>> the gentleman's time has expired. >> maybe you could respond to our letter. >> can you allow our guest -- >> mr. noonan has five minutes. >> i give the balance of my t e time. >> thank you. one former chairman mentioned that nobody is talking about getting rid of the charitable contribution that actually in the prior three budgets, the president has capped charitable contributions to 28%. just want to remind the gentleman from new york regarding the president's last three budgets and what he proposed. obviously it wasn't adopted by the congress, but there is one person in washington who has talked about the issue in the context of reducing that charitable contribution. and i wish mr. lewis were here, because he and i as the chairmanmen have the caucus have both opposed that as co-chairmen

of the philanthropy caucus. those of you who are vice presidents for companies, dealing with tax issues, can you tell me who your major competitor is and how the current tax code causes you to make decisions based upon investments? starting to my left. >> the united states postal service. they don't pay my tax. ups, their tax profile is very sloor to ours. and we have several international competitors, dhl, at&t and others. as an example, dhl's reported epr's effective tax rate over the last 10 years have hovered around 20%, vis-a-vis our 36%, 37%. that's why i say us paying at what we are right now is a real competitive disadvantage, because they have additional after-tax funds that they can

continue to reinvest in their global networks they don't have. >> and they compete with you here and abroad? >> yes, sir. >> our main competitors are at&t and verizon, as well as the satellite companies, directv and dish. and obviously we compete globally in the capital markets for investments. and farce the impact on the communications industry, i think verizon and at&t are much more similar to us than maybe even the satellite companies, although the difference is that large. we're all capital intensive companies. for us, tax reform is more about getting the economy stabilize and growing, because that's where our growth is going to come from. >> even though you don't compete -- i'm trying to get more of an answer from you. i don't want to put words in your mouth. maybe i can tell you what i'm

trying to do and then you can answer. even though you don't have a quote, unquote, international competitor, you're competing internationally for capital. >> yes. >> the tax code impacts you how with respect to that? >> i think if you look at some of the analysis and research that has been done, companies with lower effective tax rates do have an advantage when it comes to garnering investment from the global capital markets. so from our vantage point, that clearly is an issue. also from, you know, just the pe of raising dpal and also being able to invest more and grow our business, an economy that is more robust is going to help us on both fronts. >> so because capital can go anywhere in the world, it's going to go where it -- >> it's going to go where they believe the higher rest return at. >> so even though you're an american company, more jobs in

ohio, to uh very much. you're a domestic company, domestic jobs, that international competition in terms of tax rate is very important to the growth of your business in america? >> it is. and it's also very important to our customers. our highest growth area is in the commercial services arena. and our customers, small, medium and large, they do compete intensively in the global markets. and our success is tied to their success. >> thank you. >> good morning. i think in the u.s., we have -- you know, we're competing against air products, u.s. based multinational, outside of the u.s., we have french and german companies. and when we look at the u.s., we're all competing at the same rate. but as you said, capital can move.

when we look at foreign prgts, you know, what we really want. and i think we have today, maybe not perfectly, is to have a level playing field on the tax rates offshore. if we're looking at a product in mexico, france or germany, we want to be on a level playing field so we can win our share of those projects. we have our r&d in new york. that offshore growth comes back here to the u.s. so it's important for us to remain competitive on offshore projects. >> thank you all for being here today. first, appreciate the chairman holding this hearing. secondly, i think the draft proposal on territorial and lower rates the way it was laid out has been very positive and helpful movement towards fundamental tax reform. all the witnesses today have really opened up a lot of

questions on how we move forward and doing it with the most pro growth impact, weighing both the book and the accounting tax-type requirements you're under. both of you rightly make the case that in addition to lowering the corporate tax rate that there is is need for capital investment incentives. and you're willing to put erg on the table, but recognize looking at the last 40 or 50 years, the single strongest correlating driver for new jobs, you know, is private business investment. you're building buildings, buying software, new equipment and technology.

so my goal is at the end of the day i want the lowest possible tax rate, but i want the strongest possible pro growth tax goad. one that allows us to have the largest economy in the world, until china catches us or someone else. but for the next 100 years. so i want to ask, as you're willing to put everything on the table, which i think is very important, what are the strongest -- looking at the cost of capital in investment, what is the strongest capital investment incentive that ought to be considered to remain in the tax code. >> from our perspective, i think 100% expensing. permanent -- on a permanent basis would be extremely strong. investment tax credit can be draft crafted in a similar manner. there were some issues with that in the past.

but expensing works quite well. it doesn't address the financial issues talked about earlier, but it stel affects the cash flow and has a tremendous impact on our environment and other companies like us. >> 100% expensing would be the top? >> yes, sir. >> for us, the biggest drive to investment is a growing economy. i think if we can get there, all other problems will eventually improve and rectify and remedy. immediate short-term policy, bonus expensing is tremendously important right now. we're being hit by the are everse sal of prior year benefits from bonus depreciat n depreciation, just as our economy is struggling to pick up a lit bit of momentum.

now is not the time to have those reversals take full effect. >> sure. >> i think overall if you can get to a lower rate, it will encourage growth and more than make up for the loss of some of the tax incentives, including even accelerated depreciation. but that requires us getting to a much more meaningful lower rate. 25%. >> knowing what with ecan get to 28%, the final three points lab possible discussion. >> can i ask the other witnesses your thoughts on the pro growth tax code? >> yeah, i just did a little bit different than the pro file. >> if it was a permanent fixture in the tax code, we would put that into our decision. >> which is what we're seeking,

permanent tax provisions rather than temporary ones. >> but i think we recognize that that would be extraordinarily expensive and we need to -- we need revenues. i think the current provision that's like that is accelerated depreciation. that would be the one that practically speaking you might be able to keep if you go to a permanent bonus structure, you're going to have it very closely -- we would be happy to take it, but i think it would cost too much for the country. >> yeah. >> when analysts look at permanent bonus depreciation, or permanent 100% first-year write off, they argue that you would also need to repeal the interest deduction in order to prevent negative effective tax rates. >> mr. mcder mo the is recognized.

