Grassley Voices Concern Over AJCA Corporate Tax Deduction

by Mike Godrey, Tax-News.com, Washington

07 April 2005

Senate Finance Committee Chairman Charles Grassley has conceded that a tax deduction passed as part of legislation that he was instrumental in designing has not achieved its intended outcome and has distorted the corporate tax system.

The provision in question, part of the American Jobs Creation Act 2004, created a 9% deduction for qualifying US firms for domestic manufacturing activities, effectively reducing their corporate tax rate to 32% from 35%.

However, it has become apparent that the system is difficult to enforce, and many critics have pointed out that the provisions have merely served to complicate the already complex tax code.

Seemingly acknowledging these concerns, Grassley recently admitted that the deduction was not an ideal solution, but represented the best compromise during the conference stage of the legislation.

“So now you get out there two or three years and you get away from what we were trying to do - then I think the situation is you get all corporate tax down to around 31% or 32%,” he stated.

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