Tag: corporate tax rates

Tax Reform and Lower Rates, a Painstaking Venture

Kevin Hall, McClatchy, “Business leaders wary of Obama’s plan to cut corporate tax rate“:

“Do I think it can be done? Yes. But it’s going to be very painstaking, it’s going to be difficult,” said Dorothy Coleman, the vice president of tax policy for the National Association of Manufacturers. “If it was easy, it would have been done a long time ago.”…

“I think our overall feeling on corporate tax rates is they should be as low as possible,” said NAM’s Coleman. She offered only a qualified endorsement because Obama said the lowering of corporate tax rates can’t add to the deficit, projected Wednesday by the nonpartisan Congressional Budget Office to hit a record $1.5 trillion this year.

“We support fiscally responsible tax reform, but starting from the beginning, that it’s got to be revenue neutral almost by definition means creating winners and losers,” Coleman said. “When you target one industry over another, that changes the conversation.”

USA TODAY, “Corporate tax rates beg for cut but reform tough to achieve, “Scott Hodge, head of the non-profit Tax Foundation, says tax reform is likely this year because Japan is slated to cut its corporate tax rate in April, giving the U.S. the highest rate. ‘We’ll have to do something,’ he says.”

Hodge covered the Japanese developments in a blog post last month, reporting that the cabinet of Prime Minister Naoto Kan had OK’d reducing the corporate tax rate by 5 percentage points, a move expected to be finalized when the Diat approves the government’s budget this spring.

Hodge also addresses the impact of the worldwide tax system — which the United States continues to use — versus the territorial tax system. (continue reading…)

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Tax Extensions, Tax Permanence, Tax Competitiveness

John Engler, president of the National Association of Manufacturers, participated in a conference call with NAM members from small- and medium-sized companiess on Tuesday. Taxes were Topic No. 1, and while the NAM welcomes the agreement between President Obama and Congress on extending the current tax rates, there’s more that needs to be done.

Engler spoke the larger issues and had a few things to say about Rep. David Camp (R-MI), incoming chairman of the House Ways & Means Committee, as well. Excerpt:

Congressman David Camp from Michigan, who’s going to chair the Ways & Means Committee, one of the things that he really has a keen appreciation for, is the importance of having permanence in some of these provisions and rates. We have got to get away from this practice where everything is expiring every year or two.

No one can do proper estate planning, if you’re talking about the estate tax, or business planning – if you’re talking about what dividends and capital gains rates are – or investment strategies. I think Dave Camp, who is really going to be a superb chair, is really thinking about how to do we get some of these locked down – we cannot have so many moving parts. (continue reading…)

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Heritage Analysis: Lower Corporate Tax Rate Would Spur Growth

From the Heritage Foundation, “The Economic Impact of a 25 Percent Corporate Income Tax Rate,” a WebMemo on taxes:

One way to spur private sector investment in the U.S. and get it into the hands of entrepreneurs would be to reduce the federal statutory corporate income tax rate, which is currently 35 percent.

The Heritage Foundation’s Center for Data Analysis (CDA) conducted a dynamic simulation of a reduction of the corporate income tax rate to 25 percent, comparing it to a baseline forecast of the economy with the current policy of a 35 percent corporate rate.[1] The results of this simulation show the U.S. economy growing faster than the baseline in the 2011–2020 forecast horizon.

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On Taxes, What’s Needed is a Simple, Pro-Business Agreement

Thanks to Jason Becker of Orlando Florida for his letter in The Wall Street Journal today, reacting to last week’s op-ed by John Engler of the National Association of Manufacturers and Jerry Howard of the National Association of Home Builders on taxes. Letting business owners keep their income is NOT a cost to the federal government, Becker reminds us. From his letter, “They’re Not Taking Money Away From the Government“:

Democrats have suddenly become creative in generating ideas that let tax rates on the rich go up in exchange for other tax “giveaways.” Virginia Sen. Mark Warner, for example, proposes letting upper-income rates increase, but he dangles in front of business owners a more generous research-and-development credit, more generous business expensing and fine-tuning of depreciation allowances (in effect, giving businesses back the $65 billion that the federal government takes in higher income taxes). Other bipartisan groups are proposing more fundamental tax reform, with one group urging a 6.5% national sales tax in exchange for lower income tax rates. However, as Mr. Engler and Mr. Howard argue persuasively, what’s most needed right now is a simple, pro-business agreement to let all income tax rates stay exactly where they are for at least another two years.

