fairer tax code will keep people's jobs. would that be accurate? >> i see nodding of heads, but i see ms. hanlan hesitating. >> i'm not hesitating. i'm just -- >> just say yes. >> it certainly wouldn't hurt job creation, that's for sure. >> okay. t the second question. since 95% of the world's population and 70% of the purchasing power today is outside the united states, it goes without saying that global marks are a critical component of the future growth and success of the united states businesses. how does the success of u.s. global businesses impact jobs in the united states? >> i think we're a great example of that. also in my written testimony, i included some statistics about our growth since 1989 when we first got into the international -- started growing our global network in earnest.

and our u.s. team member camp, for example, has grown from 56,000 members to 290,000 members today. it's symbiotic of global growth and u.s. growth. have increased in tandem, as our global network has gone. and we've seen that with our customers as well. as you pointed out, 75% of the world's purchasing power is outside the united states today. that's a huge market. and it's increasing. and that seems to me to be a -- something that we need to tap into very effectively in this country to address some of our revenue issues. >> anyone else like to comment? >> yeah. i would reiterate those comments. i mentioned earlier, our headquarters, when we win projects globally, we get jobs here.

those folks are working on those projects. and it's not as good as a project here in the u.s., but it is adding jobs. so global competitiveness is critically important. . >> you know, one of the things we struggle here in this committee and in congress is we want to see the united states trade, right? 95% of our market is outside this country. we can't all buy american here in the united states. we want other countries to buy american. my time is up, but i want to ask your help. please deliver the message that trade is good for the global economy. global economy is good for the united states economy, equals jobs. thank you. >> you bet. >> mr. pisani is recognized. >> thank you, mr. chairman. i want to clarify something that came up during dr. mcdermott's line of questioning. and that is the joint tax

analysis that was done. i want to reemphasize the stats about that report. the estimates are not complete and secondly, they're not comprehensive. in fact, only 60 out of 150 measures have been scored. and those are preliminary. and that gets us to a rate of 25%. i'm optimistic we can get to a lower rate once we have a full analysis of all these measures. so i think we need to keep that in mind the joint tax analysis is not comprehensive at this stage. and our committee will have to continue to work to get to that point. professor hanlan, we've all been very concerned about the vast number of temporary provisions in the tax code and the uncertainly it's created. often times these get renewed retroacti

retroactively. i would like you to elaborate on how do you deal from a financial accounting perspective. >> they're just unpredictable. it's hard for chaens to plan. it's hard for them to take long-term investments. again, it's hard for them to predict what the tax rate will be and they're benchmarked on that tax rate. i think it's just unpredictable for them. it's hard to make investment decisions when things are in flux like that.

>> can you comment on investment decisions and just the general uncertainty that arises as a result of these temporary provisions. >> uncertainty is definitely a huge impediment to investment and i think rational growth and overall development of the economy. it's very difficult for my boss as the cfo and for our coo and ceo to figure out what we're going to do over the long term and try to figure out how to analyze the impact of tax policy from both book and tax perspective, much less explain it to our investments and our analysts. and so it is always an issue that is brought up each quarter on our earnings calls. and it is always brought up by the analysts when our investment relations folks are meeting with them.

>> will the gentleman yield? >> i'll yield to you. >> my understanding is that the chairman said they should only analyze dmes ix tax expenditures, not international ones because they intended to use the international ones for reform of international tax structure. i don't know that there's a single domestic tax expenditure still left on the table. unless you -- >> we need to recognize that we have complete information it and just to proceed cautiously based on that. thank you. in your testimony, you pointed out the growth of intangible assets. this is, you know, clearly a new area, or an expanding area that we need to be looking at was o ego -- as we go forward. lowering the tax wait would

bring down the effective rates of both class rate, tangible and intangible. elaborate a little bit on the difficulties in applying appropriate tax policies to intangible assets. can you further elaborate on that? >> i think the economy has clearly changed from 1986. in terms of the copyrights and the patents and the recent federal reserve board economies showed that investments in intangible assets was as large as the investments in the property plant and equipment. you look at the companies and they're concerned about intangible investments and their tangible. and so a lower corporate tax

rate is a positive effect for both of those investments. and the fact if the really high returns that are earned by, you know, the u.s. companies that are doing that type of r&d, they will benefit significantly from a lower corporate tax rate. it has also the benefit of trying to keep those intangibles in the u.s. versus offshore. >> thank you. >> the gentleman's time has expired. >> thank you. >> mr. neal is recognized. >> thank you. you're asking for a lower rate, but just as importantly, you're asking for greater certainty in how we go forward. i just has been reading bruce bartlett's book. and i always find how liberating it is for former staffers to leave the hill and write what they deem to be a more truthful version of events. david stockman as we all know has taken the same position,

