Wall Street Tells Washington: Cut Corporate Taxes in 2013
Corporate CEOs have released their wish list for what Washington should do to energize an economy they expect will grow just 2% this year. High on the list: reforming the corporate tax code.
John Engler, president of the Business Roundtable, which represents the CEOs of more than 200 U.S. companies, tells The Daily Ticker that the 35% top marginal corporate tax rate in the U.S.—the highest in the developed world—is too high and creates difficulties for U.S. corporations competing in the global market.
“This is just a numbers game, and we’re losing at it," says Engler. “Even Canada has a 15% corporate tax rate.” Engler says the relatively high U.S. corporate tax rate affects corporate decisions on location, investment and jobs.
The former Republican governor of Michigan argues the U.S .tax code also makes it difficult for companies operating overseas to repatriate their foreign profits. “We should encourage the money to come home, we should encourage the investment here,” says Engler.
The Roundtable favors a so-called territorial system of taxation, which most industrialized countries use. President Obama, Citizens for Tax Justice and other groups argue that the territorial system is an incentive for companies to move more operations—and jobs—overseas because the overseas earnings, when repatriated, would be taxed at a lower rate than profits earned stateside.
The U.S. currently uses a worldwide system for corporate taxes. Overseas profits brought home are taxed at the U.S. corporate rate minus a partial credit for foreign taxes already paid. President Obama favors a modification of this current system, whereby a company pays only the difference between the U.S. tax and the foreign tax already paid.
U.S. corporations saw profits grow 171% during Obama's first term, according to Bloomberg.
In the accompanying video, Engler says taxes aren’t the only factor that makes U.S. companies less competitive. Talent is another. That's why another policy priority for The Roundtable is immigration reform. The Roundtable’s 2013 CEO Growth Agenda calls for a “national priority to attract the world’s best and brightest innovators, especially those who hold advanced STEM [science, technology, engineering, mathetmatics] degress from colleges and universities around the world."
Also on the CEO agenda: reducing the federal debt not only on an absolute basis but also as a percentage of GDP; increasing the number of international bilateral and regional trade initiatives; improving education and infrastructure and reforming entitlement programs. The Roundtable is also calling for raising the eligibility age for Social Security and Medicare to 70.
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