ABC News' Amy Bingham reports:
At 39 percent, the United States has the highest corporate tax rates in the world. In Britain and Canada the government collects just 28 percent of corporate profits and in Ireland companies get away with a rate as low as 12.5 percent.
In a rare moment of consensus on Capitol Hill Wednesday, both Democrats and Republicans on the Senate Finance Committee agreed that in order for America to remain globally competitive against these lower rates, Congress must make drastic reforms to the tax code.
“If we're going to be competitive, we've got to get in the game,” said Finance Committee member Sen. Kent Conrad, D-ND. “Our tax code was designed at a time when we did not have to worry about the competitive position of the United States. I don’t think anybody, if they were going to sit down and devise a tax code for the United States in 2011 or 2012, would come up with one that looked anything like this one.”
Four CEOs from some of America’s largest corporations agreed. In their testimony the heads of Walmart, Kimberly-Clark, CVS Caremark and PMC-Sierra each emphasized that Congress needs to overhaul the entire system to encourage companies to invest in America and create jobs at home.
The devil, though, is in the details.
The United State’s corporate tax system is an intricate web of loopholes, tax breaks and investment incentives.
For example, tax breaks for research and development saved companies $8 billion in taxes this year and an incentive to encourage domestic investment in machinery and equipment eliminated almost $40 billion from the federal coffers.
Thomas Falk, the CEO of Kimberly-Clark — a Fortune 25 company that produces health and hygiene products such as Kleenex and Depends — said he would give up his company’s research and manufacturing tax breaks in favor of a lower overall rate.
Falk said many companies make investment decisions based on the marginal, or overall, rate, so lowering that rate would increase companies’ ability to invest and create more jobs.
Walmart CEO Mike Duke cautioned that tax reform must not only lower the overall rate, but also revise the loopholes and address how foreign profits are taxed and brought back into the country.
“Comprehensive reform means willingness to put everything on the table including incentives,” he said.
But it is much easier to talk about cutting incentives than to actually eliminate them as there are a host of corporate lobbyists whose job it is to create and protect such loopholes.
"Boy, you're going to be stepping on some sensitive toes when you get rid of all those special tax breaks," said committee member Sen. Bill Nelson, D-Fla.
For example, just within the four-member panel there was disagreement over what the lowered tax rate should be. Falk suggested dropping the rate to 25 percent and eliminating most of the tax breaks.
But Gregory Lang, CEO of the technology corporation PMC-Sierra, said 25 percent still would not be competitive against China or India where most technology manufacturing is located and the tax rates are only 15 to 17 percent.
With the unemployment rate still hovering around 9 percent and the debt ceiling crisis threatening to rock the country’s financial system, Falk said the climate is right to push the tough pill of comprehensive tax reform through Congress.
“Our nation is facing a crisis and in a crisis you can get amazing things done. You can drive a lot of change in a short period of time and get things done that once were thought to be impossible,” he said. “I would urge you to be bold and come up with a tax system that makes American companies more competitive.”