Text: The United States federal government should eliminate tax expenditures for all US aerospace corporations. The CP solves US aerospace competitiveness – boosts investment and encourages innovation.
Zrust 6/2- Vice President of Tax The Boeing Company( James, testimony before the Committee on Ways and Means U.S. House of Representatives “Hearing on How Business Tax Reform Can Encourage Job Creation”, June 2, 2011, http://waysandmeans.house.gov/UploadedFiles/Zrust_testimony.pdf) AE Competitiveness- Lower Statutory Tax Rate is Needed The Boeing Company is proud to have customers located in more than 90 countries. Historically, 70 percent of the commercial airplane business is derived from outside of the United States and we are rapidly growing our defense business outside of the U.S. In fact, developing and emerging markets account for a significant portion of the forecasted growth in the aerospace and defense sector. Although a significant portionof our customers are outside of the United States, our employees, manufacturing and support operations, research and development activities and intellectual property are predominantly located in the United States. Historically, over 95 percent of our net income is attributable to these domestic activities. Unlike other large multinational companies, almost all of our current worldwide income is subject to U.S. tax, and our effective rate is generally between 31-33 percent. The tax incentives that have the most impact on our effective rate are primarily the research and development tax credit (“R&D credit”) and, to a lesser extent, the domestic manufacturing deduction. Last year Boeing spent over $4 billion on research and development, primarily on our two major commercial development programs. In addition to a significant percentage of our customers being outside of the U.S., many of our competitors are as well. It is well known that our largest commercial competitor is located in Europe, and new competition is rapidly emerging from China, Canada, Brazil, and Russia-all with lower combined federal and local statutory tax rates than the United States. Everyone here today is well aware that the combined US statutory tax rate is almost 15 percentage points higher than the average combined rate of other 3 OECD member countries. It is our view that significantly reducing the corporate tax rate will improve U.S. competitiveness. We believe lowering the corporate rate would dramatically reduce tax policy pressure and rhetoric by ensuring that U.S. companies are competitive, and importantly, would not tip the scale in favor of foreign production. A 2005 study by the Congressional Joint Committee on Taxationconcluded that a reduction in the corporate income tax had the greatest impact on increasing long-term economic growth due to increased capital investment and labor productivity.1 We can no longer deny that capital is mobile. However, a workforce generally is not. Manufacturing in particular is capital intensive, so a higher corporate tax rate results in less investment in not only our facilities but also in our workforce. Recently, a commercial aircraft customer located in the Middle Eastapproached Boeing with a concern regarding the lack of US companies willing to bid on a contract in that region. The general sentiment is that price bids received from companies based in Asia, Europe and Australia are consistently lower than those made by US aerospace companies due to our tax system and high corporate rate. This is not the outcome we should want. We believe that a concerted effort to enact a corporate rate reduction to ensure that the US remains competitive and an attractive place to do business in the global marketplace needs to be made now. The statutory tax rate can impact where a company makes new capital investments. The U.S. corporate tax rate is inherently built into the price of our products. We are committed to bricks and mortar here in the U.S. and are proud to be the largest U.S. manufacturing exporter. However, in order to continue to grow, we need a level playing field with our competitors. Lower combined corporate tax rates in the countries where our competitors are located make the price of their products less expensivefor the global customers for which we compete. Our Chairman and CEO, Jim McNerney, recently noted that Boeing consistently wins contracts globally through innovation, which has always kept us ahead of our competitors. However, as the rest of the world attempts to gain market share and compete with us, a significantly lower corporate tax rate will become crucial to our continued success.Revenue Concerns 1 (JCX-4-05) 4 We appreciate the current deficit position and are not asking Congress to ignore the cost associated with a meaningful rate reduction. Like many of the bipartisan proposals outlined recently, we agree that tax expenditures should be on the table if a meaningful rate reduction is considered. It is our position that we could support eliminating tax expenditures in order to obtain a meaningful lower corporate tax rate. Making U.S. businesses more competitive by reducing the rate could, from our perspective, address some of the long-term fiscal issues we face today.