divorcing himself from what commonly happens here in terms of embracing theology as opposed to the reality of trying to administer government. you indicated the u.s. has lost 46 fortune 500 companies between 2000 and 2011. why do you think those companies specifically moved outside of the united states. and more importantly are tax considerations the only reason. >> i don't think taxes are the only driver. i think lower tax jurisdictions and the ability to produce greater returns for their shareholders have played a huge role in driving a lot of companies overseas. >> the other panelists, would

you -- >> i guess congressman neal, i was the author of that analysis on the fortune global 500. i don't think we found any u.s. companies actually leaving the u.s. that is talking about the number of companies that happen to be in the top 500 around the globe. and what we are seeing is there's an awful lot of large companies of the brick countries that are now among the top 500. and they are now larger than a number of former u.s. companies. it wasn't that companies were actually leaving in terms of this particular study. it's that we are definitely in a global environment. u.s. companies are competing much more with companies from other countries, not only europe, but also in china, brazil and india. >> production can happen anywhere, right? how about the other analysts.

would you care to -- >> mr. neal, i know there have been instances, i think, the chrysler emergencier a few years ago was driven at least in part by tax considerations. that was one company that did end up with headquarters overseas. and certainly in the 90s, early 2000, was driven by tax considerations, perhaps not all of it, but i do think it was a major consideration. >> i think congress has taken care of that movement for tax purposes offshore. and it's more as -- you just have offshore companies getting bigger is what you're seeing. >> right. >> i would agree with all those

things. i think tax is one factor. the research is quite clear that investment is attracted to lower tax rates, but it is only one factor. there's a lot of other things that companies consider. acquisitions do happen generally where the foreign acquirer will acquire the u.s. company. you wouldn't want to acquire a u.s. company. it would be hard to acquire a foreign company and then pull that foreign company into the u.s. tax system. it also depends on where the investment goes based on the tax rates. some companies just have to go where their customers are, but more tangible-based company can move around more easily. taxes will be important drivers for those kinds of companies. >> maybe you can speak of the phenomenon of japan in the sense that stagnation has paralyzed that economy for decades. if we were sitting here 15 years ago, the argument we're currently making about china

would have been the argument we were making about japan. are you arguing it's their tax rates that have kept them from growth? >> there are a lot of similarities. in the 1980s, you know, congress was facing not only intense competition from japan, but also large deficits. and, you know, i was impressed in 1982 and 1984, leading up to the 1986 tarks reform act that, you know, congress did address the deficits. it did show that there could be some tax increases, which set up, i think, the right dynamic far revenue neutral corporate and individual tax reform in 1986. clearly japan's high corporate tax rate that now is going to fall below the u.s. as of april 1 i think was a factor in terms of companies not being as successful in the world markets,

in addition to all the other problems that occurred in their lost decade. i think a lower corporate tax rate can definitely be helpful in terms of economic growth. when i look at the top 50 economies in the world, the u.s. as of april 1 will have the highest combined corporate tax rate. >> the gentleman's time has expired. >> thank you. >> mr. price is recognized. >> thank you, mr. chairman. >> we're all here interested in not just tinkering in the number -- to tinker with the number. we're interested in getting our economy growing as rapidly as possible so that people can get back to work and realize the benefits of their labor. and their own dream. the topic of discussion today is tax policy. i want to focus on hopefully three issues very quickly.

one is the rate, two is the cost of the compliance and three is the potential alternative. we talk about the corporate rate being the highest in the industrialized world. that's astounding. all we're doing is punishing businesses who are trying their best to stay in business here. i'm not so certain that -- so that's a disincentive to expand or to create a business here. the average isn't just a break even, it isn't just a wash. if folks are looking at their balance sheet and saying well, if it's 25, 28% and that's the average of oecd, countries of industrialized nations, then everything else being equal, doesn't make a whole lot of difference. wouldn't it be better for us to have a much lower rate than the average of the oecd countries?

>> i couldn't agree with you more. actually the most destructive tax that can be levied from an economic growth standpoint is the corporate income tax. though oecd has a good study on that. in an ideal state, you take it to 0, get rid of it. make the business community more productive. but to your point of 25%, if that's what it was, you have to add to that, the state rate as well. 3%, 4%. so you're at 28, 29. but at least it's a lot closer than where we are today. maybe good old american ingenuity can bridge that gap. i don't know. >> i've got great faith in american ingenuity if we don't stifle it from here. isn't 0% really the greatest pro growth rate for business and job creation? >> i would argue it is. >> i agree. >> come on down. >> yes, i think the lower the better.

