The winners and losers of corporate tax reform
Corporate tax reform is needed, but some companies would still get the short end of the tax stick.
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This all happens mostly because some companies can shift nearly all of their profits to low-tax countries while others, due to the nature of their business, can’t. But whatever the cause, the effect is that the winners are very likely to fight like Tiger Moms to preserve their tax preferences even as they argue for lower rates. Those who get the short end of the tax stick today will use all of their influence to drive down rates and, if they can get away with it, convince Congress to add a beneficial tax break or two.Skip to next paragraph
Howard Gleckman is a resident fellow at The Urban-Brookings Tax Policy Center, the author of Caring for Our Parents, and former senior correspondent in the Washington bureau of Business Week. (http://taxvox.taxpolicycenter.org)
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It would be silly to expect anything different. No CEO who likes his corner office is going to advocate for changes that will reduce his firm’s after-tax income. Such a step would make for a somewhat awkward shareholder’s meeting.
You could see all these gears turning at the House Ways & Means Committee this morning. At the first of what chairman Dave Camp (R-MI) promises will be a series of hearings on tax reform, Procter & Gamble CEO Robert McDonald spoke for the Business Roundtable. The Roundtable represents the CEOs of large U.S. companies, some who attended the Geithner session.
In his prepared testimony, McDonald embraced lower rates and a dramatic shift in the way the U.S. taxes worldwide income. He called for new tax incentives for research and development, but said not a word about eliminating corporate tax preferences. Instead, he suggested that reform be coupled with an overall reduction in corporate taxes, according to the Financial Times.
McDonald’s position was entirely predictable and, from his point of view, perfectly reasonable. But it is not the route to reform.
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