It’s funny that when it comes down it, the uncertainty mask falls completely off. Here Exxon Mobil is cool with totally scrapping the system and starting from scratch, but is “apprehensive” about the uncertainty a “hunt for revenue” would cause:
Large multinationals are only marginally affected directly by income-tax provisions on the table this year. Yet the stakes might be high for these companies. Executives worry about becoming a target for lawmakers seeking revenue to narrow deficits. If a broad revision “is a true ‘step back, let’s take a fresh look,’ we would not be frightened by that,” says Ken Cohen, a vice president at Exxon Mobil Corp. But if it pits industry versus industry or becomes a hunt for revenue, “that’s the process we would have much more apprehension about.”
At least the Journal is good to point out that there are problems with its thesis (emphasis mine):
Some call the worries exaggerated. “I truly do believe the concerns expressed over tax uncertainty are truly overblown,” says Martin Sullivan, an economist with Tax Analysts, a nonprofit tax publisher, who sees today’s situation as quite manageable compared with the profound business uncertainty companies faced during the financial crisis.
“We’re used to [uncertainty] in the tax world,” he says. “What’s changed in the last few years is the size of the temporary extensions.”
Don’t get me wrong. These issues do indeed have an impact on business decisions:
This means that if the compromise passes largely intact, the U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups. This on top of dozens of corporate-tax provisions that already were subject to annual renewal.
Nobody but tax lawyers and accountants is going to argue that the current tax system makes much sense.
And the paper is good at describing why the current system is the way it is (emphasis mine):
Political division contributes because of the daunting task of mustering a filibuster-proof 60 votes in the Senate. Legislative shepherds of the Bush cuts resorted to passage under what is called “budget reconciliation,” requiring only a majority vote. But a measure passed this way can’t be for longer than the budget that authorizes it, in this case 10 years. Hence the provisions expire in 2010.
Such an outcome is less likely in countries with parliamentary systems because these leave the government less subject to having its will thwarted by a large minority. “Very few countries have tax provisions that expire unless legislative action is taken,” says Jeffrey Owens, head of tax at the Organization for Economic Cooperation and Development in Paris. “Also, in most OECD countries, it’s the government that initiates new legislation, and once proposed the legislation generally passes.”
But the uncertainty meme is all too often PR in businesses anti-tax quiver. The real uncertainty that’s causing corporations to sit on that $2 trillion cash pile, rather than investing it and hiring people, is the terrible economy. It’s unclear where demand is going to come from as the economy deleverages.
Taxes are an issue, but a relatively minor one in comparison.