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CEOs Want Congress To Compromise On US 'Fiscal Cliff'

by Mike Godfrey,, Washington

18 October 2012

In a speech to the Detroit Economic Club, John Engler, President of the Business Roundtable (BRT), said that Congress has failed to deliver solutions to America's economic problems, particularly those being caused by the proximity of the ‘fiscal cliff’.

The BRT is an association of CEOs of leading American companies with over USD6 trillion in annual revenues and more than 14m employees, and Engler was referring to the uncertainty to its members being caused by the number of significant tax provisions that are set to expire on December 31 this year if Congress takes no action.

Without Congressional action, individuals and businesses will face approximately USD5.7 trillion of tax increases, either through the expiration of tax incentives or an increase in tax rates beginning in January 2013. The Congressional Budget Office has already projected that the expiration of those provisions, combined with automatic spending cuts prescribed by the Budget Control Act – together, the so-called ‘fiscal cliff’ - would send the country back into recession in the first half of 2013.

Engler himself pointed out that the expiring tax provisions and spending cuts "are causing chaos,” with the BRT’s most recent quarterly CEO survey showing the third largest drop in ten years in expectations for hiring, capital investment and sales.

The uncertainties felt by CEOs, he added, are reflected in the fact that more than 60 provisions in the tax code expired last year, and, if Congress does not act, more than 40 will expire at the end of this year; not minor matters, he said, but “individual tax rates, dividend tax rates, capital gains tax rates, research and development tax credits, alternative minimum tax provisions, and so many others it’s impossible to mention them all”.

He concluded that “we really don’t have a tax code in this country today. It’s no wonder there’s uncertainty. It’s no wonder businesses are reluctant to invest, even when they have cash on their balance sheets.”

While Engler considered that the need for fundamental corporate tax reform remained imperative, he was prepared to scale back his expectations for the ‘lame-duck session’ after the November elections. Even if such sessions in the past have proved ineffectual, he hoped that Congress could, at least, agree a short-term fix on the expiring tax rates and action on the government’s debt ceiling.

Even if these goals were achieved, Engler warned that “the real challenges will still be waiting: the long-term threats to our nation’s fiscal and economic health; uncontrollable entitlement spending; an uncompetitive tax system, and unsustainable levels of debt fuelled by trillion-dollar annual deficits.”

TAGS: individuals | tax | economics | business | tax incentives | fiscal policy | budget | tax credits | United States | tax reform

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