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Execs tell Congress: Low rates > targeted tax breaks

June 08, 2011

An underreported story in the L.A. Times:

Executives from four large U.S. companies told lawmakers that they would give up lucrative tax breaks in exchange for significantly lowering the 35% corporate rate, spurring efforts to overhaul the tax code.
Executives from Boeing Co., Sears Holding Management Corp., Emerson Electric Co. and Perrigo Co., a leading pharmaceutical manufacturer, said Thursday that they prefer the simplicity and certainty of a rate as low as 25% over the complexity of calculating frequently shifting tax breaks.[...]

Tax Analysts coverage of the story ($link) shows that these executives are even willing to give up sacred cows like the research credit:

Other panelists, however, singled out popular tax expenditures like the research credit as an example of expenditures that corporations would relinquish for a reduced corporate income tax rate. The complexity of the research credit and the nearly annual debate over whether it should be extended make Boeing prefer a "significantly lower rate," [Boeing President James] Zrust said. Last year, Boeing spent almost $4 billion in research and development, he added.
The research credit has also created several compliance headaches for Boeing. According to Zrust, more than 30 IRS agents are working on a continuous audit of the company. In December 2010, the company resolved an IRS audit that involved several issues, including the research credits from 1998 to 2003, he said.

So there is a constituency for a tax reform with a broad base and low rates. But there will be opposition, based on this from the Times:

But 17% said they preferred to keep their tax breaks no matter how much the rate was cut

Opposition would include whole industries, like the "renewable energy" industry and the low-income housing credit lobby -- not to mention the industry of tax credit consultants. Like all tax reform efforts, the next round of tax reform will pit those riding the gravy train against those who are pulling it. But the willingness of a big research credit recipient like Boeing to trade its breaks for lower rates is a good sign. At the state level, the Quick and Dirty Iowa Tax Reform Plan shows the way.

Via Tax Policy Blog.

Tags: Quick and Dirty Iowa Tax Reform.tax policy.Tax Policy Blog.tax reform.