TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. and fiscal policy are a key priority for the economy going forward, according to over one hundred leading CEOs who attended this year’s Wall Street Journal CEO Council.
In the annual meeting earlier this week, CEOs cited fiscal policy changes—in addition to issues regarding primarily structural reform of education and infrastructure—as key reforms to boost US competitiveness. Specifically, executives cited the need for a pro-growth agenda that includes corporate tax reform and a capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. abatement.
At the conference, CEOs highlighted corporate tax reform as well as easing trade and business regulations, as potential pro-growth reforms. Corporate tax reform has supporters on both sides of the aisle, including WSJ CEO Council participants Senator Rob Portman (R-OH) and Congressman Chris Van Hollen (D-MD), as both sides begin to acknowledge the benefits of a corporate tax rate cut, specifically for American workers. However, political gridlock continues as a source of considerable concern for CEOs.
What’s more, the CEOs highlighted the need for a capital gains tax abatement for holding shares over an extended period of time. Executives seek more management-shareholder alignment through a capital gains tax that incentivizes shareholders to take a more long-term approach to investing, which they view as an important step toward enhancing U.S. competitiveness and growth prospects.
Amid widespread fears of weak global economic growth, it’s no surprise U.S. tax and fiscal reform is emphasized among industry leaders. Europe and Japan are flirting with both recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. and deflation, while Chinese GDP growth is on the downturn. Moreover, as a Federal Reserve rate hike becomes increasingly imminent, the effect of artificially low interest rates, providing a shot in the arm for U.S. businesses, will likely abate in 2015. Granted, the drastic tumble in oil prices as of late may mean an immediate benefit to the U.S. economy in the short-term; however, such price drops due to increased supply are volatile and don’t necessarily affect U.S. long-term economic strength.
Against that backdrop, a push for U.S. fiscal, pro-growth reform becomes even more critical.
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