David Farr, CEO and chairman of Emerson Electric (EMR) and chairman of the National Association of Manufacturers, says Washington D.C. has put American manufacturing at a “clear, competitive disadvantage” with the high corporate tax rate.
In a speech at the Economic Club of New York on Wednesday, Farr said it’s “indefensible” to not have a competitive tax policy in the United States.
“If you are like me, you look at those numbers and you ask: what are we doing to ourselves? And why? What are we doing to our people? Why is Washington D.C. making it harder for America to win in the world? This is so stupid! So dumb from my perspective!” he said.
He decried the fact that the top corporate tax rate in the U.S. can exceed 39% when federal and state rates are combined. That’s the highest statutory rate among the 35 industrialized nations of the OECD, and 50% higher than the average rate, he added.
While the tax code isn’t the only problem, it’s “one of the biggest and most impactful” for U.S. manufacturers, he said. He argues that a “more modern tax code” would allow companies like Emerson to hire more workers.
“America has some incredible advantages: unparalleled resources and an unbeatable, hard-working, and dedicated workforce,” Farr said. “But if we modernized our tax code for the modern economy… if we let our companies compete on a level playing field in the world — we could lift up more families — invest in more communities — unleash the power of this industry — and improve the lives of all Americans, and this great nation.”
Farr outlined some key changes that he’d like to see. First, he said the corporate tax rate should be reduced to 15%. Second, he’d like the government to “stop punishing” companies reinvesting overseas earnings back into the U.S. He noted that 50% of Emerson’s sales in 2016 were outside of the U.S. Third, he said the U.S. needs a robust capital cost recovery system for investments manufacturers make in their businesses. Finally, he’d like to see strong R&D incentives both in deductions and a strengthened R&D credit.
“We have the best chance in decades to get this done,” he added.
He reiterated his warnings about the current tax code.
“If you are defending the current tax code, then you have to defend a manufacturing worker in Ohio losing his or her job to a worker overseas. If you are defending the current tax code, you have to defend years and years of mediocre economic growth, stagnant wages, and entire communities losing hope for future prosperity. If you are defending the current tax code, you are defending less innovation, fewer technological breakthroughs, less R&D, and fewer lifesaving medical discoveries.”
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.