Difference in Effective Corporate Tax Rates and Tax Reform: What Does it Mean for Different Industries?
At a recent event sponsored by the American Council for Capital Formation, I had the opportunity to brief those present about the effective corporate tax rate for my employer, Con-way Inc., a Fortune 500 Trucking and Logistics Company. Our effective rate approaches 40% (which includes federal, state and foreign income taxes) and is similar to that of our competitors. As I listened to other industry representatives speak about effective corporate tax rates in their various industries, it dawned on me that the difference in effective corporate tax rates can result in capital flows into industry sectors much like the difference national corporate tax rates have on capital flows between nations. Up to this point, much of the discussion of corporate taxes has focused on the difference between worldwide tax rates and how capital flows tend to gravitate towards countries where returns on investment are enhanced by lower corporate taxes. If the global competition for capital is real, then it stands to reason that competition among industry sectors for capital is real as well. Much of the difference between industries is in some ways inadvertent – the cumulative result of years of tax policy changes. This greatly increases the complexity of…
