Companies Willing To Give Up Tax Breaks For Lower Top Rate
First Published Thursday, 2nd June 2011 05:02 pm - © 2011 Dow Jones
(Updated with comments from lawmakers in the fourth, fifth, ninth and tenth paragraphs.)
By Kristina Peterson
Of Dow Jones NEWSWIRES
WASHINGTON -(Dow Jones)- Executives from major U.S. businesses told lawmakers Thursday they would be willing to give up major tax breaks in exchange for a lower top corporate tax rate.
An executive from Boeing Co. (BA) told members of members of the House Ways and Means Committee that Boeing would be willing to give up a tax credit for research and development, as well as a domestic manufacturing credit, in exchange for a lower top business tax rate.
"Though we spent last year $4 billion in research and development, given the way the R&D credit is administered right now and the fact that renewal is constantly in question, we would certainly in return for a significantly lower rate, give up the R&D credit," said James Zrust, Boeing's vice president of tax. "In return for simplicity, we would like to get rid of the complexity."
Lawmakers said corporations' willingness to make trade-offs signaled their commitment to overhauling the tax system.
"We had employers come and say they're willing to give up some of their preferences, deductions, provisions in the code for a lower statutory rate," said Ways and Means Chairman Dave Camp (R., Mich.) "It was important to get that on the record."
Executives from Sears Holdings Corp. (SHLD), Emerson Electric Inc. (EMR) and others urged lawmakers to cut the top tax rate on U.S. businesses. Last week, Republican lawmakers introduced a plan for generating new jobs that would include lowering the top U.S. corporate tax rate to 25% from 35%.
Business executives said they would favor eliminating wrinkles in the tax code that have complicated complying with the law.
"Eliminating the bulk of deductions and credits in exchange for a lower corporate rate will keep U.S. companies competitive and create jobs," said Walter Galvin, vice chairman of Emerson Electric, a global manufacturing company.
Democratic lawmakers have also advocated overhauling the corporate tax code, though many have pushed to repeal industry-specific tax breaks, such as those for major oil and gas companies. Many were skeptical that a lower corporate tax rate could be paid for without shifting higher taxes onto individuals or other industries.
Rep. Jim McDermott (D., Wash.) asked whose taxes would go up to pay for a 5% to 10% lowering of the corporate tax rate if the system remains "revenue neutral."
"Tell me who's going to pay more taxes to take the weight off?" he asked. "Who's it shifted to if it's a zero-sum game here?"
The executives cautioned that the tax code should treat all industries equally.
Retailers emphasized that a lower corporate tax rate should not be achieved by imposing a tax based on what people buy, such as a value added tax.
"One of the most harmful things that could be done to our economy at this time would be to place a direct federal tax on consumption," said James Misplon, Sears' vice president of tax, speaking on behalf of the National Retail Federation. A study conducted for the organization found that the enactment of a value added tax could cause the economy to lose 850,000 jobs, he said.
-By Kristina Peterson, Dow Jones Newswires; 347-882-7215; email@example.com
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