Entries in Tax Code (2)


Walmart, Kimberly-Clark CEOs Would Trade Tax Breaks for Lower Corporate Rate

Justin Sullivan/Getty Images(WASHINGTON) -- At 39 percent, the United States has the highest corporate tax rates in the world. In Britain and Canada the government collects just 28 percent of corporate profits, and in Ireland companies get away with a rate as low as 12.5 percent.

In a rare moment of consensus on Capitol Hill Wednesday, both Democrats and Republicans on the Senate Finance Committee agreed that in order for America to remain globally competitive against these lower rates, Congress must make drastic reforms to the tax code.

“If we're going to be competitive, we've got to get in the game,” said Finance Committee member Sen. Kent Conrad, D-ND. “Our tax code was designed at a time when we did not have to worry about the competitive position of the United States. I don’t think anybody, if they were going to sit down and devise a tax code for the United States in 2011 or 2012, would come up with one that looked anything like this one.”

Four CEOs from some of America’s largest corporations agreed. In their testimony the heads of Walmart, Kimberly-Clark, CVS Caremark and PMC-Sierra each emphasized that Congress needs to overhaul the entire system to encourage companies to invest in America and create jobs at home.

The devil, though, is in the details. The United State’s corporate tax system is an intricate web of loopholes, tax breaks and investment incentives.

For example, tax breaks for research and development saved companies $8 billion in taxes this year and an incentive to encourage domestic investment in machinery and equipment eliminated almost $40 billion from the federal coffers.

Thomas Falk, the CEO of Kimberly-Clark -- a Fortune 25 company that produces health and hygiene products such as Kleenex and Depends -- said he would give up his company’s research and manufacturing tax breaks in favor of a lower overall rate.

Falk said many companies make investment decisions based on the marginal, or overall, rate, so lowering that rate would increase companies’ ability to invest and create more jobs.

Walmart CEO Mike Duke cautioned that tax reform must not only lower the overall rate, but also revise the loopholes and address how foreign profits are taxed and brought back into the country.

But it is much easier to talk about cutting incentives than to actually eliminate them, as there are a host of corporate lobbyists whose job it is to create and protect such loopholes.

For example, just within the four-member panel there was disagreement over what the lowered tax rate should be. Falk suggested dropping the rate to 25 percent and eliminating most of the tax breaks.

But Gregory Lang, CEO of the technology corporation PMC-Sierra, said 25 percent still would not be competitive against China or India, where most technology manufacturing is located and the tax rates are only 15 to 17 percent.

With the unemployment rate still hovering around nine percent and the debt ceiling crisis threatening to rock the country’s financial system, Falk said the climate is right to push the tough pill of comprehensive tax reform through Congress.

“Our nation is facing a crisis and in a crisis you can get amazing things done. You can drive a lot of change in a short period of time and get things done that once were thought to be impossible,” he said. “I would urge you to be bold and come up with a tax system that makes American companies more competitive.”

Copyright 2011 ABC News Radio


Tax Reform Game: How Low Will Obama Go?

Photo Courtesy - Getty Images(WASHINGTON) -- In a speech to the Chamber of Commerce on Monday, President Obama vowed to boost the country's competitiveness and cut corporate taxes, but he gave few hints about how he would reform the tax code.

While lawmakers are just starting the long road to simplifying the tax code, the president said he wants to reform taxes without raising the $14 trillion deficit.

"I am eager to work with both parties and with the Chamber to take additional steps across the budget to put our nation on sounder fiscal footing," the president said.

Reforming the tax code, however, is sure to be a complicated process -- from lowering corporate taxes to closing loopholes.  Lawmakers are not sure exactly where to begin.

"There are different levels in the debate right now," said Scott Hodge, president of The Tax Foundation.  "At the forefront, there is growing recognition that the U.S. corporate tax rate is too high and needs to be cut to make the U.S. more competitive.  The president acknowledged that in the State of the Union Address."

The U.S. corporate tax rate will be the highest of the 34 countries in The Organization for Economic Cooperation and Development when Japan lowers its corporate tax rate this year, according to Eric Toder, co-director of the Tax Policy Center.  The rate, 35 percent, is 39 percent when including average state corporate taxes, according to the Tax Policy Center.

However, federal taxes are at their lowest level since 1950 by some measures, and many companies are able to dodge taxes entirely or pay very little.  A report from the Government Accountability Office found that two-thirds of U.S. companies, or 1.3 million businesses, did not pay federal income taxes between 1998 and 2005.

Hodge said most companies were waiting with "bated breath" to see if the president would announce specific proposals during the speech to the Chamber of Commerce, but he did not expect Obama to highlight specific tax breaks.  Hodge said he was hoping to hear how low the president believes corporate tax rate needs to for the country to be competitive globally.

Instead of divulging details, the president called for reforming the "burdensome corporate tax rate" and a fairer distribution of taxes.  He said some industries' tax burdens are four or five times higher than other industries and that companies are making too many decisions based on their tax implications.

Copyright 2011 ABC News Radio

ABC News Radio