Randy Zook, CEO of the Arkansas State Chamber of Commerce and Associated Industries of Arkansas, says reducing the federal corporate tax rate from 35% to 20% is critical for U.S. companies to remain competitive worldwide.
“It makes us more competitive in the global economy,” said Zook, who appeared on this week’s edition of Talk Business & Politics. “It avoids the trapping of profits earned overseas by U.S. companies because of the possibility of having to pay yet another tax when you bring profits back into the U.S. So the money sort of is in a box overseas and not available for investment in plant and equipment and wages and dividends.”
Zook said analyses that suggest the tax cut plans being discussed in the GOP-controlled Congress would balloon deficit spending don’t account for economic growth that would be stimulated by the cuts.
“The key to all of this is the impact on growth in the U.S. economy,” he said. “With this tax change, the likelihood is we’re going to have greatly accelerated growth. Compared to the relatively anemic growth rates that we’ve had over the last several years, we should see our growth rate in the economy expand as much as twice what it is today. From one and a half to three plus, maybe even 4%. And that growth is going to generate more revenue and should offer opportunities to keep the deficit at least in reasonable control compared to where we are today.”
While he warns that federal spending still needs to be better managed, Zook said he doesn’t think tax cuts will result in lopsided revenue losses.
“Our experience is that every time we’ve had substantial tax reduction and reform, federal revenue has increased not decreased. So, I think the proof will be in the pudding… it’s the only tool in the box to get the economy growing at the rate we need it to grow,” he said.
STATE TAX REFORM, WORKFORCE NEEDS
Zook also addressed two major corporate priorities in Arkansas. He said that despite a prolonged review of the state tax code, he’s not sure that legislators will make dramatic alterations from a task force studying changes.
“I would encourage the legislature to be careful and prudent in their considerations of this very complicated issue,” he said, noting that we may not see something as ambitious at the state level as we do at the federal level.
“I think not, you know just judging the two. First of all, you have much more potential change at the federal level because the rates are much higher and the impacts are higher. So that’s where you can really get some impact on what people pay in taxes. You know if everybody in the U.S. sees, on average, a $1,500 to $2,000 tax reduction next year, that’s going to change folks’ outlooks.
Zook also said that Arkansas businesses need to step up and do more to affect change in workforce development. The state and nation are facing a looming crisis of skilled labor shortages due to retiring baby boomers.
“Business is going to have to accept more of the responsibility for making these changes or underwriting the cost of the changes. Getting the right resources in place, put some more skin in the game for equipment and instructors,” he said. “It’s just a matter of the right emphasis and the right resources being put in play in the right places. And more and more that’s happening across the state. Enormous progress has been made. There’s just a lot more to go.”
Watch his full interview below.