distort business decisions. but the current u.s. tax code does that. it's highly distorted characterized by a high statutory rate and will encourage the the use of debt rather than equity, and it discould your honors multinationals from repate yating. they can be at best. my question for the entire panel -- isn't it true that the corporate -- it seems to me a lower u.s. corporate tax rate makes it more likely that proposals for the u.s. may make it -- it would support the growth of u.s. jobs. am i wrong about all this?

>> senator hatch, you are correct. a lower rate and tax reform would create the want to invest. we agree. >> to build on his tax rates, it let the record show our cost of capital and it makes more projects atrial court aive. so lowering the rate in the u.s. would make more projects attractive to us in the u.s. >> and for a global business, i think lowering the effective tax rate allows us to invest in the u.s. without being penalized. today there's a penalty. >> senator from the cvs caremark perspective acknowledging that we are a domestic company, this would help us accelerate in terms of

bringing products and services to market faster, and in a more robust fashion. >> thank you. a quick ol follow-up question. mr. faulk, in your testimony, there's been proposals recently to november u.s. tax system further away from competitive global enormous. by ending deferral of u.s. tax on a company's foreign earnings, that's been -- this would burden u.s. companies with an even higher tax rate. seems to me we can't create the jobs we need if the tax code remains this way. can you comment object effect on your company and the economy and if there were a tax rate deduction that were significant enough, would that make the

repeal of deferral acceptable? >> you're certainly right that it would add further complexity to the tax code and drive up the cost and would be viewed as anti-business by the larger multinationals. so the challenge would be how do we get a competitive global tax system with a competitive rate tied to a competitive rate that would set american companies up to compete on an even keel with other multinationals around the world. >> thank you. one more question. the grand deal i hear being proposed by all of you gentlemen is that you are willing to have a broader tax base meaning getting rid of credits in return for a significantly lower tax rate, is that right that's a grand deal. it interests me a great deal. i'd like to help you with that but off concern.

what if we agreed to get rid of a lot of tax expenditures and we get the corporate tax rate down to 25% or lower for the first year but what if congress over the course of the next few years increases the corporate tax rate back up to 30% or up to 35% but without the tax expenditures. does that concern you or are you concerned a good part of the deal might only be temporary but the bad part could be permanent? how do you get past that concern? >> sir, we are not competitive today. american companies are at a disadvantage today, and we do believe we need move ahead with the comprehensive tax reform. i think it would be fortunate remain competitive and it would be very, very important to measure, over time, the competitiveness and ensure american companies stay competitive. it would clearly not be in the

interest of american jobs to then increase that type, and we would clearly not want to see that. >> i just wanted to go off mr. duke's answers. the level of uncertainty out there on tax polydoesn't help. so we would hope comprehensive corporate tax reform would be coupled with a tax being held in the marketplace for a long time. >> that's similar to what i had said with the uncertainty involved having to go through that question mark every few years. >> i empathize with you there. >> if i could point out having predictability in terms of being able to make our business decisions is one of the key elements in overall tax reform

and i would encourage that. >> thank you very much. >> thank you mr. chairman very much and i wanted to talk to you about r & d and tax credits. when we talk about the three problems each of you talks about. one is eliminating tax expenditures. so my question would be if you look -- how would you recommend that we evaluate expenditures if r & d is a tax expenditure, and a very important one i believe, and i certainly wouldn't want to eliminate it. but when we evaluate all this, to me, it's very much about focusing on incentivizing

innovation, research development. i also think incentivizing manufacturing in our country is important. in the recovery act that i helped champion to incentivize 32% for making things here for making clean energy. so i wonder if you might speak as we're reforming tax expenditures and looking at all of this, how should we decide which ones to keep and which ones to eliminate? because i'm assuming you would not want to eliminate all of them. >> yes. thank you for your support and in recognizing the importance of this part of our tax code. but i believe that the challenge on the tax code in general is a multifaceted challenge, as you're well aware. and our basis where the package

