For the Record…Manufacturers and other American Corporations Do Face a Heavy Tax Burden

By March 27, 2013Taxation

Manufacturers were surprised this morning by the front-page story in the Washington Post that calls into question the tax burden faced by U.S. global corporations, including manufacturers. As the Post article accurately points out, the “tax expense” figures on which they base the story are not the same as taxes paid to the IRS. And, despite admitting that “it is nearly impossible to figure out the amount companies are actually paying [in taxes],” the take away from the article is the misconception that American companies are not paying enough.

First, let’s set the record straight. U.S. manufacturers comply with tax laws and pay their fair share of taxes. Indeed, at 35 percent, the United States has the highest corporate statutory tax rate among developed countries.  And that high tax rate does effect a businesses’ investment and business decisions.  Admittedly, the U.S. statutory corporate tax rate doesn’t tell the complete story. The effective tax rate reflects deductions and credits included in the tax code that can reduce a company’s tax liability. According to our friends at the Tax Foundation, the most recent studies show that the average effective corporate tax rate for corporations headquartered in the U.S. at roughly 27 percent, is still higher than our competitors in other countries that face an average effective tax rate of about 20 percent. And there’s more. The effective average rate for new investment in the U.S. is roughly 29.8 percent, 7.4 point above worldwide competition.

And while we’re at it, we’d like to challenge the unnamed “experts” cited in the story who claim that the U.S. code has encouraged companies to shift their income overseas.  Here’s how we see it.  Current U.S. tax laws make it difficult for U.S. companies with worldwide operations to thrive and compete in the global marketplace. In contrast to our competitors, the U.S. system taxes income regardless of where it is earned. As a result, U.S. global companies generally have a higher tax burden than non-U.S. companies — a significant disadvantage when competing for business in a global marketplace.  Manufacturers know firsthand that if U.S. companies can’t compete abroad, where 95 percent of the world’s consumers are located, the U.S. economy suffers from the loss of both foreign markets and domestic jobs that support foreign operations. Thus, in order to make U.S. multinationals more competitive, the NAM supports moving from the United States’ current worldwide tax system to a territorial tax system similar to systems in most industrialized countries.

Finally, we’re proud to say that the NAM is actively involved in the current debate on tax reform but not,  as the Post would have it  to “protect client interests.” Rather, Manufacturers’ goal is to secure a tax climate that encourages competitiveness and economic growth and  that benefits all businesses and families in the United States.

Dorothy Coleman

Dorothy Coleman

Dorothy Coleman is vice president of tax and domestic economic policy at the National Association of Manufacturers (NAM). Ms. Coleman is responsible for providing NAM members with important information related to tax issues and representing the NAM’s position to Congress, the Administration and the media. An NAM spokesperson for tax policy issues, she coordinates membership coalitions; prepares testimony, reports and analyses; and responds to media inquiries. Before taking over as vice president of the tax policy department, she served as director of tax policy from April 1998 to April 2000.
Dorothy Coleman

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