and academia. i got there in a different manner. up until 1953, m.i.t. had a perfect record of placing its graduates. with general motors and general electric and all the companies. but they came to the end of the list in about september, and one stark was still unemployed. well, they solved that problem. they said we'll make him a teacher. and i must say -- you have improved the appearance of the sloan school magnificently and made accounting look a lot more attractive than i remember it being from what the -- whatever was next to the window. i want to thank you. but in some more seriousness, i'm concerned about some of the

issues that we create tax expenditures for and their usefulness. and i'm going to ask you. you may not know now. but you may know some place in your literature, has anybody done any study as to the usefulness of whatever is created through these tax expenditures? and i give as the example the idea that orrville redenbacher got the r&d tax credit to develop microwave popcorn. now you could make a case, if it doesn't stick in your teeth of maybe that was a good help to society. but in all seriousness, i would love it if you know of or could

dig out in the accounting research if anybody has done a study on what the actual usefulness, seriously, to society has been in many of these tax expenditure areas. and if you would be willing to spend a few minutes of your spare time and dig out something like, that i would sure love to have it. >> i can certainly look at that for you. but i think the one thing that has been looked at in the literature is in an r&d study, for example, when they look at the dataer, they might see what looks like an increase in spending. but what has been looked as, you know, is that really more r&d that results in more products or is it, say, a rise in the input prices. and there is actually one study that shows that all the increase in r&d spending actually goes to salaries, r&d. so it's not more r&d, it's just

paying the engineers more. whether the input providers actually demand a higher price for the inputs when they know the other party has an r&d credit that part has been looked at. and there is some mixed evidence on it. but i don't know of a study, because that would take some researcher, you know -- >> okay. i thought you might have come across. i would add that there are people who i think would have advantage of it. i hung around in the tax area with a guy name steve jobs, probably before you were born. and he didn't really pay much attention. i mean, he would take advantage and he came to this committee to get some tax relief for giving computers away. but that didn't stop him from developing with the iphone and all these gadgets my kids want, regardless of whether or not he got the investment tax credit. he was just an innovative guy. and i suspect that's true of

most innovators. they're going to go ahead and develop these things whether or not they get the r&d tax credit. so that perhaps we're not getting much bang for our buck in that area. thank you, mr. chairman. >> thank you. mr. berg is recognized. >> thank you, mr. chairman. one of the most frustrating things for me out here is the uncertainty. and it seems like there is a lot of taxes that are short-term. in fact, we miss a lot of deadlines and go back and reinstate tax incentives and et cetera, et cetera. so just to make sure i'm not the only one that feels that way, my question for ms. hanlon is do you think this instability in the tax code creates a problem both a book and a tax problem? >> yes, i would agree that the unpredictability and the uncertainty creates a lot of problems for companies when they try to make these long-term investments. i think a stable tax policy

would be a lot better from both the tax and the accounting side. >> i think i heard kind of those comments. i mean, whatever it is, if it's fair, if it's reasonable, hopefully lower, flatter, keep it there, and then we can make business decisions around that. so -- and i know this has been a long hearing. my question, maybe if we can just go through and there is some specifics that you could relate to the committee where you see the temporary nature of taxes creating a problem for the fact that certain incentives have expired, and then gone back in and reinstated, if there is any anyspecifics that anyone on the panel would have. mr. fryt, would you? >> i think the biggest one in that regard right now for us, some of these extenders, we actually have several of the extenders that apply to us. but the biggest one is probably

expensing, deappreciation. that does have an impact. if we had that in there permanently, or in any of these, permanency and certainty i agree with you is almost paramount. as long as it's a good code. but it's very important to us. beyond that, i don't know that i would have any further comment. >> then again, i'm looking for examples that you see day in and day out that again are talked about, maybe creating more costs and problems than really the incentive or disincentive was worth in the first place. >> definitely. it comes up all the time. i had a conversation with my old boss who is now our president and chief operating officer about some activities that do qualify for the section 199 domestic production credit. and he was absolutely delighted and said fantastic. we're going bake this into our investment analysis and the return analysis.

and i had to caution him and say wait a minute, i think we need to be careful. you probably can count on it for the next couple of years. beyond that, i'm not so certain. those types of issues come up all the time. whatever we do, it needs to be permanent and consistent to allow my boss and the ceo and the rest of the team to make business decisions that are based on something that they can understand and count on. >> international that's one of the reasons why there is a lot of money sitting on the sidelines right now. people run their analysis, but they can only see clearly one year out or two years out. and so they have to put so much risk in the remaining eight years or however long they do their analysis that it drives it from being a potential good investment to too much uncertainty. >> well, it's not just on the business side. a number of commentate verse

commented that we have almost an entirely temporary tax system with so much expiring at the end of 2012, tax rates not only for the top income earners, but throughout the entire tax schedule, a number of tax credits that are also going to be significantly changed. so it's a very important issue. when there was that possible expiration in 2010, there was clearly activity that was occurring in late 2010, in anticipation that the rates and other things might be changing. >> all right. >> i just -- i just echo all the same comments. certainty is going to help us a lot. >> i just have a rhetorical question. is it better to address the issues that are coming up december 2012 sooner or december 31st of 2012?