of getting to the package of the overall system, it's to compete globally. so we should be looking at how do we, as a country, enable our companies to compete the most effectively? that's in the form of many different dimensions, but i think very clearly r & d incentives are being targeted very aggressively by certain countries who would love to have our r & d jobs relocated to their countries, so it's impair tai for us not only to not stand by and let that happen but a system that allows us to stay home dooned that. >> how do we do that? >> yes. how do we go that? on one hand we're talking about lowering the rate and lowering tax expenditures yet we have a

very big one called a & d and we're competing with germany and it's got major manufacturing incentives and taking our new clean energy ideas because of their tax snevts. so how do we do that while legitimately dealing with the other issues you raise while at the same time because there are other tax incentives? >> i'll speak next. my advice. folks -- it means getting the rates as low as you can and the marginal rate is where a lot of investment systems get made and so having a lower marginal rate is more important than incentive package answered when it comes to making a choice

between a marginal rate and incentive package i'd choose the lower rate and get rid of the incentives. >> but you agree with that even if it gets rid of the r & d tax credit? >> i think as far as it's been a foundation for the i.t. industry that has really propelled growth for this country over the past decades, so i think as a combination of factors, we need to be competitive as a country or we stand to lose something that was invented here. >> that's our dilemma. is to be looking at competitive rates globally but at the same time the incentives are also being given around the world, because we are losing, because there are incentives being given in other countries. and again, mr. chairman, on the manufacturing front, you know i care deeply about -- we are

facing dilemmas because of both financing mechanisms and manufacturing and i want to make sure once we're done that you're making everything here as well. so that's my question is how do we do that. thank you chairman. >> senator nelson, you're next. >> mr. lang, thank you for recalling that the semiconductor industry is so important. and you remember about 20 years ago when all that business was about to go offshore. and when the united states decided that it was going to stop that trend, it put together a consortium called sem tech and the proof is in the pudding, what you just told us. so congratulations. i wanted to ask mr. duke, in your testimony, you said in our

view thebowl-simpson tax proposal represented a very good start, because it endorsed these 3com opponents of reform. there's a version of that that is circulating right now, which is the gang of six. and it basically gives huge deficit reduction, back to the committee's jurisdiction. the biggest deficit reduction would come back to this committee. tax reform, what you all have testified to. health reform, and set up. now a big part of that tax reform is taking all of these tax preferences otherwise known as tax expenditures, and

getting rid of a lot of them. and instead, taking that revenue that you gained from that, and then allowing the tax system to be reformed. and to do just exactly what all four of you have testified. which is bring down the rates for everybody and simplify the tax code. as a matter of fact one is simplefied in three brackets for the individuals and lower of course all the rates considerably as well as the corporate rate. now my question to you all is boy, you're going to be stepping on some sensitive toes when you get rid of all those special tax breaks when you -- otherwise known as tax

expenditures. so i'd like your comment on it. >> first of all, i'd have to say i'm not familiar with the discussions you are talking to that are taking place at the moment. so the details of the current dialogue, i can't speak to. but this broad topic you're asking about, we do believe comprehensive reform does mean putting them on the table. we think for the overall rating to be lords and needs to be in that mid 20 range to be competitive with other countries that we're competing with, then it will require some difficult decisions around those incentives. and we do think comprehensive reform involves reviewing all of those in a very thoughtful way. >> yes. our nation is facing a crisis.

and in a crisis you can get amazing things done. every one of us as a crowe has faced that in business. and you can get things done quickly that were once thought impossible. so i urge you to come up with a vote that gets things done. >> kind of like the package becomes the whole becomes greater than the sum of its parts. but some of its parts are a lot of special tax privileges for individuals that they are not going to want to give up including the four of your companies. >> to be honest, we do most of our r & d in the manufacturing process. i would trade both of those off

for a competitive global statutory rate. >> mr. marlo, you've got a separate area. if this all came to pass and it came back here to the finance committee, and we had to start doing some serious looking at where you take things out of the health care system, particularly medicare and medicaid, you want to make some suggestions? >> well, i think that similar to the discussion we had, i think that's also true with our health care system, specifically medicare and medicaid. i acknowledge one of the challenges we have and i think we have many opportunities to address the cost of medicare and medicaid and at the same time address some of the unnecessary costs and wasteful spending we're seeing. the example i gave earlier.

