Corporate Tax Rate Also Needs to be Addressed as part of Fiscal Cliff
December 7, 2012
Earlier this week, the Taxpayers Protection Alliance highlighted the devastating effect of the increase in dividend taxes (read here) if the country goes over the Fiscal Cliff. Today, as a bonus tax blog, TPA wants to reiterate the importance of including corporate tax rate reform in discussions surrounding the Fiscal Cliff. On April 1, 2012, the United States had the dubious distinction of becoming the country with the highest corporate tax rate. As Congress talks about tax reform as part of the Fiscal Cliff discussions, lowering the corporate tax rate should be at the top of the list. According to an April 4, 2012 op-ed in Reuters by Elaine Kamarck and James P. Pinkerton, “The U.S. in the dubious position of being number one in anti-competitiveness with a current combined rate of 39.2 percent. . . . combined corporate tax rate, and federal rate at 35 percent, leaves us in a weaker position relative to other leading economies.” In February, Treasury Secretary Timothy Geithner proposed a plan to reduce the corporate tax rate to 28 percent and House Republicans have proposed a rate of 25 percent. Unfortunately, policy makers in Washington are not the only ones paying attention as Kamarck and Pinkerton point out our competitors are also taking notice, “Over the last 20 years, America’s competitors have lowered their top corporate rates to levels as low as 12.5 percent and 8.5 percent in the cases of Ireland and Switzerland, while the U.S. has not.” Now, a new letter from the Chief Executive Officers of 17 of the largest U.S. companies, members of the RATE Coalition , sent a letter to lawmakers looking for a “reduction of the corporate tax rate as part of any wide-ranging corporate tax reform.” Read the full letter here.
December 6, 2012
The Honorable Dave Camp Chairman House, Committee on Ways and Means, United States House of Representatives, 1102 Longworth House Office Building, Washington, DC 20515
The Honorable Sander Levin , Ranking Member House Committee on Ways and Means, United States House of Representatives, 1102 Longworth House Office Building, Washington, DC 20515
The Honorable Max Baucus, Chairman, Senate Committee on Finance, United States Senate, 219 Dirksen Senate Office Building, Washington, DC 20510
The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance, United States Senate, 219 Dirksen Senate Office Building, Washington, DC 20510
Dear Chairmen Camp and Baucus and Ranking Members Levin and Hatch:
With the 2012 elections behind us, Congress now begins the challenge of solving America’s fiscal cliff and laying the groundwork for long-term economic growth and job creation that will build on the momentum of President Obama’s first term.
While campaigns – particularly during presidential years – are often contentious, the recent elections underscored the common ground that exists between Democrats and Republicans on the need to enact comprehensive tax reforms that will put American workers and American businesses on more sound footing and the urgency to act during the lame duck session to set the stage for reforms in early 2013.
In particular, each of you, along with the presidential candidates, has identified the need to reform America’s tax code in order to make it more competitive globally. Specifically, President Obama and Governor Romney each called for a significant corporate rate reduction to as low as 25 percent and a simplification of the corporate tax system.
The 28 member companies and organizations of the RATE Coalition applaud these principles and stand ready to support you during the lame duck session and throughout President Obama’s second term. Our organization believes that America simply can no longer afford a 35 percent statutory corporate tax rate (39.2 percent, including the average state rates) – the highest in the industrialized world, a full 10 percentage points above the average of our OECD competitors. Our high statutory rate and complex tax code hinder investment in the U.S., discourage job creation on our shores and slow economic growth.
Simply put, in order to expand and build upon the job creation achieved under President Obama, the U.S. must enact comprehensive corporate tax reform with a significantly lower corporate tax rate.
Our coalition understands that this is not an easy proposition, especially given the current fiscal environment. Because of this, our member companies, which span various geographic and industry sectors and represent more than 30 million U.S. jobs, understand that base-broadeners, such as eliminating tax expenditures, may be necessary to achieve the significant reduction in the statutory rate that is required for the U.S. to better compete globally.
It has been over 25 years since comprehensive tax reform was enacted. Then, like now, the U.S. faced divided government and the prospects for reform at times seemed bleak. Yet, working in a bipartisan fashion, President Reagan and Members of Congress achieved comprehensive reform and a competitive tax system that helped fuel sustained economic growth.
Since the 1986 reforms were enacted, our trading partners have raced to reform their tax codes and lower their rates to grow their own economies. It is time for the U.S. to follow our own precedent and again work to pass reforms that will encourage investment here at home. If done properly, a lower corporate tax rate will benefit all U.S. businesses, as well as U.S. workers, and will encourage investment and job creation.
As leaders on tax reform, we encourage you to use the opportunity of a lame duck session to set the framework for comprehensive reform in early 2013. We stand ready to support you in this effort and thank you for your leadership.
Together, we can work to restore America’s global competitiveness and boost economic growth.
Martin J. Barrington
Chairman and Chief Executive Officer, Altria Group, Inc.
Chairman and Chief Executive Officer, AT&T Inc.
President and Chief Executive Officer, CVS Caremark
President and Chief Executive Officer, Ford Motor Company
Edward R. Hamberger
President and Chief Executive Officer, Association of American Railroads
Chairman, President and Chief Executive Officer, The Boeing Company
Frederick W. Smith
Chairman of the Board and Chief Executive Officer, FedEx Corporation
Thomas J. Falk
Chairman and Chief Executive Officer, Kimberly-Clark
Gregory B. Maffei
President and Chief Executive Officer, Liberty Media Corporation and Liberty Interactive Corporation
Chairman, Chief Executive Officer and President, Northrop Grumman Corporation
Thomas A. Fanning
Chairman, President and Chief Executive Officer, Southern Company
Chairman and Chief Executive, Verizon Communications Inc.
Robert A. Iger
Chairman and Chief Executive Officer, The Walt Disney Company
President and Chief Executive Officer, National Retail Federation
Chairman and Chief Executive, Raytheon Company
Glenn A. Britt
Chairman and Chief Executive Officer, Time Warner Cable
President and Chief Executive Officer, Viacom
cc: President Barack Obama
Speaker John Boehner
Minority Leader Nancy Pelosi
Majority Leader Harry Reid
Minority Leader Mitch McConnell