Although this page presents a highly simplified account of US taxation of corporations, in reality the Tax Code is an enormous mountain of nightmarish complexity. Politicians and businessmen alike want to fix it, and during 2006 the President convened a Tax Panel which took evidence and made proposals for root and branch change of the Code in November, 2005.

In September, the panel turned its attention to taxation issues facing America’s corporate and small business taxpayers during a meeting in Tampa, Florida.

In testimony from several academics and tax law experts, the panel heard how the current state of the US tax code has placed an unfair and disproportionate compliance burden on small firms, while growing global competition and sophisticated tax planning has allowed the corporate tax base to be eroded.

“Small businesses and self-employed taxpayers, in particular, are burdened by the complexity of our tax code and bear a substantial proportion of the estimated $125 billion in compliance costs,” observed tax panel chairman Connie Mack.

“These costs create a disproportionate burden, as studies have found that the smaller the business, the higher the cost of complying with the tax code per dollar of tax paid. We have heard from small business owners from all over America who have told us that the tax code should be reformed and simplified so that these entrepreneurs can spend less time doing paperwork and more time growing their businesses,” he added.

Meanwhile, Douglas Shackleford, professor at the University of North Carolina's Kenan-Flagler Business School noted that the US corporate tax base is “under attack from many directions”.

"Despite a decade of record profits, the corporate income tax never recovered to the levels of the less prosperous 1970s,” Shackleford stated in his testimony.

However, he observed that the decline of the corporate tax sector has been a global phenomenon, caused by growing international competition which has affected “all countries' ability to extract corporate tax dollars".

Other factors which have contributed to falling corporate tax revenues according to Shackleford include: the rise of the knowledge economy with its associated intangible assets; growth of ‘S Corporations’ and partnerships that “pass through” taxes; deductions from employee stock options; and the formulation of tax shelters.

Shackleford told the panel that the success or failure of future tax reforms can be measured by a corresponding decline or growth in the country’s tax planning industry.

"The key to reducing the need for tax accountants and lawyers is the elimination of differences in tax rates. Whenever you tax the same income differently, you provide an opportunity for a planner to reduce taxes," he observed.

In November the Panel recommended two options for simplification of the US tax code in its final report.

The two plans differ on the taxation of businesses and capital income. Although they use different approaches, the nine member panel of academic, legal and tax experts chaired by former Republican Senator for Florida Connie Mack said that the plans share a common goal of providing simple and straightforward ways for Americans to save free of tax while lowering the tax burden on productivity-enhancing investment by businesses.

The first plan, known as the Simplified Income Tax Plan proposed to:

The second plan, known as the Growth and Investment Tax Plan, proposed:

Under both plans, a number of further measures would be applied to individual taxation. Both proposals would allow every taxpayer to use a simple tax form, less than half the length of the current Form 1040.

The Panel also developed and considered a progressive consumption tax plan that would be administered using the infrastructure of the current tax system, but was unable to reach a consensus to include it as a recommendation. In addition, The Panel also discarded ideas for a value-added tax and a national retail sales tax.

Then Treasury Secretary John Snow was set to deliberate over the panel's proposals before making recommendations to President Bush as to which parts of the report, if any, to adopt.

"The recommendations that they (the tax panel) are presenting today will begin the dialogue that will help shape the future of tax policy," Snow said. "Their advice is the starting point, and I look forward to reading their recommendations and considering them carefully before I make a recommendation to the President based on the excellent work carried out by this Panel," he added.

In December, 2005, however, it transpired that the Bush administration was considering delaying the unveiling of a broad tax reform proposal until 2007 while the Treasury continues to deliberate on the recommendations of the tax reform panel, in order to avoid having to sell a controversial policy initiative during a mid-term election year.

The tax reform effort was also be hampered by the fact that the assistant secretary for tax policy post has been vacant for several months, and one Republican source noted that there is insufficient manpower to churn out such an extensive and wide-ranging policy initiative.

John Snow said that government would not be held to an "artificial timetable" with regard to tax reform. "We will be looking hard at the whole question of tax reform," Snow told reporters in Washington D.C. "I don't want to foreshadow what we will be recommending to the president," added the Treasury Secretary.

In the spring of 2006, Snow said that his department remained "busy" working on proposals for simplification of the US tax code, despite the fact that the Bush administration appeared to have quietly shelved its tax reform commitments until 2007.

"At the Treasury Department we are quite busy working on tax reform, carefully considering the options provided by the Tax Panel," Mr Snow stated in response to a question posed in an online interactive forum known as "Ask the White House."

However, Mr Snow once again reiterated that the Bush administration was in no immediate hurry to forge ahead with tax reform. "Reform of the code is so important and the opportunity to really improve it only comes around every twenty years or so, so we want to be sure that we get it right. So at this time we must consider all options carefully and be sure that we are creating a more simple and fair tax system for all," he explained.

With mid-term elections approaching, it is now widely believed that moves towards serious tax reform will not begin in earnest for about a year. Indeed, Senate Finance Committee chairman Charles Grassley (R - Iowa) told Tax Council members earlier this month that the Treasury will not publish its long-awaited report on tax reform until next year at least.

"From what I’ve heard, this won’t happen this year," stated Grassley.