need to end corporate tax inversions and reform the U.S. tax system following President Obama's State of the Union address.

“Let me say at the outset that our entire federal tax code needs to be overhauled. It has been almost 30 years since we last rewrote it, and since then, the tax system has become heavily burdened by loopholes and inefficiencies,” according to Lew’s prepared comments.

On the issue of ending corporate tax inversions and the choice between a territorial tax system versus the United States’ worldwide tax system, Lew said, “The President’s proposal strikes a sensible balance, and would move us towards a more hybrid system.”

Lew claimed that such a hybrid system “would create a new minimum tax on foreign earnings and make it simpler for a business to bring income back to the United States. It would also tighten the rules so that companies cannot use accounting techniques to avoid paying taxes, such as shifting profits to low-tax countries. Moreover, the President’s strategy eliminates tax deductions that reward companies when they shut down operations in the United States and relocate abroad, and it provides tax breaks for companies that bring production back to the United States. With these changes in place, we can help encourage investment in the United States.”

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The switch to a new tax system would “generate one-time transition revenues” and the Obama administration “would use a portion of this temporary revenue to pay for long delayed one-time investments to upgrade our infrastructure, helping to address the funding gap we face to meet our long-term transportation, water, and electricity needs,” according to Lew.

Additionally, Lew noted that President Obama’s proposals would lower the corporate tax rate from 35 percent to 28 percent and offer an even lower 25 percent tax on manufacturing companies.

Lew concluded his speech by stating that “we can build on this momentum and pass bipartisan business tax reform so that our economy is one where innovation and ingenuity thrive, where hard work and determination pay off, and where the opportunity to succeed is available to everyone. And I am confident that as long as we keep our focus on doing what is right for our economy and our nation, we will get this done.”

Posted In: NewsPoliticsGeneralBrookings InstitutionJack Lew
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