Corporate CFOs: We’ll give up tax breaks for lower rates

The comments from the CFOs – also representing Caterpillar, Zimmer Holdings and Kimberly-Clark – came at a wide-ranging tax reform hearing, which also touched on a proposed corporate tax holiday and whether multinationals’ global success came at the expense of U.S. workers.

The financial officers’ call for a lower rate for the most part dovetails with what top Washington policymakers have said recently. Edward Rapp of Caterpillar also said that he would like to see the rate top out in the mid-20s counting both federal and state taxes.

Treasury Secretary Timothy Geithner has signaled a desire to get the top corporate rate down to the high 20s, while Rep. Dave Camp (R-Mich.), the Ways and Means chairman, and other House Republicans have called for a top rate of 25 percent. 

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The statements on tax expenditures come as many in Washington basically agree on the need for tax reform, but also expect a difficult time finding agreement on which tax expenditures to eliminate to help pay for a lower rate. 

“The problem is going to be, whose ox is being gored,” said Rep. Charles Rangel (D-N.Y.), a former Ways and Means chairman.

At the hearing, the CFOs also responded to criticism that their expansions abroad had come at the expense of the American market, saying that their success in other parts of the globe was crucial to the overall health of their operations.

Hayes told the committee that “you can’t build an elevator in Hartford, Connecticut, and ship it to Shanghai.” He and the other panelists, including James Crines of Zimmer and Mark Buthman of Kimberly-Clark, also said that global growth fueled research and development that was done in this country.

But some Democrats on the panel were not so sure, with Rep. Xavier Becerra of California citing statistics that showed top American multinationals had shed 2.9 million jobs in the U.S. between 2000 and 2010 while adding 2.4 million abroad. Becerra added that corporations had added millions of jobs both in the U.S. and worldwide in the 1990s.

The corporate executives also called for the U.S. to switch to a territorial tax system, which would essentially mean their offshore profits would not be taxed here. 

But they also said they would not be interested in a corporate tax holiday, which would allow multinationals to bring foreign profits home temporarily at a reduced tax rate. As it stands, corporations can defer paying taxes on those offshore funds until they are brought back into the United States and are credited for whatever taxes they paid to foreign governments.

“Done in isolation, I don’t believe it accomplishes the objective of leveling the playing field,” Crines said. 

Another slice of corporate America – many of them technology companies like Google and Cisco – have pushed for a holiday, saying it will help spark the economy and could be done as officials work toward a tax overhaul.

Rep. Kevin Brady (R-Texas), a Ways and Means member, introduced repatriation legislation this week that would allow multinationals to bring funds back in either 2011 or 2012 at a top rate of 5.25 percent. Caterpillar and Kimberly-Clark were among the multinationals that used a 2004 measure that allowed companies to bring back profits at that same rate. 

Critics of the previous holiday have said it did very little to ignite job creation, and that the policy in general encourages multinationals to keep profits abroad to wait for the next holiday.

Administration officials have said they are unwilling to look at repatriation outside of the context of broader reform.