Corporate income taxes - where are they headed?

• Position: Panel discussion

Corporate income taxes--where are they headed?

The amount of income taxes paid by corporations has been increasing for the past seven years. Will this trend continue? Are there viable alternatives to the nation's need to increase federal revenues? Members of FEI's Committee on Taxation lead a discussion which examines the perception that an increase in corporate taxes is justified. Many financial executives view with concern recent increases in corporate income taxes. The Financial Executives Research Foundation (FERF) has issued a study on The Corporate Tax Burden in the United States. The FEI Committee on Taxation is also following this development, and recently Frederick L. MacDonald of General Motors, and a member of the study's advisory committee, led a panel discussion of these issues.

Members of the distinguished panel were: William G. Dakin, supervisory tax counsel, Mobil Corporation Frederick L. MacDonald, assistant general tax counsel, General Motors Corporation Mark L. McConaghy, Price Waterhouse, Office of Government Services Gillian M. Spooner, Peat Marwick, coauthor of The Corporate Tax Burden in the United States MacDonald: There is a public perception that corporations are not paying enough taxes, and I think we here share a concern that the business community is going to be targeted as a primary source of increased federal revenue. Mark, what kind of a need does the federal government have? McConaghy: The Office of Management and Budget has forecast numbers that show that the Gramm-Rudman-Hollings target will be met next year without revenue increases. However, these projections assume current services (that is, no new programs) and are based on fairly optimistic assumptions. I hope those assumptions come true. On the other hand, the Congressional Budget Office has projected that the Gramm-Rudman-Hollings target for next year will not be met and that $25 to $30 billion will have to come from a combination of spending cuts and revenue increases in order to avoid sequestration. CBO's assumptions are less optimistic and tend to follow the average of the 1980s. If I had to guess today, I would say that it is likely that somewhere between $5 and $10 billion in revenues will be needed. Spooner: Whether the amount of the additional revenue is $5, $15, or $25 billion, we know it's not all going to come from individuals. Some people are talking about additional excise taxes meeting our needs, but I don't think that's going to happen alone. You're not going to get any tax bill without some base broadeners for the corporate sector. McConaghy: I agree with Gillian. It's an eye opener when you read the results of a 1,000-person telephone survey that was commissioned by FEI's Committee on Taxation. According to its findings, the general populace believes by a ratio of about 2 to 1 that corporations are not paying their fair share of taxes. I remember Ken Duberstein once said that when you can keep revenue increases on page two of the business section, the general public isn't as concerned that a tax bill is being enacted. Spooner: It is also easier politically to change the more complicated technical provisions, rather than something like rates, which everybody can...