$300 billion spent annually on unnecessary medical costs as a result of poor prescription drug compliance and adherence. so i would encourage us to look at both of those as potential solutions to that challenge, recognizing that there are things that we can do to take cost out of the system and at the same time, keep americans healthier. >> thank you. this has been a helpful hearing and as the parents of twins thank you for the diapers. >> i'm sure we have 100% use in your households. i am sure you're doing well at last check. >> i am. >> mr. chairman, i think you put your hand on a key question people are talking about.

that is how is this going to affect jobs? i think people in this country -- that's what everybody's focused on. kitchen table, anywhere you go. and i want to ask a very specific jobs question. if you all as part of tax reform were to give up tax deferral, that's the break, of course, that you get when you're doing business overseas. you defer paying taxes until you bring the money home. and all of that money. all of that money was brought back to our country, and used to slash rates dramatically when you're doing business in the united states, so that we would be able to say you're then competitive with everybody around the world, wouldn't that be a significant boost for job

creation in the united states? >> let's start with you, mr. duke. >> i think the opposition would be each of these steps would be important. but it's fortunate look at the whole picture. that's why we've continued to focus on comprehensive reform operating on a global basis. so we're growing in the united states already. and i would say that competitiveness is very, very important. one of the retailers, our competitors that's been growing in the united states recently is tesco. a u.k.-based retailer that has an overall lower rate. so growth in the united states and around the world is important, and we believe all of it should be looked at together. >> the reason i asked this question is the finance committee says that your

effective tax rate for 2010 was 32. if you abolish deferral and use those dollars for creating what i call red white and blue jobs, jobs in this country, your effective rate would go down considerably. you'd be certainly in the mid to low 20's. >> that's why if you look at markets around the world. we are growing at different rates. so use five diapers a week, within five years they'll be using five diapers a day. china we do 500 million. to meet the demands of those consumers. for me it's more about treating a system where we have free trade and free flow of capital. generally those countries who

do that have a higher rate of growth. >> mr. lang, we touched on this yesterday. >> yes. we did. i would start by saying certainly having a system that allowed companies to bring the dollars back to the u.s. and put them to work in the u.s., it can only be positive. having those dollars overseas does nothing for us. so bringing them home is something i would strongly agree would be a positive for u.s. jobs. i think the key question comes down to what is that rating? and is something in the lower 20's really going to make it competitive in the markets where we compete? i think we probably all have different countries where we compete. our businesses most of the places we compete are in the 15% 17% rates and they could be lower. so my view or concern about that would be finding that rate that would make it competitive or neutral, and i think it

would be below the lower 20% range but the concept would be positive because it would simplify life and bring the u.s. dollars back to the u.s. >> acknowledging we're a domestic company, some of your question really doesn't specifically apply to -- >> you're at a 38.9% effective tax rate according to the finance committee figures. so under this, for job creation in the united states, you would be wanting to see a very substantial rate reduction. >> and i think that supports our goal of doing more in terms of products and services and -- i think the question to my other panelists. i certainly concur with them. and i think overall tax reform,

that does benefit multinationals in terms of bringing those dollars back to stimulate economic growth, a company, by a meaningful corporate tax rate reduction makes all the sense in the world. >> my time is up, mr. chairperson. i just want to say i'm very interested in working with you senator hatch on the point senator hatch made with respect to when we a baucus tax reform bill, that we have some way of trying to keep in place that good work and that we don't unravel it so as to create uncertainty again. i thought senator hatch's point was a good one. >> thank you. >> thank you, mr. chairman. gentlemen, thank you for coming. interested -- with interest, i read your testimony. let me start with mr. duke. you have my former chaffin working with you now. i have come to -- if i read one more email that says save

