FedEx founder and CEO Fred Smith says the U.S. economy is slowing but says he is bullish on America long-term. And, he provided some advice to make the nation more competitive—cut corporate taxes.
“The single biggest thing the US can do is to change the corporate tax rate, because as it exists today, the system favors leveraged finance and financial services over industrial activities,” Smith told Fortune.
“Just set the maximum rate at 20 percent or 25 percent across the board and eliminate all the other foolishness,” Smith added.
“Since Japan lowered its rate last April, our corporate tax rate has been the highest in the world,” wrote former Senator Ted Kaufman in the Huffington Post. “There is no disagreement in Washington, believe it or not, that a 35 percent rate is too high.”
However, Kaufman, like many others, goes on to point out that very few companies are actually paying that rate.
“The Congressional Budget Office recently reported that in 2011 total corporate taxes paid by the government fell to 12.1% of profits earned in the U.S. That is the lowest tax rate since 1972 and far less than the 25.6 percent average rate paid from 1987 to 2008,” Kaufman wrote in his Huffington Post article.
That companies are finding so many ways to avoid or reduce their taxes is believed to be one of the obstacles to reform. Within that debate, an especially contentious issue is the massive amounts of money that some of these firms are keeping abroad to avoid paying taxes.
US Companies led by General Electric and Pfizer stockpiled and additional $187 billion in untaxed overseas profits over the past year boosting their offshore holding by 18.4 percent, according to Bloomberg.
A total of 70 companies are holding $1.2 trillion in profits offshore, Bloomberg added.
By hoarding the cash offshore, companies are able to avoid giving a share to the IRS but many argue that something should be done because that money could be used to help the economy and more specifically the US employment problem.
“We should go to a territorial tax system so you don't get penalized for bringing money back into the United States,” Smith told Fortune. “Put a different way, money that is made in China making baby food for Chinese babies should not be taxed if it's brought back to the United States. We want the money to come back in the United States so we can create jobs.”
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