The executives are sending a letter to congressional leaders today, urging action on the one-year anniversary of Japan’s rate cut, which left the U.S. and its 35 percent statutory corporate tax rate as the highest in the industrialized world.
“We stand ready to support your efforts to make the U.S. more competitive,” wrote the group. “We know that some choices may be difficult and understand that base-broadeners, such as eliminating tax expenditures, may be necessary to achieve the significant reduction in the statutory rate that is required for the U.S. to better compete globally.”
Offering up tax breaks for elimination is easier for companies that don’t benefit from many of them and don’t have subsidiaries in low-tax foreign jurisdictions. CVS, for example, reports no foreign income.
The lack of agreement on how to offset the cost of a corporate rate cut -- along with political differences over broader fiscal questions -- have prevented lawmakers from turning a general agreement on revenue-neutral corporate tax rate reduction into specific law.
Representative Dave Camp, a Michigan Republican who is chairman of the House Ways and Means Committee, plans to move a comprehensive rewrite of the individual and corporate tax codes through his panel this year. He hasn’t said how he would pay for reducing the rate to as low as 25 percent.
President Barack Obama last year called for dropping the rate to 28 percent and to 25 percent for manufacturers. He would eliminate breaks for oil companies, the insurance industry and private equity managers as part of the way to pay for the rate cut. The administration has also suggested options such as lengthening depreciation cycles and limiting the deductibility of interest.
Many U.S. companies, particularly in the high-technology and pharmaceutical industries, don’t pay anywhere near the 35 percent rate, making them more interested in preserving breaks than cutting rates.
Signers of the letter included Jim McNerney, chief executive officer of Boeing, Larry Merlo, president and CEO at CVS and Frederick Smith, chairman and CEO of FedEx. Other signers were Thomas Falk, chairman and CEO of Kimberly-Clark Corp. (KMB) and Robert Iger, chairman and CEO of The Walt Disney Co. (DIS)
They are members of the RATE Coalition, a collection of companies that place a priority on rate reduction.
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