money, live better, i -- wow! talk about branding. let me tell you. [laughter] >> but he does a great job for you and did a great job for me. let me pick up on a point that we had a hearing yesterday, and it was a deficit hearing. and my colleague, senator conrad, made a -- what i thought was a very good point. he pointed out that interest rates matter. and he said a sustained one -point increase in interest rates would cost the government over a trillion dollars in the next decade. i noticed that you were one of those c.e.o.'s that signed a chamber of commerce letter warning of the danger of default, and in part that

letter says treasury securities influence the cost of financing not just for companies, but more importantly for autoloans and credit cards and student debt and the default would raise those and a host of unintended sequences. so my question is, beyond what it will cost the government, what could be the impact of the default on interest rates for your customers? and if they are increased by this self-inflicted wound of the default, which we still hope and pray we can prevent, what do you think that would do to the purchasing por and sales like yours? >> thank you again for your comments about our colleague, and i appreciate the training you provided. that worked very well. related to, this i would have to first represent our consumers, our customers that are shopping in the stores and across america they are

watching the events take place here in washington. and there is both a real and perceived. and i think both reality and per exception -- perception have to be taken into account. the ability of the consumer to regain confidence, to start then reinvesting themselves as families across america is important. a default and the ripple effect , i think, would be impactful, and representing our consumers, we think that would be very, very difficult for the american economy to with stand that the point in time in our history. the other factor is consumer confidence. i'm out every week talking to customers in our stores. when ifill talking with the customers who are -- i measure my own consumer confidence when i'm out talking with our consumers, and with the

situation and the economy and the job situation and other factors facing consumers, i think a default at this time would be devastating in that both reality and perception of consumers. >> i appreciate that. mr. marlo, i want to follow on with what my colleague was saying in terms of profits and i understand that c.v.s. caremark isn't necessarily in that category, but you did say you're paying almost effectively a 35% rate. and in essence, by paying a high effective rate, it seems to me your company and others similarly situated is paying for loopholes and then you have to avoid the actions of others. 1k3w so do you believe

aggressive -- the ability of companies to be able to take their overseas earnings and convert them into tax benefits here at home that ultimately provide them with a much lower effective rate, and you still paying a higher effective rate is a fair competitive set of standards? >> well, i think it certainly does create competitive challenges for us. acknowledging that we compete with domestic companies as well as foreign nationals that have the opportunity to have a lower tax rate. and i think that it goes back to the theme of this hearing in terms of we support an overall corporate tax reform review that would reduce our overall rate. i would like to go back and tag on to something mr. duke mentioned. consumer confidence, and bring

us back to the health care space. because we do see evidence of consumers today making decisions about when to get their maintenance prescription far chronic condition filled, and we see evidence they are getting it filled later which means they are not taking their medications as prescribed, and in many cases, dropping off those therapies. so we would be very concerned with the decline of consumers's confidence and how it would help americans. >> i appreciate that. i would like to work, mr. senator in a way that would encourage other companies to do so. but when i hear the choice is 5% as the rate to return the money on, it's hard to tell a person from new jersey who is paying 25% or higher in a tax bracket that we're going to do

a 5% rate for repatriation of foreign assets unless there's some connection with job creation, -- and we did it before i think it's problematic. so i'm one of those that says sign me up when there's a way we can have -- we pate yate thank you for your testimony, gentlemen. >> mr. mendez. -- menendez. >> i appreciate the witnesses' expertise and insights. the urgent need for tax reform as well as the direction in which we need to move is agreed, and that is a lower corporate rate and a territorial tax

