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News flash: FedEx CEO thinks U.S. corporate tax rates are too high

FedEx CEO Frederick Smith writes in Financial Times:

Our tax system is particularly onerous for asset-intensive, industrial businesses such as manufacturers and transport companies. For example, Caterpillar, Boeing, FedEx, commercial airlines and carmakers produce goods and services and provide jobs for millions. But to maintain or increase jobs and compete globally, these companies must be able earn an acceptable return on capital expenditure.

How can we make US companies more competitive and increase their ability to offer good jobs? Two things: accelerate the expensing of capital investment; and reduce the corporate income tax rate.

Let us permit US companies to write off all their capital expenditures when they make them, as opposed to the current system of long-term depreciation. Why? Experts such as Ernie Christian and Gary Robbins have said that, over time, every dollar of tax cuts for expensing adds about nine dollars of gross domestic product growth. Even without counting the benefits to the economy of new jobs, it is a relatively cheap option for the US Treasury, since the only cost to the government is the time value of money.

He also notes that the United States’ top rate, 39 percent, is second only to Japan’s, and higher than Germany, the Netherlands and other competing nations. Mind you no corporation in existence actually pays the top rate thanks to the gazillion tax breaks corporations get, but you have to admit: if a company shells out a half-million dollars for a new Cat tractor, they pay the expense now, so there’s a certain logic to writing it off now.

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Tom Mangan posted at 8:29 am December 22nd, 2008 |

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