July 26, 2007
HP-508

Paulson Closing Statement at the
U.S. Business Tax Competitiveness Conference

Washington, DC--I hope that this morning's discussions have been as informative for you as they have been for me.

The distinguished experts and leaders who joined us did not disappoint; we have heard a variety of perspectives and candid discussion. And there is a strong consensus that our business tax system is far from optimal, and is undermining the competitiveness of American workers.

The business tax system has a very tangible impact on workers' daily lives and living standards. The goal of a business tax regime should be to minimize economic distortions and allow capital to flow to its most efficient use. Capital is the necessary fuel that provides workers the greatest opportunity for productive jobs, higher incomes, and living standards. Higher living standards, efficient use of capital and maintaining competitiveness are our mutual goals. They are the answer to the question "What are we trying to achieve?"

This morning we examined the options for answering the logical next question, which is "How do we best achieve it?" We heard from professors and policy-makers who have studied how to address the issues of complexity, targeted preferences, depreciation regimes, and incentives for entrepreneurship for many years. CEOs educated us on the impact the tax system has on investment, innovation, and expansion decisions. We heard some ideas for improving the system without sacrificing revenue, which could bring greater prosperity through new jobs and increased opportunities for workers.

It is clear from our discussion that America needs to remain alert and responsive to changing global economic conditions. Other nations have seen the results of the bold tax reforms enacted by the U.S. in the 1980s and they have moved to follow our example. And with much of the world having reduced their corporate rates, we now have the second highest statutory corporate tax rate among OECD nations.

The American economy today is healthy and we have record-low unemployment. But we must look to our future competitiveness with the goal of making sure that our policies recognize and respond to changes in the global marketplace.

We can't turn back the clock on globalization, nor should we want to. A globally integrated economy leads to greater innovation by American companies and gives American consumers a wider variety of choices and lower prices on a wide range of products from food to clothes to cars. Our business tax system must be one that will help our companies and workers successfully compete in a dynamic global economy.

We heard many good ideas and relevant insights here today. Much of our discussion confirmed what we at Treasury have already identified as elements of our business tax system that are obstacles to U.S. competitiveness. We also heard insights and ideas that have prompted additional thinking. We will spend some time digesting today's discussion and will then develop specific follow-up steps in the coming months to build support for the need to improve our business tax system, and ideas for doing just that.

It is important to act comprehensively and prudently, rather than respond on an ad hoc basis to current headlines. Promoting an efficient business tax system is a high priority for me, and I look forward to working with you on this complicated and significant endeavor.

Thank you again for joining us this morning.