By Bernie Becker - 06/02/11 08:31 PM EDT
Under questioning from Rep. Aaron Schock (R-Ill.), the executives also said they would be willing to put every so-called tax expenditure on the chopping block in exchange for lower rates – which would include the research and development credit and a deduction for domestic manufacturing.
Speaking to reporters after the hearing, Rep. Dave Camp (R-Mich.), the committee's chairman, said the executives’ testimony was another promising sign as policymakers continue to discuss tax reform.
But Rep. Sandy Levin, the panel’s ranking member, cautioned that “we learned long ago that on the table is different from action.” The Michigan Democrat added that he did believe that there should be discussions about the future of the research and development credit and the manufacturing deduction.
At the hearing, Camp continued to stress the need for a comprehensive, revenue-neutral tax reform, a day after telling reporters he believes the administration might look to use an overhaul to reduce deficits. Camp is among the Republicans pushing to reduce both the top corporate and individual rates to 25 percent.
“Tax reform cannot and should not be confused with increasing taxes – it must be done in a revenue-neutral manner,” Camp said in his opening statement. “We will not grow if Washington is taking an ever-increasing share of our economic output in the form of federal taxes.”
But Democrats on the panel had sharp questions for the corporate executives, with Rep. Jim McDermott (D-Wash.) asking Walter Galvin of Emerson would definitely not lay off American workers if the rate did come down to 25 percent.
For his part, Galvin called the issue “complex.”
“We have no crystal ball on the economic outcome,” Galvin added.
Democrats also wondered whose taxes would rise to pay for a reduction in corporate rates in an overall revenue-neutral package. The Treasury Department said in 2007 that eliminating a wide range of credits and deductions would pay for to bring the corporate rates down to 28 percent.
Rep. Pete Stark (D-Calif.) questioned Boeing about its tax bill as well, after the liberal group Citizens for Tax Justice said the aerospace giant had a negative effective tax rate over the last three years.
James Zrust of Boeing responded that he expected the companies’ bill to rise in the years to come because it won’t be able to claim as many deductions. In his prepared testimony, Zrust also said that Boeing’s effective rate was generally between 31 percent and 33 percent.
And Schock shot back that Democrats complaining about effective tax rates were engaging in “a little disingenuous demagoguery,” noting that the Obama administration had touted targeted tax cuts and deductions for manufacturing.
“It’s one thing to say you don’t like the rules,” Schock said. “It’s another thing to write the rules and then criticize people for following the rules.”