In an interview with Fox News Sunday’s Chris Wallace today, FedEx founder Fred Smith said the corporate tax code needs to be reformed to get the economy moving again and that the nation’s energy policy, trade policy and new regulations are blocking the economy’s ability to grow.
Here’s the interview -
Wallace: Mr. Smith, how deep of a hole are we in right now and is Washington making it better or worse?
Smith: Well, I think the economy is slow. Our economist and our information would not show that we are not entering a recession, but the policies that we are pursuing at the federal level are certainly not creating a situation which would create growth in the economy, either.
Wallace: When you say — what is hurting growth that’s coming out of Washington?
Smith: Well, the economy is divided in two parts, investment and consumption. And investment is virtually 100 percent correlated with job creation and our investment levels are significantly below where they have been in the past. So, our corporate tax code, our energy policy, our trade policy and the tremendous increase in regulations are all impeding the economy’s ability to grow at reasonable levels.
Wallace: Mr. Smith, you do business all over the world, is Mr. Kent, right?
Smith: Well, we have been in China for 25 years and in our sector of transportation there are plenty of challenges in China, I can say that for sure. But, we have had a tremendous growth spurt there.
Wallace: Mr. Smith, I want to follow up on that. We had the president’s chief strategist, senior strategist David Plouffe on “Fox News Sunday” last week and he made the argument that you’ve heard a lot from the president and the White House, the wealthy aren’t paying their fair share. Mr. Smith, is the White House right? Are business men like you and Mr. Johnson getting off too easy on taxes?
Smith: Well, I think you have to divide the tax argument into a little bit more discreet argument. First of all, the top 10 percent of the taxpayers in the United States pay 70 percent, or near 70 percent of all federal personal taxes. Corporate taxes are only about 9 percent.
The problem is, when you talk about personal taxes, it takes everyone’s eye off of the corporate tax situation. And from 1986 forward, the United States has had in essence a similar tax code for corporations as they do for individuals. And that is a big part of our slow investment and why we are not getting the jobs.
Let me give you an example that goes back to the interview with Mr. Cain. 9 percent sales tax that he advocates is similar to a value-added tax in Europe and elsewhere. Under the world trading rules, the value-added tax is deductible from exports where our corporate income tax is not.
So we are playing with one hand tied behind our back when it come to exports, which is one of the biggest potential growth areas that the United States has. That’s why the corporate tax has to be lowered, it has to be configured for a world wide economy and it has to incent business investment.
Wallace: All right. We’ve got two prescriptions here in Washington for what to do. The president as you all know has proposed a new jobs plan, it would have more short-term spending stimulus they call it, more short-term tax cuts. But down the road starting in 2013, $2 trillion in additional taxes over the next decade, and then going on beyond that.
Republicans say cut spending, cut regulations, get government out of the way.
Mr. Smith you are a Republican, as we said Mr. Johnson you are a Democrat. Let me ask you both starting with you Fred Smith, which side has got the better argument?
Smith: Well, entitlements have to be reformed. And you can either reform them by some sort of rationing, or regulations, or you can do it by market forces and means testing. That’s what Congressman Ryan has proposed and which based on my experience is far the better answer.
But regardless was which side you choose, neither can be successful unless we can get the economy growing at a rate that is able to pay for the entitlements. And absent a more modern, you know, advanced tax structure and we are not competitive with the rest of the world that incents businesses to invest, a better energy policy which creates a much bigger pool of energy that comes from North America rather than shipping hundreds of billions to the Mideast and elsewhere, we can’t be successful.
Wallace: And Fred Smith, if (President Obama) were one of your division heads would you keep him on or would you let him go?
Smith: Well, the president is for corporate tax reform. And I would simply say, Mr. President, to keep your job here, you need to reform these taxes and getting America back to work in the industrial sector rather than all of this financial speculation and we can do that. And I think he actually supports that.