Manufacturing Groups Call For Corporate Tax Overhaul
Ahead of this week’s income tax filing deadline, the National Association of Manufacturers and the Manufacturers Alliance for Productivity and Innovation Foundation said the U.S. should exempt its companies’ foreign earnings from corporate taxes.
In contrast to current tax policy, the groups’ analysis argued that exempting those earnings would allow corporations to return them to U.S. shores.
“Converting from a global to a territorial tax system would make U.S. rules more internationally competitive and unlock an estimated $2.1 trillion in stranded profits held abroad by U.S. multinationals,” the groups said.
The analysis contended current law encourages U.S. companies to instead boost foreign profits and hurts domestic producers in the global marketplace. Only four competing nations use a comparable tax system: Chile, Ireland, South Korea and Mexico.
Meanwhile, the report said the U.S. also maintained a high corporate tax rate over the past two decades as other countries reduced corporate taxes. The country’s 35 percent federal rate exceeds all of its major trading partners and trails only the United Arab Emirates, according to the study.
NAM and MAPI acknowledged that credits, deductions and other programs helped reduce that rate for many companies; the effective rate, however, climbs to about 40 percent when state and local taxes are factored in.
The study also noted some corporate income undergoes “double taxation” when after-tax profits are returned to company shareholders. That policy discourages some companies from filing as C corporations with the IRS, a distinction that would otherwise enable “wider access to capital markets.”
The report argued the switch to a territorial system should be included in a broader tax overhaul; the groups said the current tax system is far too complicated and that changes should enhance both simplicity and neutrality.
MAPI Foundation President and CEO Stephen Gold said, “It’s time for our elected leaders to put words into action and advance a tax system that allows manufacturers in the United States to compete.”
