Kerry's Tax Plans Receive Frosty Response From US Business

by Mike Godfrey, Tax-News.com, Washington

30 March 2004

The US Chamber of Commerce has joined other business groups in America in condemning the tax policies advocated by the Democratic presidential candidate John Kerry, expressing concern that his proposals, designed to encourage domestic investment, will ultimately undermine economic growth and destroy job creation.

“It’s wrong to wave the ‘white flag’ for US companies that are competing in the world-wide marketplace,” contended Bruce Josten, Chamber executive vice president, continuing:

“Politically-motivated tax proposals based on fears of outsourcing will hurt US companies abroad, undermine competitiveness and cost US jobs.”

The centrepiece of John Kerry’s tax plans, unveiled in a speech last Friday, is the ending of a tax break enacted in the early 1960s that allows US companies to delay paying taxes on foreign income, provided that those profits are reinvested in those overseas operations.

Kerry suggested that this change would strip away an incentive for companies to move jobs abroad, and would generate about $12 billion annually, which could be used to pay for a 5 percent reduction in the corporate tax rate, from 35 percent to 33.25 percent.

He also pledged to give firms a tax credit against payroll taxes, and to cut income taxes for middle income earners whilst restoring the top rates to Clinton-era levels for those on high incomes.

However, the Chamber of Commerce argues that raising taxes for US firms doing business overseas will result in them becoming “less competitive, less profitable, and less likely to create new jobs,” ultimately leading to higher prices and less investment.

Josten continued:

“Pitting US companies against each other is not wise economic policy. And raising the top individual tax bracket across the board – which will hurt millions of small businesses that create most of the new jobs in America – to pay for a targeted tax cut will interrupt our economic recovery.”

“The best way to create jobs is to build strong and sustained economic growth. Economic growth fuels long-term demand, which results in more jobs. The impediments to hiring – sluggish growth, over regulation, tort concerns, the lack of an energy policy – are not erased by a one-time payroll tax credit,” he warned.

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