NEW YORK (Reuters) - The U.S. corporate tax rate should be lowered to encourage competitiveness with rivals around the globe, the chief executive of conglomerate Honeywell (HON.N) said on Thursday, days after a U.S. senator proposed sweeping changes to the tax code.
David Cote, CEO of New Jersey-based Honeywell since 2002, said it is in the best interest of the United States to have a tax policy that allows its companies to better compete in emerging economies that are projected to grow more quickly than developed peers.
“We need to have a globally competitive tax system for our companies,” Cote said in an interview. “If you put U.S. companies at a disadvantage when they’re competing in emerging economies, we’re making a huge mistake.”
Honeywell, which makes products ranging from thermostats and break pads to aerospace and medical components, derived more than half its $37.66 billion in revenue last year from outside the United States.
Cote said he intends to bring the same attention to the tax debate as he does to the “Fix the Debt” campaign, in which CEOs spent most of last year lobbying President Barack Obama and Republican lawmakers to reach a deal to reduce the national debt.
The current U.S. corporate tax rate of 35 percent is too high and should be lowered to help his and other companies compete, Cote said.
“Feel free to tax distribution, when I get paid, when my people get paid, when shareholders get paid,” Cote said. “But don’t tax the companies that are in the middle of trying to compete with new and growing firms.”
Democratic Sen. Max Baucus on Tuesday issued a “discussion draft” - effectively a memo, not proposed legislation - that he hopes will motivate U.S. multinationals to bring home billions of dollars in profits stored offshore at a low 20 percent tax rate.
The plan would also make taxation on some, but not all, foreign profits compulsory.
Cote said he “loves the fact” that Baucus has opened the tax reform debate. But he added that he would have a “tough time” supporting parts of the proposal that could boost overseas corporate taxes.
The issue could prompt a “schism” among domestic-focused U.S. companies and multinationals, he said.
Companies that operate primarily in the United States have been inclined to favor high corporate tax rates on overseas earnings to lower their own tax bills.
For instance, industrial gas supplier Airgas Inc ARG.N, which operates through the contiguous United States, has said it prefers the business community advocate for lower U.S. domestic rates before lower overseas rates.
Cote is set to be awarded membership in the Horatio Alger Association next year for his philanthropic and educational work.
He started his working career washing windows and cleaning bathrooms at his father’s gas station at the age of 12, tasks that, while menial, cultivated a spirit of hard work and customer service that stick today, Cote said.
“Our customers could go anywhere they wanted to buy gas. At the end of the day, if we did the job right, they came back,” he said.
Cote’s rise to become one of the world’s most-influential CEOs mirrors, in some ways, a Horatio Alger novel, a fact the association mentioned when it chose him.
Cote said that with his award, he and Honeywell intend to sponsor scholarships and Honeywell internships for disadvantaged youths. The amount of scholarships and the number of internships have not yet been determined.
“When you look at the caliber of these kids that are coming up and the drive they’ve had to exhibit in order to get through what they’ve been through, those are the kind of people you want to be supporting in our society,” Cote said.
Editing by Bernard Orr and Dan Grebler