system that does not impose a second layer of taxation on u.s. companies. the u.s. really is an outsider when you look at that. we have the second highest corporate tax rate in the world and other g.a. nations. we are the only one now that have a worldwide tax system. -- g8 nations. that combination makes it difficult for u.s. companies to compete. i would hope that we would take into consideration the testimony provided by our witnesses today and look at lowering rates, broadening the base, and putting american companies in a position where they can compete better globally. this may be a tough question to answer, but i would be interested in knowing from each of you if there's any targeted tax benefits that you would be willing to give up if it were necessary to do so? in order to lower our corporate tax rate to a level commensurate

with our major competitors in the move towards a territorial tax system. that is the whole debate right now. the way we do tax expenditures or tax preferences, if we close some of the loopholes or in order to lower rates, we may have the necessity of closing some loopholes or doing away with some targeted tax benefits. do any of you have observations of things you would be willing to give up? >> senator, we are willing to look at everything panned believe that they all should be on the table for discussion. as a multinational company, we receive some benefit. we are not into heavy research and development investment as a retail company, but there are benefits received today that we think should be looked at as part of an overall comprehensive plan. >> i guess i would add that i believe it is possible to have revenue-neutral corporate tax reform. the fiscal crisis is not easy

and this should not add to it. i think everything should be on the table. i would err in favor of a lower rate. if we can get the combined federal and state rate in the u.s. of 25%, then i'd think a lot of the incentives become less and less important. >> one of the hallmarks of the increasingly global economy is larger and roger portion of u.s. businesses is and outside the u.s. -- larger and larger portion. u.s. companies are moving operations abroad is the perception. there are others who believe that it is a necessity in a world where 95% of the consumers and 75% of global purchasing power outside our borders. can you describe briefly or discuss what this greater reliance on foreign revenue

means for u.s. jobs and is that a positive or negative thing? >> i will start. in the semiconductor industry, we are 80% overseas. we live and breed the this -- breathe this international footprint every day. i don't view it as a necessity. it is an opportunity for us to take things that we invent here or that we grow here and offer the products and services around world and benefit from that and leverage u.s. jobs and u.s. efforts to realize those gains. it is not evil and not a necessity, but a wonderful opportunity, growth potential outside the u.s.. we should be pursuing all those.

>> pistons 4 mr. duke or mr. -- this is for mr. duke or mr. merlo. what does it mean when you compete abroad with companies that are not u.s.-based? it comes back to the question that -- who are your major competitors and where are they headquartered and what challenges to the tax system present for you as you seek to expand markets around? >> senator, i could quickly named three large multinational retailer is that we compete against around the world.

tesko from the u.k. and metro from germany. we often compete for specific real estate sites to build new stores in markets around the world. that means there is an advantage in the calculation of return on investment. their return would be at a lower rate. an example of tesko in china, we would compete against recently. we would pay the 25% tax rate and an additional 10% as far as the u.s. rate. all sell, and it comes into play when even acquiring the business, and then, as i mentioned, tesco is now building stores and growing in the u.s. we are actually opening the door for foreign retailers to have an easier entry to compete in the united states against u.s.-based

retailer's. >> senator, i think mr. duke is spot on. i would add we have other countries out democrats -- we have other companies out then that the same principles that mr. duke mentioned apply and they create competitive challenges. >> thank you. time has expired. >> thank you. senator conrad. >> thank you, mr. chairman and thank you very much for holding this hearing. it is so important. i was part of the fiscal commission as was the chairman of the committee. i have been part of the group of six. they concluded you have to have fundamental tax reform to broaden the base, laurates to help us be more competitive. at the same time to raise additional revenue to couple with entitlement reform and to

couple with domestic spending reductions in order to get our debt down. that is the fundamental framework of the both the fiscal commission and the group of six. i would like to quickly ask each of you, does that fundamental framework makes sense to you? >> senator, the fundamental framework of debt reduction and fiscal responsibility certainly makes sense. the comprehensive corporate tax reform is important. we do believe all of this should be looked at on a long-term perspective. i think the earlier members of the discussion today mentioned the uncertainty. that's why our interest is in a long-term comprehensive tax reform plan that we think would be able to lay out what the future would look like for american companies. >> very important. let me just say, fundamental tax reform i don't believe can be done in six weeks or six months.