Tax-planning certainty is a prerequisite for small-business confidence and the side benefit of keeping $700 billion of private earnings out of the hands of Washington isn’t so bad either.

The Engler-Howard op-ed is “Tax Hikes and the Small Business Job Machine.”

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The Co-Chairmen’s Report on Deficit Reduction on Corporate Taxes

The co-chairmen of the Presidential deficit reduction panel, The National Commission on Fiscal Responsibility and Reform, have released their draft recommendations to the full panel. The full document released today by Erskine Bowles and former Sen. Alan Simpson is available here for download.

We’ll leave it for our policy mavens to read, analyze and comment in the days ahead, and for now just highlight this section of the tax discussion:

From Co-Chairs' draft report, National Commission on Fiscal Responsibility and Reform

The Tax Foundation this summer summarized a new Eurostat report on corporate tax rates in the European Union, comparing 2000 to 2010 rates. The paper, “New EU Report Shows U.S. Corporate Tax Rate Out of Step With Global Trends,” concluded: “The top statutory corporate tax rate among the EU27 fell 8.7 percentage points, from 31.9 percent to 23.2 percent. Among the 16 largest EU nations, the average rate is 25.7 percent.”

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Global Competition, ‘Outsourcing’ and How Jobs are Really Created

In today’s Wall Street Journal, Craig Barrett and James Moore cut through the heated political rhetoric about “outsourcing” and get right to the heart of the problem—a misunderstanding among some Congressional leaders on how jobs actually are created. In fact, they say, if the Creating American Jobs and Ending Offshoring Act rejected by the Senate this week ever became law, job losses would accelerate and even more companies would relocate jobs overseas.

In their column, “Outsourcing and the 21st-Century Economy” (subscription), Mssrs. Barrett and Moore explain that companies outsource for two reasons:

The first centers on the nature of the global. In today’s world, outsourcing can save companies money, reduce the time it takes to deliver products and services to customers, and provide access to skilled employees unavailable in the U.S. Outsourcing also allows companies to capitalize on incentives offered by foreign governments to attract investment…

The second reason U.S. companies outsource is that our own government pursues policies that drive investment and job creation offshore: excessive taxes, needless regulations, lengthy permit processes, a decreasing supply of U.S. citizens with technical and engineering degrees, and a general governmental misunderstanding of how to support private-sector jobs. For example, taxing new U.S. corporate investment at 35%—when the world average is just over 18%—pushes U.S. companies to invest offshore to increase return to shareholders.

They go on to argue, “Politicians who accuse the business community of being solely responsible for the loss of U.S. jobs are disingenuous at best and urge legislators to “recognize the competitive nature of the 21-st century world economy.”

Manufacturers could not agree more. In fact, NAM’s Manufacturing Strategy for Jobs and Competitive America sets out a roadmap for policymakers. On tax policy, rather than looking at ways to punish worldwide American companies, lawmakers should lower the corporate tax rate, provide a permanent and strengthened R&D credit and advance fair and competitive rules for taxing foreign income of U.S. companies, all changes that will make the U.S. a better place to do manufacturing.

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This Tax Increase Will Not Help Create Manufacturing Jobs

The Wall Street Journal today points out the ironic title of the Creating American Jobs and Ending Offshoring Act (S. 3816), slated for a procedural vote in the Senate tomorrow.  Masquerading as a way to “insource” jobs back into the United States, the bill introduced on Sept. 21 by Sen. Richard Durbin (D-IL) would make U.S. companies less competitive and actually could lead to a loss of U.S. jobs.

The real culprit here is the U.S. corporate tax rate, currently ranked No. 2 among developed nations and much higher than most of our competitors. The NAM’s Manufacturing Strategy for Jobs and a Competitive America encourages law makers to support policies to ensure that the United States will be the best country in the world to headquarter a company, to innovate and perform global R&D and to manufacture, both for the American market and as an export platform for the world.

To this end, the National Association of Manufacturers supports a national tax climate that does not place U.S. manufacturers at a competitive disadvantage in the global marketplace. Unfortunately, the tax increases in S. 3816 do just the opposite. With “jobs” a key theme in political campaigns around the country, it’s hard to understand why the Senate tomorrow will vote on a bill that would be a job-killer when instead lowering the corporate tax rate could create more than 2 million jobs by 2019.

