COMMENT: Why the US budget will leave American businesses playing catch-up
Businesses want certainty, and they want quick, decisive action on tax reform. President Barack Obama’s budget did not provide for any of these, and the continuing delays in action being taken could hurt US companies for some time to come.
Before the budget was announced last week, industry bodies were lobbying Obama to implement changes that improve the worldwide competitiveness of American businesses, increase economic growth, and provide for sustained job creation.
Bodies such as the PACE Coalition, Business Roundtable, National Association of Manufacturers and the US Chamber of Commerce, all urged Obama to rethink the announcements he made in his State of the Union address, and to avoid higher taxes on international commerce.
But, following the budget speech, the consensus seems to be that rather than focusing on pragmatic solutions and sound tax policy, the President’s proposals are more geared towards trying to please the electorate and drum up support for his re-election campaign.
It was quite clear that what business wanted from the budget was an insight into the specifics of comprehensive corporate tax reform, but this did not come. Indeed, this was perhaps unrealistic given that the government had already stipulated that the issue would be dealt with separately.
But, some would argue, the budget speech is the ideal platform from which to project such policies, and the lack of it being addressed did leave businesses with a feeling of lingering uncertainty and of nothing being any clearer than before the speech – surely not a good sign.
The critics do have a point. Everything about Obama’s speech seemed to be concentrated on good campaign rhetoric and presidential appeal, rather than the enactment of any fiscal plan. From the school gym setting to the friendly and supportive atmosphere, to the endless case study examples of real local people juggling jobs and real local businesses striving to create jobs, this was definitely Obama in campaign mode.
This is of concern to American businesses because, as pointed out by John Engler, president of the Business Roundtable, the rest of the world is not taking the year off simply because the US is having an election. While other countries continue to propose and implement tax policies aimed at increasing competitiveness and growth, the US cannot afford to wait for the political atmosphere to clear before playing catch-up.
The Obama administration needs to show a more business-friendly approach. Senate Finance Committee member Michael Enzi’s (R-WY) international tax reform bill to adopt a territorial tax system, introduced last week, is a good start and builds on some of the progress made in Dave Camp’s October discussion draft. The bill does not deal with a corporate tax rate reduction, but this will be handled in its own right, though this too should be done sooner rather than later.