i believe fundamental tax reform is such a complicated undertaking would take us well into next year. joint tax's just told us they could not score some fundamental tax reform within the next six months because they do not have a model that would allow them to doodad. in terms of the basic structure of a strategy to get at our deficits and debt, do you favor of what the commission and the group of six have proposed? >> , yes, it makes sense. i would echo mr. duke's comments. it is taken as more than a generation to get to this point, so there will be a lot of things that have to be dealt with the correct our problems and get our fiscal house in order moving forward. >> i would agree with the comments made. fiscally responsible approach to adjusting to the major issues today. >> i agree with the panelists. there's no question a comprehensive reform is going to have to be thoughtful and have a lot of elements to consider and

just emphasize the point about predictability and certainty. that is a key byproduct of the decision making process. >> i appreciate that. let me go to a question on repatriation. i have asked my staff to look into what happens in the last repatriation. here's what they report to me. "a number of empirical analysis have been undertaken to assess the use of repatriated earnings and their impact on investment in u.s. growth and jobs. the studies found no evidence that the firms used repatriated earnings to significantly increase domestic capital investment, employment, or research and development, rather their earnings were largely used to benefit company shareholders through a stock repurchase programs even though this was explicitly prohibited by the measure." the memo goes on to say

"researchers also assigned specifically with regard to employment that the number of firms repatriating funds actually reduced employment in their domestic operations in the period after they repatriated funds. a tax economist found three of the top firms in repatriation produced u.s. employment in 2005 and 2006. i will not name the companies, but we have it all laid out here. i would just say to you that clearly fundamental tax reform needs to include how we are dealing with worldwide and,. -- worldwide income. i served on the commission in the reagan administration regarding taxing.

let me just say the argument that has been made by some on repatriation that it's going to create jobs here, we get it, it did not produce jobs here. that does not mean we should not do fundamental tax reform. if we are going to be competitive, if we have to get in the game. our tax code was designed at a time when we did not have to worry about the competitive position of the u.s. we were fully dominant when this tax code was developed. i don't think anybody, if they were going to sit down and devise a tax code for the united states in 2011 or 2012 would come up with one that looks anything like this one. my time has expired. i thank the panelists for their testimony. >> thanks very much for your work on the commission, the gang of six. it's clearly time to overhaul an

antiquated tax code. that is clear. but it's not going to be easy. one thing i have learned around here, abstractions' sometimes are cruelty because it is the specifics that really count. for example, a lot of talk about lowering the rate and broadening the base. the current corporate rate, 35%, the federal, how much good parade be lowered if all tax expenditures were eliminated? you don't get very far. sticking with the territorial system. you don't get very far. you get down to 9% approximately. the next question is what about interest expense? you want to eliminate interest expense. then you start to make little headway, getting the rate down quite significantly. i suspect in a lot of other

countries, other tax systems allow those countries to raise revenue, because revenue is a percentage of gdp is higher in those companies generally. i don't know. i have researched this, but it could be a combination of income taxes in those countries and value added tax and so forth. so it is not easy to get the breakdown to levels that people talk about, say 25% corporate rate or lower. it's not easy at all. the next set of questions, which potential expenditures are you willing to give out? theoretically, everybody gives up everything. but there are some specifics. for example, mr. duke, tax credits are pretty important to your company.

