Senior Fellow Edward Alden runs CFR’s Renewing America project, which looks at how U.S. domestic challenges in six major issues ranging from the corporate tax and regulations to infrastructure to immigration affect the country’s ability to project power abroad. We will visit their blog posts and publications from time to time since many of their issues are being debated on the campaign trail.
Today’s blog post looks at the best and the worst Washington can offer on the budget debate at a time the country faces growing deficits and a bitter political divide over how to address them. Alden says on “the best” that it is worth sitting through the video of Treasury Secretary Timothy Geithner’s appearance Tuesday before the Senate Finance Committee where “Geithner set the tone” with these remarks:
I know the conventional wisdom in Washington is that this debate we begin today does not matter because Congress is too divided to legislate in this election year. But this debate is a very important debate. It matters because this is a fundamental debate about economic priorities, about how to increase growth and opportunity, how to strengthen health care and retirement security, how to reform our tax system, how to live within our means.
Earlier in the week, CFR.org looked at how much political space there is for addressing corporate tax reform:
Both parties have acknowledged shortcomings in the current corporate tax code and support a reduction in the U.S. statutory rate as a way to increase the global competitiveness of U.S. corporations (PDF). Lowering the corporate rate and closing loopholes, or base broadening, may also provide a higher level of federal revenues. But disagreement remains on several issues, including the way U.S. multinationals are taxed on foreign profits.
Corporate taxation is currently the third-largest source of federal income (PDF), fluctuating around 10 percent of all revenues, or 2 percent of GDP, in recent years. Tax breaks enacted to help drive the recovery have kept corporate income tax receipts at unusually low levels for the past three years, averaging just 1.2 percent of GDP–although the Congressional Budget Office expects this number to more than double by 2014 (PDF).