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Caryn Freeman 4:56PM EST
The House Ways and Means committee, in its sixth hearing on how business tax reform can encourage jobs took aim at the corporate tax structure. The six person panel of witnesses from various parts of industry including, Boeing and retailer Sears, explained to members of the committee why their companies and others like them need speedy tax reform to stay competitive with emerging markets in Asia and other parts of the world.
Acquisitions of intermediary or "pass through" companies by foreign corporations is a crucial element of the current job loss rate in the U.S. according to Walter Galvin, Chairman of Emerson Electric Company in St. Louis Missouri. Mr. Galvin told members of Congress the lopsided incentive to debt-load in the U.S. exacerbates tax code disparities for companies like Emerson. Making way for the acquisition of pass through companies by foreign interests. In Mr. Galvin's statement to the committee he outlined challenges American businesses face when trying to compete with foreign interests. "If Emerson wants to acquire a company in India or China, we must generally come to the table with cash-not debt. If one of their companies, or any international company, wants to purchase an American company, U.S. tax law encourages them to finance that acquisition with debt. Foreign corporations load debt in the U.S. and enjoy the interest expense deduction, thereby minimizing U.S. taxes paid to the federal government." Gavin cited the 2008 acquisition of Anheuser-Busch by Belgium-based InBev.
Each of the six witnesses agreed that the proliferation of pass through entities has been dramatic and significant. “These entities are drivers of the economy based on the impact that layoffs have on consumer spending,” explained Judy Brown, executive Vice President and CFO of the Perrigo Company. Perrigo is a global healthcare supplier that develops, manufactures and distributes over-the-counter and prescription pharmaceuticals. The panel also told the committee that the cost of hiring savvy tax lawyers and consults to take advantage of “so-called loopholes” runs in the millions and with this capital freed their respective companies would be able to invest more in job creation for the middle class and possibly prevent the acquisition of pass through entities by foreign interests, thus keeping more jobs in the U.S. “The unintended consequence of money spent on tax lawyers could go to preserving jobs, this non-competitive tax rate hurts jobs,” Galvin explained.
The "RD," Rapid Depreciation tax credit, was put on the table in exchange for a lower overall corporate tax rate. Spreading out the original cost of a fixed asset, such as a factory or equipment, over the estimated useful life of this asset reduces the taxpayer’s taxable income, but not their actual cash balance. This is along standing method of compensating businesses for the wear and tear or depletion of assests. Rep. Aaron Schock (R - IL) used his time to scold members of the committee for writing bad legislation and then criticizing corporations for following current tax law, “don’t criticize corporations for practicing what is legal as opposed to passing tax law that is easier to comply with.” All witnesses were in agreement that “Everything (all tax credits) is on the table for a lower tax rate.”
Caryn Freeman 4:56PM EST
The House Ways and Means committee, in its sixth hearing on how business tax reform can encourage jobs took aim at the corporate tax structure. The six person panel of witnesses from various parts of industry including, Boeing and retailer Sears, explained to members of the committee why their companies and others like them need speedy tax reform to stay competitive with emerging markets in Asia and other parts of the world.
Acquisitions of intermediary or "pass through" companies by foreign corporations is a crucial element of the current job loss rate in the U.S. according to Walter Galvin, Chairman of Emerson Electric Company in St. Louis Missouri. Mr. Galvin told members of Congress the lopsided incentive to debt-load in the U.S. exacerbates tax code disparities for companies like Emerson. Making way for the acquisition of pass through companies by foreign interests. In Mr. Galvin's statement to the committee he outlined challenges American businesses face when trying to compete with foreign interests. "If Emerson wants to acquire a company in India or China, we must generally come to the table with cash-not debt. If one of their companies, or any international company, wants to purchase an American company, U.S. tax law encourages them to finance that acquisition with debt. Foreign corporations load debt in the U.S. and enjoy the interest expense deduction, thereby minimizing U.S. taxes paid to the federal government." Gavin cited the 2008 acquisition of Anheuser-Busch by Belgium-based InBev.
Each of the six witnesses agreed that the proliferation of pass through entities has been dramatic and significant. “These entities are drivers of the economy based on the impact that layoffs have on consumer spending,” explained Judy Brown, executive Vice President and CFO of the Perrigo Company. Perrigo is a global healthcare supplier that develops, manufactures and distributes over-the-counter and prescription pharmaceuticals. The panel also told the committee that the cost of hiring savvy tax lawyers and consults to take advantage of “so-called loopholes” runs in the millions and with this capital freed their respective companies would be able to invest more in job creation for the middle class and possibly prevent the acquisition of pass through entities by foreign interests, thus keeping more jobs in the U.S. “The unintended consequence of money spent on tax lawyers could go to preserving jobs, this non-competitive tax rate hurts jobs,” Galvin explained.
The "RD," Rapid Depreciation tax credit, was put on the table in exchange for a lower overall corporate tax rate. Spreading out the original cost of a fixed asset, such as a factory or equipment, over the estimated useful life of this asset reduces the taxpayer’s taxable income, but not their actual cash balance. This is along standing method of compensating businesses for the wear and tear or depletion of assests. Rep. Aaron Schock (R - IL) used his time to scold members of the committee for writing bad legislation and then criticizing corporations for following current tax law, “don’t criticize corporations for practicing what is legal as opposed to passing tax law that is easier to comply with.” All witnesses were in agreement that “Everything (all tax credits) is on the table for a lower tax rate.”