>> i want the audiences and witnesses to recognize this is a day we all gathered here with silver faces for holding pictures. we are all for tax reform. everybody in this room is for tax reform. we're on the ways and means committee. we do tax reform, right? now mr. johnson has asked you have you studied how low you can get the tax rate if you eliminated tax expenditures, and all the witnesses said they haven't. so i just want to enter into the record the study from joint tax dated 27 october 2011 which talks about what you really have to do if you're serious here. now that study suggests that

roughly half the cost of a seven-point reduction, that is from 35 down to 28 would come from the repeal of depleted, accelerated depreciation. yet all the companies have said this is very important. don't take away our accelerated depreciation. and you want to retain it. that means you can only finance about a 3 1/2% reduction. this report says you're going to have to come up with $960 billion, $506 billion comes from depreciation acceleration. i wonder what you actually would support. because as mr. rangel suggested, tax reform in 19860 cured after ronald reagan came in in 1981

and played golf with tip o'neill for five years. and it was before the global economy had really taken hold. so we're talking about a new world that we're trying to reform rather than the one they were reforming in 1980. give me your views of what we should do? what are the things that are most important that you're willing to give up or shift off on to somebody else. yes? >> congressman mcdermott, we looked at the joint committee on taxation's revenue estimate from october, and we looked at the provisions that they estimated and scored in terms of base broadening. they represented 2$209 billion

out of the total tax expendit e expenditurexpenditur expenditures. so it was only 40% that they actually scored. there was another $185 billion of corporate tax expenditures that they had not yet estimated. so i'm actually relatively optimistic that when you really take a hard look, that you can get down to 28% and even possibly 25%. i look at the 1986 tax reform act, and i look at the base broadening that occurred from tax expenditures. it was only 60% of the base broadening. 40% of the corporate base broadening was not from tax expenditures. i think the tax treasury and elsewhere, if they look hard will be able to find additional base broadeners beyond just the tax expenditure list. >> do you have that list? i mean, the $195 billion you

talk about. can you tell me what are the pieces in there that we would have to get rid of? >> i don't have those with me, but we've gone through the entire gtc estimating list and they have rots of provisions that were not yet estimated and we've linked that to the tax expenditure list. and 40% of the estimated tax expenditures have not yet been estimated. >> i think i would appreciate -- everybody on the committee would appreciate if you give us what your estimate is. anybody else have any ideas how to do this? >> i would just like to echo the comments, you know, sort of a quick fix answer is difficult to give. i do think we have to look line by line at each of the expenditures and weigh it against tax rate reduction. and certain expenditures are

going to be more important to tax growth. i think everything should be on the table and we have to have a very serious conversation about which ones we want to take out and which ones we want to keep. >> thank you much chairman. i want to try to get three quick questions in. no speeches. i'll just start with the questions. focused on the -- trying to think of these questions in terms of jobs. we all want tax reform. and we want to energize the economy. but we want to it to equal, of course, jobs here in the united states. they have the effect of providing preferential treatment in terms of particular business behaviors or particular sectors of the economy.

do you agree that tax reform should address these kinds of distortions? >> i think reform should have the 2k3w0e8 of making tax pro growth, simpler and fairer. and in 2010. and part of the house expiring provisions included a provision that was not ultimately enacted that required the joint committee on taxation to look at the expiring tax provisions and look at the analysis in terms of the cost benefit analysis, who the beneficiaries were, and i think it's that type of analysis that really is important in terms of looking at all the provisions that congress has previously enacted. some of them, you know, very well worth keeping as part of tax reform.

others, if a thorough analysis has been done, may be outdated and should be limited. >> okay, thank you. >> i think the best approach to take is they are willing to put these things on the table. they would rather not but they're willing to do it if it will get them to a lore rate. we conducted a survey of tax executives and asked them point blank, is the u.s. corporate tax rate hinder your competitiveness and almost 80% of them said yes, unequivocally. so i think these things are very important. i think a stable tax structure that's predictable is the best way to go. >> a so a review of pro growth policy, a simpler tax code and 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 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 globaltwande've seen that with 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 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 cots i mentioned earlier, our headquarters, when we win projects globally, we get jobs here. those folks are working on those

projects. and it project here in the u.s., but it is adding jobs. so global competitiveness is critically important. . >> you know, one of the things we this committee and in congress is we want to see the united states trade, right? 95% of our market is outside this cry 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 econ united states economy, equals jobs. thank you. >> mr. pisani is recognized. >> thank you, mr. chairman. i want to clarify something that came up during dr. mcdermott's o 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 hav. 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 wilpoint. 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 forr. i don't know that there's a single domestic tax expenditure still left on the table. unless you -- >> 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. ca 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 reading bruce rd. 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 happensof embracing thd 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 c