Solvency – Innovation/Confidence
Corporate tax rates can boost confidence in the US economy- key to allow companies access to new market opportunities and technology
Kim 10- Policy Analyst in Heritage's Center for International Trade and Economics (Anthony B, “U.S. Losing Global Competitiveness with High Corporate Tax Burden” February 2, 2010, The Heritage Network- The Foundry, http://blog.heritage.org/2010/02/02/u-s-losing-global-competitiveness-with-high-corporate-tax-burden/) AE High corporate tax rates are undermining U.S. international competitiveness. The global economy continues to demand that companies be flexible and swift in order to remain competitive. High tax rates deprive companies of both the means and the incentive to take advantage of new market opportunities or technological changes that can improve productivity. Most advanced countries in the world have responded to new global economic realities by slashing corporate tax rates.The U.S. stands almost alone in having resisted such cuts, and its corporate tax rates are now among the highest in the world. Future U.S. prosperity depends on the willingness of our political leaders to resist populist anti-corporate dogma and make the necessary adjustments to keep the U.S. economy competitive. America’s strength and economic success are based on economic freedom, which fosters the virtuous cycle of entrepreneurship, innovation, and growth. Our economic freedom has sustained economic opportunity and prosperity, as well as the creativity that leads to new products and new jobs. Clearly, U.S. inaction in improving fiscal freedom through more competitive tax rates undermines our economy’s innovative pulse; America stands still while its competitors are moving forward. As the 2010 Index reveals, since July 2008, more than 30 countries have introduced reforms in direct taxes or have implemented tax cuts as previously planned, despite the challenging economic and political environment caused by the global economic slowdown. America’s inaction is particularly damaging in a time of economic slowdown and ongoing recovery. A long-term policy plan that strengthens economic fundamentals would calm fears among entrepreneurs and restore confidence in the U.S. economy. Lowering the corporate tax rate is key to maintain global competitiveness, long-term economic success, and encourage investor confidence
Hanna 2/3- (2011, Rep. Richard, The Hills Congress Blog “Cut taxes on business to restore American competitiveness,” http://thehill.com/blogs/congress-blog/economy-a-budget/141995-cut-taxes-on-business-to-restore-american-competitiveness-rep-richard-hanna) AE America's corporate tax rate undermines our country's competitiveness, hurts consumers, jeopardizes jobs and weakens the confidence of shareholders and investors. Recognizing this disadvantage, President Obama has singled out our corporate taxes - the highest in the developed world at around a blended 40 percent - as a bipartisan opportunity for us to stop encouraging the exportation of businesses and jobs and allow our companies to do what America has always done best - compete. Next week, I'll introduce "The American Competitiveness Act," which follows up on calls from the President and members of both parties to cut the corporate tax rate. Under this legislation, the federal corporate tax rate will be lowered from 35 percent to 25 percent over two years-and kept at 25 percent permanently. Ideally, the phase-in period gives us time to simplify our tax code because government shouldn't pick winners and losers. What we know is that a vibrant, diverse economy is directly linked to our ability to compete - something I learned well in my 30 years as a businessman in Upstate New York. Increasingly, such competition is on an international basis.Compared to the rest of the world, our tax rate is punitive and discourages business investment and job creation in the United States. Other countries have taken notice of this penalizing tax and its effects on their economies. Recently, Japan cut its corporate tax rate, formerly the highest among developed nations. European nations that once boasted exorbitantly high corporate tax rates have dramatically lowered them. Even our northern neighbor Canada is at 18 percent-and the Canadians are still cutting. The average rate in the Organization for Economic Cooperation and Development countries is just over 25 percent, meaning the effective U.S. corporate tax burden, when state and local taxes are considered, can be 50 percent higher than some of our developed competitors, rendering our companies and workers less competitive, if at all. Such a tax climate is occurring in the country that has been the creator of and home to the most successful multi-national companies in history: the United States. But we're losing our edge as a result, and it can only be stopped and reserved if we incentivize companies to stay here. It is simply unrealistic to expect businesses to pay more in this country when they can pay less someplace else. The United States needs a corporate tax structure roughly equal to that of our competitors. The American Competitiveness Act accomplishes that goal, allowing our nation's businesses to compete in the global marketplace in the 21st Century, and it provides the motivation to make the necessary structural changes to our tax code that are vital to our long-term economic success. Lowering corporate tax rates increases competition and levels the playing field
