Greenspan, CEOs urge cut in US corporate tax rate
Monday, 30 July 2007
WASHINGTON, July 29 (Reuters): The United States should cut its corporate tax rate while broadening the revenue base by eliminating special credits and deductions, former Federal Reserve Chairman Alan Greenspan and top business executives said on Thursday.
Such changes would make American companies more competitive and ease distortions in the allocation of capital, the executives and economists told a US Treasury conference on the business tax system.
"I think we should go back to broaden the base and lower the rates and then figure out a political way to keep it there," Greenspan said.
He decried that the benefits of a widely admired 1986 tax overhaul had been "almost fully unwound" by various tax breaks, credits and other changes. The "ink wasn't dry" on the 1986 statute before interest groups began chipping away at it.
Even though software maker Oracle Corp benefits from US tax credits that help offset its research and development expenses, company chief financial officer Safra Catz said she "would trade it in a minute for a simpler, lower rate, because, by the way, that gives everyone more capital that they can then invest in technology."
Caterpillar Inc. chief executive James Owens also said he would prefer a lower rate with fewer exclusions, but added that US manufacturers pay higher taxes when they repatriate capital earned overseas back to the United States. Many competitors don't face such penalties in their home countries.
As a result, the heavy construction equipment maker keeps more treasury and planning jobs outside the United States than it would under a system where taxes are paid territorially.
At a briefing later, Treasury's assistant secretary for tax policy, Eric Solomon, described the US taxation system as "antiquated" and inefficient for an economy in which services play an increasingly large role rather than manufacturing.
Such changes would make American companies more competitive and ease distortions in the allocation of capital, the executives and economists told a US Treasury conference on the business tax system.
"I think we should go back to broaden the base and lower the rates and then figure out a political way to keep it there," Greenspan said.
He decried that the benefits of a widely admired 1986 tax overhaul had been "almost fully unwound" by various tax breaks, credits and other changes. The "ink wasn't dry" on the 1986 statute before interest groups began chipping away at it.
Even though software maker Oracle Corp benefits from US tax credits that help offset its research and development expenses, company chief financial officer Safra Catz said she "would trade it in a minute for a simpler, lower rate, because, by the way, that gives everyone more capital that they can then invest in technology."
Caterpillar Inc. chief executive James Owens also said he would prefer a lower rate with fewer exclusions, but added that US manufacturers pay higher taxes when they repatriate capital earned overseas back to the United States. Many competitors don't face such penalties in their home countries.
As a result, the heavy construction equipment maker keeps more treasury and planning jobs outside the United States than it would under a system where taxes are paid territorially.
At a briefing later, Treasury's assistant secretary for tax policy, Eric Solomon, described the US taxation system as "antiquated" and inefficient for an economy in which services play an increasingly large role rather than manufacturing.