By George Yaksick, Washington Staff Writer
Much has been made about economic stimulation of late, and how best to accomplish such a boost. But executives at America's successful corporations--those who do a lot of the buying, selling and employing in this country--have ideas of their own on what truly constitutes economic stimulus.
U.S. businesses would prefer a lower corporate tax rate rather than faster depreciation, tax executives from some of the country's largest employers said on February 20, 2008. "Congress must make the U.S. more attractive for investment," Stuart D. Goldstein, vice president, taxes, Lockheed Martin Corp. told tax professionals at the Ninth Annual Tax Council Policy Institute (TCPI) Symposium in Washington, D.C. The U.S. federal corporate tax rate of 39 percent is the second highest in the industrialized world.
Pending legislation would reduce the corporate tax rate, but a recent economic slowdown and worries about the federal budget deficit could derail the proposal.
Trend for Lower Rates
The trend among our trading partners is to lower their corporate tax rates combined with a strong research tax credit," Goldstein noted. The United Kingdom, which is one of Lockheed Martin's largest export markets, has a statutory rate of 28 to 30 percent and a generous research tax credit, Goldstein said. Australia and Canada, also significant export markets, have lower rates. Ireland has a corporate tax rate of 12.5 percent.
Retail is another industry that is hampered by the U.S. corporate tax rate, Del Threadgill, vice president, tax services, JCPenny Company, Inc., reported. "On average, retail has a high effective tax rate in the low 30s." Moreover, Threadgill noted that the retail industry, unlike the manufacturing sector, does not benefit from the domestic production activities deduction, the research tax credit and other incentives that result in a lower tax rate.
Legislative Fix
"It would be great to have a comprehensive public debate about business tax reform," Ronald A. Pearlman, a former Treasury official said, but he recognized that creating such a debate would be a "challenge." Rep. Charles B. Rangel (D-N.Y.), chair of the powerful House Ways and Means Committee, has proposed reducing the corporate tax rate as part of an overhaul of the Tax Code. However, Rangel's proposal has received very little support from other Democrats. Republicans, on the other hand, have long favored corporate tax reform of some kind.
Several think tanks and private organizations have proposed alternative measures, such as repealing the Code Sec. 199 deduction and other corporate tax breaks and replacing them with faster depreciation (35 percent), one speaker noted. Threadgill predicted that, in the retail sector, enhanced expensing would not result in more stores being built, more inventory being acquired, or more jobs being created.
- Related items:
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- Economic Stimulus Package Clears Congress
Posted February 25, 2008.
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