WSJ 1/27- (David Wessel, “Tax Redo to Seek 'Level Playing Field'” Wall Street Journal, January 27, 2011, http://online.wsj.com/article/SB10001424052748703293204576106483031438912.html?mod=googlenews_wsj) AE In his State of the Union address, President Barack Obama called on Congress to embark on a major revamp of corporate taxes: "[S]implify the system. Get rid of the loopholes. And use the savings to lower the corporate tax rate for the first time in 25 years—without adding to our deficit." On Wednesday, Treasury Secretary Timothy Geithner talked to The Wall Street Journal's David Wessel about the initiative. Mr. Geithner emphasized the administration's insistence on offsetting the corporate rate, now 35%, by eliminating deductions, credits and incentives. Raising more revenue from businesses in light of global competition "isn't realistic," he said. But, given the deficit, "We can't raise taxes on individuals to lower business taxes." He wouldn't say if the administration wants to move from taxing multinational corporations' global profits and instead tax only domestic profits, as most other countries do and as U.S. business wants. But he said a "level playing field" is a major goal. View Full ImageBloomberg News Timothy Geithner in Washington, D.C. on Jan. 12. The White House isn't planning to include a specific proposal in the president's February budget. Q. How would corporate tax reform help economic growth? A. Lowering rates, removing the distortions in the present system, helps growthbecause it allows business to compete on the basis of performance and return rather than on their ability to get or protect special provisions in the tax code. If you level the playing field, you allow the market rather than the tax system to drive investment. Q. How much does the corporate tax rate need to fall to make a difference? A. To have a more competitive system, you want to try to bring down the rate closer to the range of our major trading partners. We have a high statutory rate, which is made necessary by all the special provisions. How low you can go depends on how much of the reform you can achieve. Q. What's the point of going through the political minefield if this doesn't ultimately lower the business tax burden? A. All businesses want lower taxes. But business understands that their success as businesses depends in part on what the government does—on education, infrastructure, national security….Most business understand that we have limited resources, that we can't raise taxes on individuals to lower business taxes and that unsustainable long-term deficits hurt growth too. Q. Given the deficit, what's the point of going through all this if it doesn't raise revenue to reduce the deficit? A. You've had a very broad substantial reduction in corporate tax rates outside the U.S. That occurs at a time when it's much easier—because of technology—for companies to shift investment and income to take advantage of lower tax rates overseas. Wecan't expect to raise significant additional revenue from business, as a share of GDP, from the corporate tax without hurting our competitive position, without hurting growth. It isn't realistic. Q. Half of all business profits go to enterprises that don't pay the corporate tax. They're taxed as individuals. Are you looking at them too? A. A lot of people have suggested that we look at business income generated outside what we call the corporate sector. There is a lot of income there and many of the distortions in the corporate sector affect them too. It's worth taking a look at. Q. Are you willing to consider a shift away from the current system, in which multinationals are taxed on their world-wide profits, to a territorial one, in which they're taxed only on their U.S. profits? A. We want to find a way to reduce the incentive to shift income overseas, to increase the incentive to invest in the U.S. and to put U.S. firms that operate overseas on a level playing field with their competitors. Q. The president also mentioned his interest in pursuing simplification of individual income taxes. Is that as high a priority? A. As he said, along with corporate tax reform, we want to explore comprehensive individual reform. There's a good case for doing both. We want to start the process of exploring what's possible. Q. What are the next steps? A. It's good for confidence if we can find things that both Democrats and Republicans want to do. We're in the first inning. We're going to keep consulting—with key committee chairman, with ranking members, with other stakeholders, with architects of past reforms, both ones that worked and those that didn't. Everybody who looks at the current system says: We can do better than this. And there's a lot of interest in doing it. A lot of people in the business community are prepared to be part of something that is revenue neutral, broadens the base, and lowers the top rate. Others want to hold out for something better.