Manufacturers Split On Breaks-for-Rate Trade in Tax Code
Tax directors for large U.S. manufacturing companies are split on how much they are willing to give up in tax breaks in exchange for a lower corporate rate.
Executives from 3M Co., Ford Motor Co. (F), Corning Inc. (GLW) and Air Liquide SA (AI) are testifying today at a hearing of the House Ways and Means Committee in Washington.
“I don’t think it’s quite time yet to choose which ones stay and which ones go,” said Diane Dossin, chief tax officer at Ford. “For Ford’s business to go forward in the U.S., we think the low rate is the single most important thing.”
Representative Dave Camp, the panel’s chairman, has proposed lowering the top U.S. corporate tax rate to 25 percent from 35 percent. The Michigan Republican hasn’t specified how he plans to cover the lost revenue.
The U.S. has the highest statutory corporate tax rate in the industrialized world. The effective rate, after accounting for tax breaks, is comparable with other large countries.
Henry Gjersdal, vice president of tax and real estate at 3M, said the maker of Scotch tape would be willing to give up tax breaks for domestic manufacturing, accelerated depreciation and corporate research to get the rate down to 25 percent.
Dossin said lawmakers should consider the full effects of rate reduction and changing the tax base as they make these decisions.
‘Base Broadening’
“We also understand that base broadening comes with costs that must be weighed against the lower rate,” she said.
Susan Ford, a vice president at Corning, said the U.S. tax incentive for corporate research is uncompetitive, noting that Asian countries offer significant incentives that make overseas investment attractive.
The lower the corporate tax rate, she said, “the less likely companies are incented to move income offshore.”
Every tax break should be considered, Ford said, with a caveat.
“The overriding concern, of course, is that rates have a tendency to creep back up,” he said.
Representative Sander Levin of Michigan, the top Democrat on the committee, called for Republicans to be more specific as to which breaks they would propose curtailing so that an overhaul plan can be analyzed for its effect on economic growth and job creation.
“Just setting a rate and not saying how you will get there doesn’t really tell you whether you are achieving those goals or not,” he said.
To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
June 29 (Bloomberg) -- U.S. Representative Dave Camp, a Michigan Republican, talks with Bloomberg's Al Hunt about the outlook for changes to the tax code and efforts to repeal the Supreme Court's ruling on President Barack Obama's health-care overhaul. Bloomberg's Greg Stohr discusses the Supreme Court's rulings on health care and Arizona's immigration law. Bloomberg's Julianna Goldman talks about health-care legislation and its potential impact on the presidential race. Commentators Margaret Carlson and Kate O'Beirne discuss this week's High Court decisions. (Source: Bloomberg)
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