mr. falk, i suspect section 199 is important to your company. and mr. lang, clearly the tax credits are pretty important. so, i am asking are you willing to give each of those up for your company? as long as everything is given up? then we get to the question, if canada has given such a great incentive to research and development, if we give a tax credit, will a lower rate make u.s. semiconductor companies competitive so they can offset that canadian incentive? i would just like myou to tell me the degree and to what you are willing to give up? >> with the overall or corporate

tax rate that would be competitive in the global marketplace such as in the mid 20's for example, we would be willing to look at every aspect of those incentives that we participate in. we believe that all should be on the table for discussion. >> you are willing to give it all up as long as your great -- the corporate rate is mid 20's or something like that? >> yes, sir. if we are competitive against another market we are competing in. >> we take advantage of the research and development credit and the manufacturing credit and spend about a half billion dollars in capital in this country every year, taken advantage of accelerated depreciation. at the rate drops from near 40% to 22% or 25% -- >> i'm talking about the federal right now, not the state and local. >> those are a lot less

accountable. >> in the semiconductor industry association working group, we had this exact conversation. i would agree that everything should be on the table. we should look at the whole package and look at what the end result is. a number of things from incentives to accelerations and depreciation, etc., that were things where the rates would be worth putting aside. agreeing with other folks on the panel, we should look at everything. at the end of the day, the overall system needs to be competitive and allow us to compete in the global marketplace. >> after you look at things, we have to make decisions. i'm kind of asking for guidance, especially in your industry is 25% sufficient to compete with the canadiens? assuming you don't have the break. >> for our industry, the primary competitors will be asia.

defective or rather the statutory rates are 15% lower than that on an effective basis. when we look at the details, amid 20% rate may be competitive for the semiconductor industry. >> you're concerned that mid 20's might not rise to compete in asia or worldwide? >> yes, that is my belief. >> i agree with everything that is already been said. everything should be on the table. that will be imperative in terms of simplifying the tax code as welcome. has expired.s a >> thank you, mr. chairman. it's nice to talk about everything on the table, but are certain things that do make it competitive with the rest of the world and without any guarantee that the corporate rates will stay. we have to consider how all this works in the future as well. let me ask this question for the

panel. considering corporate tax reform, the focus is typically on the corporate tax provisions in the code. how important is it to focus on the impact corporate tax reform if we have on the company's financial statements? for instance, if a corporation has a net operating loss that it carries for from year to year, you cannot offset taxable income in future years? thus it can be a valuable asset to your company's. it can reduce taxes in future years. if a corporation has a $100 nol, it will reduce, given the corporate tax rate, by $35. current rules state that a $100 is worth $35. but if the corporate rate were reduced to 25%, then this nol assets would only be worth $25.

that is the corporation would lose $10 by virtue of the corporate tax rate going down 10 percentage points. this $10 reduction would initially show up as a $10 reduction in the corporation posted net income, and would lower the corporation's earnings per share. i am very supportive of the corporate tax code. no question about that. i would hope the effort to reduce the corporate tax rate would not be slowed down by the financial accounting considerations. understandcannot understa those are real concerns you have to be concerned with. the research and development tax credit is critical. 13 times we have failed to increase it. chairman and i have worked very hard. i'd like to make that permanent. i think it would give you a competitive advantage than the rest of the world because of the

inventiveness and creativity of the american scientists and workers, especially in your industry. i would like you to share your thoughts on this business of how you handle the accounting matters. should corporate tax matters be considered, the impact of reform? >> in the whole discussion of lowering the overall rate from 35 to 25, as we discussed, even related to the incentives and credits, we recognize there has to be trade-offs for the formula to work. we believe the same would apply to your question about the nol. it's worth it to have a permanent long-term corporate tax comprehensive provision that would have a competitive rate in the global marketplace and that transition related to the questions about nol as well as credits would be

