Thursday, July 16, 2009
Proposal could cripple corporations
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Hugh Keogh
Keogh has served as president of the Virginia Chamber of Commerce since 1992.
Even in this financial climate, Virginia's economy is strong and diversified. According to the "2008 State New Economy Index," Virginia is on track to rank among the top 10 states in terms of growth and innovation over the next decade.
As the president and CEO of the Virginia Chamber of Commerce in these perilous economic times, I believe it is of the utmost importance that we stay on this upward trajectory and stimulate our state's varied sectors with pro-growth policies.
Unfortunately, a current tax proposal before Congress would stall the progress of U.S. companies operating overseas, ultimately causing salary decreases, job loss and declining investment in Virginia and across the country.
In a time when America needs to be united in its efforts to restore our economy to vibrancy, this proposal -- the elimination of federal corporate income tax deferral on revenues generated abroad -- would erect new obstacles to entrepreneurial success.
Congress must not allow the passage of this damaging policy -- and I hope Virginia's congressional lawmakers will take a stand against stifling recovery through greater taxation.
Under our current tax code, U.S. businesses already pay the second-highest corporate tax rate in the world, 35 percent.
Key provisions, such as foreign tax credits, deferral and "check the box," have historically given American companies with overseas operations the crucial flexibility to use these tools to compete head-to-head with foreign companies.
Under the new tax proposal, however, international U.S. companies would experience an additional tax burden of $200 billion -- plus the loss of provisions that ensure a level playing field in their operations abroad.
These are massive changes that would produce an anti-competitive environment for U.S. companies. So, ultimately, this radical change would result in huge gains for foreign competitors at the expense of U.S. companies and would lead to significant losses for our companies, their employees and our communities.
American companies conducting business overseas generate an additional $2.5 trillion annually to the U.S. economy.
With their domestic headquarters and other U.S. offices, these operations supply an estimated 20 million American jobs, not to mention the millions more supported by the legions of suppliers that maintain partnerships with international U.S. businesses.
Furthermore, the National Bureau of Economic Research estimates each dollar U.S. companies invest abroad generates $3.50 of additional investment on American soil. In light of this body of evidence, the negative implications of punishing tax-abiding U.S. companies become woefully clear.
If the goal is to undertake comprehensive tax reform, I urge Congress to tackle that agenda thoughtfully and diligently.
But this proposal seems rushed, incomplete and full of harmful repercussions for businesses and our economy as a whole.
In monitoring the business climate of Virginia for many years with the Virginia Chamber of Commerce and formerly with the commonwealth, I can attest that businesses throughout the commonwealth will face tremendous setbacks as a result of these proposed anti-competitive tax policies.
Despite our state's remarkably diverse industrial base and visionary entrepreneurial efforts, these oppressive tax laws, if enacted, will hold us back and hurt our citizens.
The Virginia Chamber of Commerce is working closely with its member companies to ensure our state's economic well-being. Now we need Congress to be true to its pledge to move our nation forward on the road to recovery. It can start by defeating this counterproductive tax proposal.
