The U.S. Congress is engaged in a consequential debate about corporate tax reform. The details will matter, but a competitive U.S. tax system will boost economic growth here at home and level the playing field for U.S. businesses and workers — including Procter & Gamble’s U.S. employees here in Maine.
In Auburn, P&G has been operating a plant for 20 years. With an annual payroll of more than $25 million, the plant supports more than 400 jobs directly. Our employees come from 70 communities spread over eight counties in Maine.
As a U.S. company for more than 180 years, Procter & Gamble sells consumer products in more than 180 countries. The Auburn plant is the only plant that produces Tampax products for the U.S. and Canada. Tampax is the worldwide market leader in the tampon industry, helping make P&G the global market leader in the feminine care category.
Congress is currently considering legislation that would lower the U.S. federal corporate tax rate to 20 percent and move the U.S. tax code from a worldwide corporate income tax system closer to what is known as a territorial tax system (which taxes income where it is earned and not additionally in the parent company’s home country). Both these reforms are crucial to the future competitiveness of U.S. production and U.S. industry’s global competitiveness.
The current U.S. federal corporate tax rate is among the highest in the developed world at 35 percent, plus an average 4 percent state income tax for a total of about 39 percent. The current global average for developed countries’ total federal state and local income tax is about 24 percent, and many countries are lowering their rates further, creating a downward trend.
Moreover, P&G’s competitors headquartered outside the U.S. — who already operate under a territorial system — do not pay additional tax to their home countries when they sell products outside their home countries. This makes it harder for P&G and other U.S.-headquartered businesses to compete with peer companies headquartered overseas.
Because of tax rate differences and the absence of a territorial system in the U.S., P&G’s foreign rivals start from a more competitive position. Lower tax rates in countries such as the U.K, Germany or even Canada, at 15 percent, mean that foreign headquartered firms can operate with either higher profits or with lower prices.
If U.S. policymakers do not fix this economic disadvantage, it means U.S. jobs and companies such as P&G will be at risk in today’s global economy. European, Japanese, or Chinese flagged competitors around the world will be able to tip the scale against U.S. products — developing and marketing their products in ways that U.S. companies cannot because U.S. products must absorb an uncompetitive U.S. corporate tax rate.
Fortunately, Sen. Susan Collins understands the importance of securing U.S. corporate tax reform. She voted in support of corporate tax reform in the U.S. Senate to preserve and protect U.S. jobs and U.S. companies operating in Maine.
Rick Duffy is plant manager of Proctor & Gamble’s Auburn plant.
Rick Duffy
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