worth the challenge, we think. >> my comment would be do the right thing for the country and the accountants will figure things out. i would not worry about the financial accounting implications of this. far more companies have a net deferred tax liability from taking advantage of things like accelerated depreciation. reversed a lower tax rates, they will enjoy an economic benefit. i would not let the accounting getting in the way of doing the right economic decisions for the united states. >> we are one of those companies that has nol's on our balance sheet and i would agree with the statements that we should do the right thing to make america competitive and to the right thing for the long-term structure of the business and accountants figure out how the financial accounting is impacted. >> i am not an accountant, senator, and i agree with my colleagues in terms of let the

finance folks figure things out and we will have our staff to get back with your staff on any further comments on this. >> that would be great. there are a lot of complexity is when trying to change the tax code. it is not too complex to realize we have to be competitive weapon the g8 and g20 and i would like to be more competitive. -- more competitive with them. i believe you guys would be more creative and create more products to sell. you guys are terrific at what you do. there are always a lot of trade- offs in this type of issues. we will just have to see what we can do. this has been a very valuable panel as far as i'm concerned. thank you for being here. >> thank you. senator wyden. all yours. >> mr. chairman, i have one

other question. >> go ahead. >> mr. duke, i was struck by your point with respect to your ultimate desire to have a tax rate in the mid 20's. that is very much in the ballpark for tax reform and i have tried to work with german baucus and colleagues on this for many years. -- chairman max baucus. we would like to work with all of your folks that and i'm looking at the mathematics. because deferral is so much money, like $500 billion over 10. you get rid of that and it is such a large amount and you use that to cut rates dramatically in the united states. i am absolutely convinced that you could get in the mid 20's. you also have the benefit of less gaming and more

straightforward system. my concern about going to a territorial system -- and i have put myself to sleep at night trying to understand all the aspects of territorial -- is that you will keep a lot of the complexity in the system, you will have lots of gaming and really transfer pricing, where somebody generates a sale one place, books to profit somewhere else, but especially you will have more business overseas rather than what the chairman started us off with in terms of more incentives for jobs in the united states. i personally think it will be pretty hard to get the rate in the mid 20's if you go to that kind of system. i was not able to figure it out and a lot of other people much

smarter than me. is it fair to say at the end of the day that you are willing to work throughout a lot of these concepts so that we can get to the point we started wicks, to have more american jobs and greater level of competitiveness in these tough global markets and you all are still open on the design of some of these components? >> yes, sir. we are clearly open for discussion and development of these. even though we talked some about our growth outside the united states, this year more than half of our capital investment is being invested here in the united states. we will invest $12.5 billion up to $13.5 billion and over half of it here. we desire to build more stores and grow in urban markets in the u.s. where jobs are needed and where product is needed. we are wanting to grow here in

the u.s., but we also have opportunities to grow and to really help american companies by growing outside the united states. we would love to work with you and discuss in more detail. >> i will give you all a question for the record in writing about tax policy and its effect on exports as well, because this is another opportunity for a growing more jobs in the united states. the chairman has been very patient. thank you. >> thank you, senator. we don't have much time. the question occurs, what about turning things around? i would change the code to get more foreign investment into the u.s. there needs to be more domestic investment in the u.s., which is the subject of this hearing. how do we get more foreign investment into the u.s.? we don't have time for this subject. [laughter]

>> lower the marginal rate for activity in the u.s. on a territorial basis and that would make the u.s. a more attractive investment for countries all over the world. >> simplicity, predictability, those arkies we have been talking about all morning. keys we have been talking about. >> its my understanding that our system is more complex. is that a competitive -- does that put america at a competitive disadvantage? >> a simpler system would attract more investors. >> thank you very much. this has been a very helpful hearing. i think we will have a lot more discussions. thank you very much. the goal is to get us to a much more competitive system. thank you very much. the hearing is adjourned.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> this morning, another look at the effect of federal law on the business community. the house small-business subcommittee on health care hold a hearing on the economic impact of "the affordable care act. live coverage begins at 10:00 on c-span3. coming up on c-span, ""washington journal" is next, live with your phone calls. that's all by the u.s. house with members from work on th