Earlier …

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Competitiveness and Corporate Taxes

Wall Street Journal op-ed by Michael Boskin, professor of economics at Stanford University and a senior fellow at the Hoover Institution, “Time to Junk the Corporate Tax“:

President Obama has put tax reform on the agenda, but surprisingly little attention is being paid to fixing the most growth-inhibiting, anticompetitive tax of all: the corporate income tax. Reducing or eliminating the corporate tax would curtail numerous wasteful tax distortions, boost growth in both the short and long run, increase America’s global competitiveness, and raise future wages.

The U.S. has the second-highest corporate income tax rate of any advanced economy (39% including state taxes, 50% higher than the OECD average). Many major competitors, Germany and Canada among them, have reduced their corporate tax rate, rendering American companies less competitive globally.

From The Milken Institute report, “Jobs for America“:

Reducing the U.S. corporate income tax rate to match the OECD average would trigger new growth. By 2019, it could boost real GDP by $375.5 billion (2.2 percent), create an additional 350,000 manufacturing jobs, and increase total employment by 2.13 million.

National Association of Manufacturers President John Engler cited the Milken Institute’s findings, as well as its analysis of the R&D tax credit, in his remarks Wednesday in Phoenix to the Arizona Manufacturing Council. For more, see Phoenix Business Journal, “AZ manufacturers working from strong foundation, but need help.”

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From Managing Automation: A Report on Competition

National Association of Manufacturers President John Engler was in Palm Beach today, speaking at Manufacturing Automation’s Manufacturing Leadership Summit. The publication reported on today’s speeches, Engler’s included. From “Manufacturing Community Sets Agenda at Leadership Summit“:

PALM BEACH, FL — Manufacturing leaders will have to reconsider their strategies abroad and pressure Washington for policy change at home if U.S. manufacturing is to rebound beyond what one economist called “the biggest fake [recovery] in economic history.”

Those were the key messages at the Managing Automation Media Manufacturing Leadership Summit, which kicked off here on Tuesday morning.

In a keynote address, John Engler, president of the National Association of Manufacturers, implored Washington to cut corporate tax rates and to make permanent the research and development tax credit that expired at the end of 2009. Failure to pass a long-term extension is threatening U.S. competitiveness, he said.

“By standing still, we’ve fallen further and further behind in some key areas,” said Engler, who is a former three-term governor of Michigan.

 

 

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Make the United States the Best Place to Locate a Business

John Engler, president of the National Association of Manufacturers, was interviewed by WJR’s Frank Beckman earlier this week, leading up to Engler’s appearances with former Gov. Jim Blanchard to help raise funds for the Michigan Political Leadership Forum.

The interview opens with the expected jousting and joshing on Michigan and Washington politics, but then Frank turns the discussion to the Milken Institute report, “Jobs for America.” Engler observes:

The big 10,000 foot view is that this nation needs to have a growth strategy, and with a growth strategy you end up getting jobs in the private sector. We don’t think there’s such a strategy in place at the moment, and it’s important to recognize that just like the states compete vigorously against each other, nations are now competing against each other.

Our nation really has opted out. It’s sort of like going to the Olympics and not training and hoping that somehow you’re going to win a medal. Not going to happen.

We think you’ve got to get very aggressive. When we look at the competitive environment in the world, you cannot send Michigan or Ohio or even North Carolina or Mississippi out to compete against Singapore or China or Ireland with some of the things that they’re doing to attract business and investment.

I tell people, Frank, that you want the United States to be the best place in the world to locate a company, to headquarter it. You want it to be the best place in the world to do the bulk of your research and development, and them finally, you want it to be a great place to do a lot of manufacturing, and especially to meet the needs of the North American market.

That’s when you get to the idea that taxes matter, regulations matter, the right kind of education or workforce training – all of that matters. Frankly, we’ve got so much room for improvement, and the conversation in Washington is creating lots of risks, lots of doubts, and solving no problems.

Engler and Beckman also discuss health care policy. The full interview is available as a podcast, “Frank talks with Gov. John Engler, who will be in town for the Michigan Political Leadership program at MSU.”

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