Former Founder, Chairman & Chief Executive Officer, FedEx
10/2/11 Former FedEx CEO and founder Fred Smith on high corporate taxes sending jobs overseas
The U.S. has the highest corporate tax in the world. Not only is that passed on to the consumer as a hidden tax but it makes our corporations less competitive in the overseas market against overseas corporations.
About Frederick Smith
Frederick Smith, founder and former CEO of FedEx, has continued to comment on trade, economic policy, and supply chain issues in public appearances. In a January 2023 conversation at MIT, Smith said he was personally disappointed by China's shift toward a "state directed Mercantile path" after he had pushed for its entry into the WTO. He also stated that "work is now optional" in the U.S., attributing inflation and slow growth to a lack of blue-collar labor willing to work. Smith expressed support for a carbon tax and said FedEx does not view Amazon as a direct competitor. In earlier appearances, Smith advocated for infrastructure investment, calling the 2021 bipartisan infrastructure bill "a step in the right direction." He said the U.S. should not abandon the Trans-Pacific Partnership but improve it, and warned that withdrawal from NAFTA would have "massive repercussions." Smith has repeatedly called for lowering the U.S. corporate tax rate and adopting a territorial tax system, arguing that the current code discourages investment. He also stated that 85% of U.S. job losses over the past 25 years were due to automation, not trade.
Transcript (6 segments)
✨ AI-enhanced transcript with speaker attribution
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Interviewer0:00
And one of the things that got us thinking about this subject this week were the comments from Muhtar Kent, the CEO of the Coca-Cola Company. He said it's easier doing business in China, which he compared to a well-managed company, and he said that in the U.S., high taxes and the political divide are hurting business and hurting investment. Mr. Smith, you do business all over the world. Is Mr. Kent right?
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Frederick Smith0:25
Well, we've 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. What I wish I could say is that the United States does not have challenges, and we have significant challenges as well.
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Interviewer0:49
Mr. Johnson, another business leader spoke out this week. Ted Leonsis, who was one of the people who helped build AOL and, as you well know, is now the owner of two big sports teams here in Washington, he wrote a blog about the president and some of his statements under the headline 'Class Warfare? Yuck.' And he wrote this: 'Some in the Democratic Party are now casting about for enemies, and business leaders and anyone who has achieved success in terms of rank or fiscal success is being cast as a bad guy in a black hat.' Mr. Johnson, Ted Leonsis is a big Democratic donor, as are you. But is the president playing class warfare?
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Frederick Smith1:35
Well, I think the president has to recalibrate his message. You don't get people to like you by attacking them or demeaning their success. You know, I grew up in a family of 10 kids, first one to go to college, and I've earned my success. I've earned my right to fly private if I choose to do so. And by attacking me is not going to convince me that I should take a bigger hit because I happen to be wealthy. You know, I think Ted and Fred and I both sort of take the Ethel Merman approach to life: I've tried poor and I've tried rich, and I like rich better. Doesn't mean that I'm a bad guy. I didn't go into business to create a public policy success for either party, Republican or Democrat. I went into business to create jobs, create opportunity, create value for myself and my investors. And that's what the president should be praising, not demagoguing us simply because Warren Buffett says he pays more than a secretary. He should pay his secretary more, and she'll pay more.
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Interviewer2:41
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. Take a look. 'The American people are screaming out saying it's unfair that the wealthiest, the largest corporations who can afford the best attorneys, the best accountants, take advantage of these special tax treatments that lobbyists, along with lawmakers, have cooked into the books here.' Mr. Smith, is the White House right? Are businessmen like you and Mr. Johnson getting off too easy on taxes?
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Frederick Smith3:24
Well, I think you have to divide the tax argument into a little bit more discrete 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 nine 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 that's why we're not getting the jobs. Let me just give you one example that goes back to your interview with Mr. Cain. The 9 percent sales tax that he's advocating is similar to a value-added tax, as they call it 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're playing with one hand tied behind our back when it comes 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 worldwide economy, and it has to incent business investment.