Tax and the Economy
EIA appreciates the many steps taken in recent years to enhance business competitiveness, encourage investment and reward savings through improvements to the U.S. tax code. As our industry operates within an increasingly complex and competitive global marketplace, we believe there are additional measures that would further improve our system and level the worldwide playing field.
Currently, our 40% corporate tax (35% federal rate plus average state rate) is the second highest among OECD countries, as rival economies have slashed their rates to attract investment. While EIA members that qualify as manufacturers under the American Jobs Creation Act of 2004 will benefit from a 3% tax rate reduction over the next several years, other member companies will not; and all companies continue to be at a disadvantage under the U.S. corporate tax system.
The U.S. tax code should be examined with the goals of making it simple and fair while promoting business investment, innovation and personal savings. EIA favors no particular alternative to the current tax system. Our primary goal is to ensure that any method used to reform the tax code brings the effective U.S. corporate tax rate in line with rates in the rest of the world, and EIA will oppose any move towards reform that will increase effective corporate tax rates, either directly or indirectly.
EIA has adopted a set of tax principles that we will use to measure any reform proposals introduced by Congress or the Administration.
Another longtime priority on which EIA will continue to focus in 2007 is the enactment of a permanent and effective research & development (R&D) tax credit. On average, companies invest $94 in R&D for every $6 the federal government invests in the tax credit, so the return on investment is substantial. Since its enactment in 1981, the R&D tax credit has demonstrated that it is a powerful and effective incentive for firms to increase research spending. Congress has endorsed the credit by extending it 12 times since its enactment, but the current credit is set to expire on Dec. 31, 2007.
Click here for more information on the R&D tax credit.
One additional focus in the 110th Congress is our work to repeal the ill-advised 3% withholding tax on government purchases passed by Congress in 2006 and set to take effect in 2011. We will also work vigorously to prevent an acceleration or percentage increase of this provision.
For more information on EIA's efforts, click here.
In addition, EIA will advocate the maintenance of current international tax rules and promote tax incentives for U.S.-based business investment.
For more information on EIA's tax and economic policy work, please contact Storme Street.
EIA and the Telecommunications Industry Association are jointly pressing Congress to permanently ban new taxes on Internet access. For more information, click here.
