Following months of calling for higher taxes on American employers, which are already subject to some of the highest tax rates in the industrialized world, Democrats on the House Ways and Means Committee this week selectively used elements of a report from the Joint Committee on Taxation (JCT) in an attempt to suggest it would not be possible to reduce the corporate tax rate to 25 percent, which is a centerpiece of bipartisan and bicameral efforts to reform the tax code.
Conversely, Ways and Means Chairman Dave Camp (R-MI) observed that while incomplete, the analysis shows that corporate reform is possible, “Bringing our corporate rate down to a more competitive 25 percent as part of comprehensive tax reform remains the goal. The preliminary and partial report from JCT shows we can get there.”
The report is limited in two key ways that the Democrats failed to note:
1. Estimates are NOT complete
As noted in the memo from JCT Chief of Staff Tom Barthold, the report must be viewed in context and specifically pointed out that:
- “not all provisions are estimated at this time” (In fact, 90 provisions are specifically identified as not yet estimated by JCT)
- “estimates are very preliminary”
- “[t]he estimated 28 percent rate could change”
2. The estimates are NOT comprehensive
Furthermore, because JCT was only asked to look at a narrow set of measures, its much-hyped analysis ignored well-known measures available to tax writers to lower the corporate rate. For example, because of the Democrats’ instructions to JCT, the tables don’t even include the president’s favorite “tax loophole” – the depreciable life of corporate jets.
Despite the misleading claims by Ways and Means Democrats, employers and tax experts alike have cheered a proposal from Chairman Dave Camp to lower the corporate rate to 25 percent and shift to a territorial tax system — which would help make American employers more competitive and lead to more jobs for American workers.
Employers Applaud Push for 25 Percent Rate, Territorial System:
John Engler, President of the Business Roundtable: “Bipartisan support exists on Capitol Hill for broadening and lowering the rates. Rep. Dave Camp, Michigan Republican and chairman of the House Ways and Means Committee recently released a draft discussion document proposing a 25 percent corporate tax rate and a competitive territorial tax system. The Camp proposal is a solid foundation for action.”
Walter Galvin, Vice Chairman of Emerson : “America’s high corporate tax rate and worldwide system of taxation — a toxic combination — discourage U.S. companies from sending their foreign-source income home, make U.S. companies vulnerable to foreign acquisition and give an advantage to our international competitors. The chairman’s proposal would solve these problems.”
IBM: “IBM has long supported reforms that would move the United States to a more competitive and territorial corporate tax system. We applaud Ways & Means Chairman Dave Camp for significantly advancing this policy discussion. Done right, tax reform can enhance economic growth and investment in the United States, and we stand ready to work with Chairman Camp and others as the discussion moves forward.”
More examples of support for a 25 percent rate and shift to a territorial tax can be found below.