you don't need to answer that. i'm assuming that done in a logical process where people can engage in the debate makes more sense. i'll yield back, mr. chairman. >> thank you. ms. black is recognized. >> thank you, mr. chairman. now that all the questions have been asked and people have said how much fun they've had, i do start to question some of my colleagues about what their definition of fun is. but it has been very educational to have you all here today. and mr. berg has been running in and out, in and out, and he comes in and asks my question last minute. since i'm the last one here, mr. chairman, it does not seem fair. but all that aside, this has really been a very helpful. and much of your written testimony has also been helpful. i do want to add or tag on to what mr. berg has said about the stability. and i want to go to one of the statements that you made, mr. frank, that i thought was interesting. you said you wanted to compete

on the merits of business and not on the tax code. let me take that a little further and ask you with the temporary tax incentives how you see those as affecting competitiveness. because i will say just as a sidebar, between the hearing that we have had in this committee, this year, which have been very, very helpful, and then those business round tables that we have had, i've had a number of businesses say that because of the complexity of the tax code, that not always are they aware of maybe some of those opportunities that they could possibly have. and therefore they're not as competitive with someone else because either there isn't that competition naturally in there for them, or they don't know about it. could you talk about especially since you've made that statement, mr. fryt, about how the temporary tax incentives do affect competitiveness. >> you've hit a hot button issue in our company. i cannot tell you how many times my ceo, cfo and others in

executive management, decision-makers have lamented what my ceo likes to call an arcane tax code. with all of these temporary extenders that come in and out, and special provisions here that apply to us, you know, or maybe don't apply to us and apply to others. overall, there is no question in my mind. they would like to be unburdened from all of that, do their business, conduct their business. take all of those if we can, reduce the tax rate as far as we can so that they don't have to pay attention to any of that. pay the revenue that is appropriate. whatever is decided and move on. that's our feeling. >> thank you. mr. schichtel? >> i agree. my job could be called tax

translator. that's a big part of what all do. it becomes even more of a challenge for medium-sized companies that may not have all the resources that we have. clearly from a financial perspective, the compliance burden, the difficulty in dealing with all of it are a huge drag. i just went through another budget season, and it's always painful. and everyone is frustrated that we have to spend so much just to comply with the law. not even optimizing. i'm talking just basic compliance. and then every time we have a transaction, the level of risk and uncertainty and complexity in the law, it's just enormous. and really shore, tax be a high-risk area just because of the complexity and difficulty in applying laws? >> good point. >> it certainly makes doing transactions more difficult. and i can't imagine what it's like for companies that don't have the kind of resources that we have.

>> ms. hanlon? >> i would agree with all these statements. i think the complexity takes a lot of time. as tom was saying earlier with the compliance costs. they're very high. and i also agree with the small business. i think small businesses have a very hard time with the complexity. they don't have the internal tax departments. and what they really should be doing is focusing on their business. but instead they spend a lot of time worrying about, you know, how should they compensate themselves, how should they structure their business, where who they structure their business, in the u.s. or somewhere else because of the tax code. and i think making a more simple, more fair system would help the u.s. >> thank you. >> mr. neubig, do you have a comment? >> again, i think this is another example of where oftentimes the economists don't give lower corporate tax rates the full benefit that would happen if there was a broader base and lower corporate tax

rate. that uncertainty, complexity, and how lower corporate tax rates affect so many different business decisions really is very powerful. so when people talk about the bang for the buck in terms of a lower corporate tax rate, sometimes they worry about lower corporate tax rate applying to old capital. but i think they really are missing so much of the power of a lower corporate tax rate that would also be simple and more predictable. >> thank you, mr. chairman. and if i may make one final comment? >> yes. >> since there are very few of us. what i continue to think about as we look at the complexity and the costs of the business, i think about how the service or the product, the cost of the service or the product is raised because of this complexity. and how ultimately, it's the end user that has the cost borne. so thank you. thank you, mr. chairman. >> thank you. well, i very much want to thank all of our witnesses for a very good hearing this morning, and for all of your time, all of

your effort, all of your testimony. i appreciate it very much. i do just want to clear up couple of items. there has been some question about a joint committee on taxation estimate. i want to note for the record i did not request the estimate. and also of the 90 remaining items, virtually all of them are domestic items. i think we want to have the record be clear on that. again, thank all of you for being here. this hearing is now adjourned.