Letter Opposing the Inclusion of Proposals Which Limit or Repeal Deferral in the Budget Resolution

March 23, 2009

The Honorable Kent Conrad

Chairman

Budget Committee

United States Senate

Washington, DC 20510

The Honorable John M. Spratt, Jr
Chairman
Budget Committee
U.S. House of Representatives
Washington, DC 20515

The Honorable Judd Gregg

Ranking Member

Budget Committee

United States Senate

Washington, DC 20510

The Honorable Paul Ryan
Ranking Member
Budget Committee
U.S. House of Representatives
Washington, DC 20515

Dear Chairman Conrad, Chairman Spratt, Ranking Member Gregg, and Ranking Member Ryan:

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, strongly opposes the inclusion of proposals which limit or repeal deferral in the budget resolution. Limiting or repealing deferral would hurt the ability of U.S. companies to compete internationally and have serious negative consequences on the U.S. economy.

The United States employs a worldwide system of taxation. Thus, a U.S. company with foreign operations is subject to two levels of tax: one in the foreign country in which they operate and one in the United States. Deferral provides that the U.S. tax is not levied on these foreign earnings until the earnings are brought back to the United States. In contrast, other countries employ a territorial system. Under this system, operations of a foreign company are subject to only one level of tax, in the country in which they operate.

Ending deferral would be detrimental to U.S. companies operating in the global marketplace as they would be forced to accelerate the payment of U.S. taxes. This would be an increased expense for U.S. companies, thus making U.S. companies less competitive against foreign competitors who are only subject to only one level of tax. Quite simply, because the United States employs a worldwide system of taxation, deferral is a vital mechanism to keep U.S. companies competitive against foreign companies. Without deferral, U.S. companies and foreign companies do not compete on a level playing field.

The ramifications of limiting or ending deferral would adversely impact American workers and the U.S. economy. The operations of U.S. companies abroad stimulate U.S. exports, increase purchases from U.S. suppliers, and allow for expansion of U.S. research and development (R&D). With the economy in recession and exports abroad declining, Congress should not be considering proposals which would trigger further job losses and lead to a prolonged economic downturn.

The Chamber strongly opposes the limitation or repeal of deferral in the budget resolution. Limiting or ending deferral would hamper the global competitiveness of U.S. companies, impede growth in the U.S. economy, and result in the loss of jobs at home.

Sincerely,

R. Bruce Josten

Cc: The Members of the House and Senate Committees on Budget