>> and 0% would be the most pro growth policy we could have as it relates to business? >> yes. >> i think there are important government services -- >> without a doubt. >> the highways, the airports, the feds. and so i'm not sure a 0 rate is what necessary would be the best. >> but pro growth policies as it relates to businesses? >> i think businesses are looking at more than just the tax rate. they're looking at all the factors that would make the american economy successful. so i guess i'm not convinced that a 0 rate is the optimal rate. >> let me ask you about the cost of compliance of our current code. do you have any sense about what that is and how that challenges you in your business? >> it clearly is very significant. and anything to the 39.1% marginal statutory rate, you also have to factor in a very

high cost of compliance and cost of uncertainty in our current u.s. tax system. you clearly have a benefit by simplifying and making more certain the code that in combination with a lore corporate tax rate and a simplifications could be, you know, very significant. >> do you have a sense about the magnitude of the cost of compliance? is it another percent? is it another 10%? another -- >> i think i have seen some estimates that, you know, the efficiency costs including compliance costs could be as large as the entire corporate income tax. >> as large as the tax itself? astounding. which brings me to the alternative. what would a consumption tax, doing away with the business tack. what would a consumption tax do for your businesses and job creation and the economy. do you have any thoughts on that? >> from a very high level, i

think a consumption tax is probably close to a corporate income tax. a corporate income tax in effect penalizes work, productivity will. consumption tax penalizes consumption. whether it's realistic or not -- >> or incentivizes savings and allows consumers to make their own choices. things like that. yeah. >> i agree with mike's overall statement, but i think it does require a great deal of study and analysis because of the impact on prices and on consumers. consumers that have limited discretionary income to buy our services as well as others. also, there is an element of regr regressivity that should be consid looked at, but overall, i think it's something that should be considered. >> mr. smith is recognized. >> thank you, mr. chairman and

thank you to our panel. it's interesting as we look at these issues, i don't think anyone can pretending that they're simple or we've got an easy answer here. but i do want to reflect a little bit on -- i guess the interrelated nature of a lot of these businesses. and i won't ask whether time warner uses fed ex or ups. that's not what i'm getting at here. you do? okay. nonetheless, is there any concern in knowing that fed ex, for example, is a consumer of manufactured products? and that the manufacturing industry domestically, you know, has a bias in favor of the r&d. and tax credit i would understand. is there any concern that maybe the -- the products or services that you use within your own companies and outside your own companies would have an adverse impact if we don't get this right?

>> absolutely, mr. smith. and i think you have put your finger right on one of the pressure points here, is that our current tax code has so many different provisions that attempt to direct economic activity one way or another. my personal feeling is we leave it up to the economy and the business community and try and minimize that as much as possible. you mentioned about manufacturing having r&d, or 199. in effect, fed ex is part of the manufacturing business as well. but we're not generally categorized as a manufacturer. but we're in the distribution chains for a lot of manufacturers. we don't qualify for 199, for example. why did that line get drawn quite that way? but it's those kinds of issues i think you're exactly right. >> anyone else? go ahead. >> i think you're right. i mean all of our businesses are interconnected in one fashion or

another. it just depends on the degree of separation. that being said, i agree with mike here as far as the complexity and the inability to predict what is going to come from all these various different tax policies. and also a very real concern as far as fairness. you have a situation here if we can move way from this level of complexity and all of the different provisions, you can have a situation where fairness really fits in nicely with the overall free enterprise market. and let the economy decide. let markets decide where things should go. >> okay. mr. heenan? >> i think our sole focus should be about growth and how do we get growth and jobs. so i think sometimes there is a difference between equal and fair. and we should be focusing on growth. so while i think a lower tax rate certainly for us would put

more cash in our pocket to spend on new investments, some of the targeted tax expenditures that are out there may have a bit more leverage than a lower tax rate. so we have to look that very closely. what is right i think is what promotes growth and jobs. and that might not be equal, but it's probably fair for the country overall. >> okay. thank you. i yield back. >> mr. kind is recognized. >> thank you, mr. chairman. i want to thank the panelists for your testimony today. always very illuminating and interesting. let me just raise a couple concerns and get your reaction on a few things. sometimes we're not really comparing apples to apples. i think everyone is in agreement that the goal should be to try to lower the base, simplify, expand the base, lower the rates and simplify the tax code. and if the goal is 25%, according to the oecd, it doesn't take into consideration the vat systems that they have

