Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Business Roundtable Urges Corporate Tax Reform

Author: James F. McDonough

Date: March 16, 2015

Key Contacts

Back

The Business Roundtable recently urged a reform of federal corporate tax policy, and John Engler, president of the industry representative, presented this view to Washington lawmakers on March 11.

During a Senate hearing about balancing the federal budget, Engler, a former governor of Michigan, emphasized the importance of pro-growth policies.

Corporate Tax Policy

The former governor warned that if the federal government keeps generating deficits, such a situation will have an adverse impact on economic conditions. With this concern in mind, he pointed out flaws he perceives in the current corporate tax policy and offered some solutions.

Engler specifically stated that U.S. companies have a harder time expanding in the global economy because of the nation’s corporate tax system, and that this situation undermines the labor market, wages and investment in the world’s largest economy.

Foreign M&A

In addition, U.S. tax policy prompted a large number of foreign companies to purchase American businesses, according to a study released by the Business Roundtable March 10. This research, conducted by EY, evaluated more than 25,000 cross-border merger and acquisitions.

The accounting firm compared the differing outcomes of using the corporate income tax rates that existed between 2003 and 2013 and a rate of 25 percent, the average of The Organisation for Economic Co-operation and Development nations.

M&A trends

The research found that if the U.S. tax code had used the lower rate during this period, U.S. companies would have purchased $590 billion in cross-border assets as opposed to losing $179 billion worth of these assets.

The difference between the two figures is $769 billion, which represents the amount of assets American businesses have lost because of the tax policy used at the time. In addition, the report estimates that if the nation had used a 25 percent corporate income tax rate, doing so would have resulted in 1,300 companies remaining in the U.S. during the last 10 years.

Amid all these figures, Engler lamented the outflow of key resources he believes have stemmed from current income tax treatment of companies based in the world’s largest economy. As a result of these policies, the U.S. has become “a net exporter of headquarters, valuable assets and startup technologies,” he said in a statement released along with the results of the EY study. “We’ve got to reverse this trend.”

Engler’s proposal

To fix the situation, Engler suggested taking two key steps. For starters, he proposed lowering the corporate income tax rate at 25 percent, which he contended would be more competitive than the current policy.

Secondly, he suggested adopting a “territorial” system of taxation, which would stop penalizing the repatriation of foreign earnings to the U.S. once and for all. In addition, this proposed system would eliminate any taxation of the active foreign earnings of American companies over and above the foreign taxes paid.

By doing so, Engler contended the U.S. federal government would align its tax policy with that of its largest trading partners.

Experts weigh in

While Engel has claimed that existing corporate income tax policy is undermining U.S. business conditions, some experts contend the accounting firm’s analysis oversimplifies the situation, The Wall Street Journal reported. According to these pundits, the impact that such policies have on U.S. companies is uncertain.

A perfect example of how the tax code can encourage American companies to buy foreign firms is the current treatment of repatriated earnings, according to the news source. Under existing policy, firms need to pay income taxes on any earnings they produce overseas and then bring back home. As a result, companies can either leave these resources overseas or use them to purchase companies based in foreign nations.

Impact of US dollar

Another variable that could have easily affected M&A over the last decade or so is fluctuations in foreign exchange rates. While the U.S. dollar has made a strong recovery over the last year, it was trading lower against many other currencies for a large majority of the last 10 years.

Many foreign companies took advantage of the weaker dollar, using it to take advantage of cheaper deals on American companies. This development spurred some robust M&A activity for firms based overseas.

While the statements that Engler made before Washington lawmakers – and EY figures he cited – may combine to create what looks like a compelling case, the actual situation may be far more complicated.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Scarinci Hollenbeck Expands NYC Real Estate and Litigation Practices ADDING four litigators post image

Scarinci Hollenbeck Expands NYC Real Estate and Litigation Practices ADDING four litigators

NYC Real Estate and Litigation Attorney Ryan O. Miller and Team Join Scarinci Hollenbeck, LLC New York City, NY – August 13, 2025 – Scarinci Hollenbeck, LLC has strengthened its Real Estate and Litigation practices with the addition of four New York City-based attorneys. Ryan Miller, who joins as a partner, is well known for […]

Author: Scarinci Hollenbeck, LLC

Link to post with title - "Scarinci Hollenbeck Expands NYC Real Estate and Litigation Practices ADDING four litigators"
What is Business Law and Why Is it Important? post image

What is Business Law and Why Is it Important?

Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]

Author: Dan Brecher

Link to post with title - "What is Business Law and Why Is it Important?"
Corporate Transactions: Best Practices for Successful Deals post image

Corporate Transactions: Best Practices for Successful Deals

Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]

Author: Dan Brecher

Link to post with title - "Corporate Transactions: Best Practices for Successful Deals"
How to Conduct a Fair and Legal Employee Termination in 2025 post image

How to Conduct a Fair and Legal Employee Termination in 2025

Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]

Author: Angela A. Turiano

Link to post with title - "How to Conduct a Fair and Legal Employee Termination in 2025"
Admin Dissolution for Annual Report: What You Need to Know post image

Admin Dissolution for Annual Report: What You Need to Know

While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]

Author: Dan Brecher

Link to post with title - "Admin Dissolution for Annual Report: What You Need to Know"
What Is Antitrust Litigation Law? post image

What Is Antitrust Litigation Law?

Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]

Author: Robert E. Levy

Link to post with title - "What Is Antitrust Litigation Law?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!