Talks Begin on Corporate Tax Revisions

Talks on Corporate-Tax Revisions Set to Start.

One likely focus of the discussions will be finding ways to use an overhaul to encourage more investment in the U.S.

President Barack Obama pushed through a temporary tax break on new business equipment as a spur to investment in last month's tax deal that extended Bush-era income-tax levels.

But many experts believe more fundamental tax changes are needed to draw investment to the U.S. and strengthen the tepid recovery. That has led Mr. Obama and his top aides to consider embracing a corporate-tax overhaul as a major goal for the new Congress, where business-friendly Republicans have gained power. Recalibrating corporate taxes also could boost the administration's efforts to mend frayed relations with business leaders.

Several possible elements of a revised corporate-tax structure could encourage investment. A lower U.S. tax rate, for example, could reduce some incentives for U.S. companies to shift assets to lower-tax countries. Many corporate leaders want Washington to reverse its longstanding policy and let them bring back billions in overseas profits without being taxed in the U.S.

Finding any new tax breaks that can meet the administration's tough budgetary standards is likely to prove a struggle. Mr. Obama is insisting that changes to the corporate-tax code not add significantly to the government's already dire fiscal problems.

That means the budgetary cost of new tax benefits—including a lower rate—likely would have to be made up through elimination of other popular business breaks.