in place right now to supplement lost revenue from the lower corporate rates there is no discussion about a possible va in this country in order to attain that lower level. so if we're going to do this in a deficit neutral fashion, we're going to need a way to pay for it as well. here is one of the concerns i've been raising consistently. the best we can do on the corporate side, eliminating every tax expenditure, every tax credit is moving from 35 to 28% rate. would that be sufficient, mr. fryt and mr. schichtel, a 28% rate, and eliminate every expenditure on the corporate side. would that be enough to make us more competitive globally? >> i don't think it would, mr. kind. >> mr. schichtel? >> i agree with mike. >> well, then we're going to need to figure out a way to pay for the additional 3% to get to 25. if the proposition here is that we're going to go to the pass-through side, where a majority of entities are structured in this country, i don't think they're going to be that enthusiastic for pass-through entities, small business owners, s-corp.s,

individuals to pay higher tax rate in order to pay for lower corporate tax rates in this country. that ain't going to sell politically in this country. so we're going to have to find a different revenue source then in order to get to the 25% if the goal is to make this deficit neutral. that's where it's going to get difficult. that's why you don't have a detailed plan from the majority on what specifically they're proposing because they know they're going to have to get into the weeds immediately overnight, and the political pushback is going to be tremendous. i wanted to pick up what mr. price was addressing because i think it's very intriguing. the numbers from last year, the federal government collected total revenue of roughly $3.2 trillion from all the revenue sources. of that, $181 billion was on the corporation side. roughly 7% of federal revenue was collected on the c side. that's roughly 1.2% of gdp. so we're tying ourselves up into knots trying to figure out a way to lower the rates when we're talking about roughly 7% of

total federal revenue to begin with. maybe we should explore further, just eliminating the corporate rate entirely, but we're going to have to pay for it. and that, again is going to be the rub of how we do it. mr. price talked about the consumption tax. i don't want to do it in a regressive fashion. my fear is that a consumption tax is going to be very regressive. it's going to hurt low income families that will have to spend every dollar they earn through the consumption tax. maybe there is a different way we could pay for it through some form of wealth tax. i don't know how many of you had chance to see "the new york times" op-ed page today. david miller i thought wrote a very interesting article. did anyone see mr. miller's article today? it's called the zuckerman tax. zuckerman is going to get about $28 billion worth of shares most of which he'll never pay a dime of tax on. what mr. miller is advocating is why not market those shares in a given year and have him pay taxes on it, rather than waiting until it's realized, which may never occur in his lifetime.

if he passes it on to his heirs, they may never realize the gains from the shares. this i think is one of the reasons why we have huge wealth disparity in our country, because it favors those that are accumulating wealth through shares primarily that never get realized. they're able to borrow off those shares in order to maintain their living standards. so maybe there is a way for us to explore trying to eliminate the corporate tax rate entirely given the small percentage of revenue it ultimately brings to the country, helping our countries be more competitive, but make it fair and start exploring ways to tax wealth to a greater extent to pay for lower or no corporate tax rates in this country. what i'm recommending would probably put you guys out of business. you guys would lose your jobs as far as corporate tax is concerned. but what i'm hearing from you is the lower the better and zero might be ideal. and that would be a real game changer around here, rather than us going through this kibuki dance with these hearings with

no detailed proposals because of what that is ultimately look like. my last concern is if we even get to 28% by eliminating all the expenditures on the c side, what is that going to do to domestic manufacturing who rely very heavily on depreciation for r&d, for 199 manufacturing tax credit. is that going to help domestic manufacturing or hurt domestic manufacturing if we take those expenditures away from them, and will that leave us less competitive in our ability to make things and invent things and create things and to grow things in our own country here. so those are just some of the issues that we're raising. and maybe you guys can help us try to figure out way of supplementing lost corporate tax revenue, get to a zero rate. but let's keep it progressive and fair, ultimately. >> thanks. >> the gentleman's time is expired. ms. jenkins is recognized. >> thank you, mr. chairman. and thank you for holding this hearing. as a cpa who used to practice in this area, this has been a real delight to have you all here this morning.

i'm not sure i've had this much fun in the year that i've been on the panel. so thank you. >> i'm glad the gentlewoman is redefining fun. >> this is good stuff. and since the focus of the hearing has been on those areas of book and tax differences and where they diverge, do you all have some suggestions as far as reform goes to address that? because it appears what we've been talking about to this point has been to move towards having less differences in book tax and you all have touched on it briefly. so can everyone on the panel just let me know your thoughts on the idea of book tax conformity. >> to some degree, i think there is some benefit there. i would caution aboutin