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JEREMY HOBSON: Now let's get to the tax story. Treasury Secretary Tim Geithner is sitting down with corporate leaders today to discuss the nation's corporate tax code. Executives from Wal-Mart, Exxon and Disney are among those expected to be in attendance. The corporate tax rate in the U.S. is the highest in the world, but it is famously full of loopholes.
For more on this let's bring in Economist Gary Shilling. He joins us live. Good morning.
GARY SHILLING: Good morning.
HOBSON: So it's been 25 years since the corporate tax code has been overhauled. Do you think it's time for an update and what do you think they should do?
SHILLING: Yeah, I think it is time for an update, because it's really gotten to be a Byzantine collection of various loopholes plus the standard rate which in itself is high. And the idea is that if you can simplify it people will know where they stand and what they ought to do. And if they do something, I think it will be a refreshing change from what is a strong trend toward more regulation. That's the natural result of the recession and the financial problems. I just wrote a new book called, "The Age of Deleveraging." And I point out there that increased government regulation and involvement in the economy is one of the retarders of economy growth. One of the things that's likely to slow it down, so if we can reverse this, that's fine, but bear in mind that this won't be permanent. They do this about every 25 years or so. They simplify it but then all the changes come in and the next thing you know, another 25 years later you need a re-simplification.
HOBSON: Alright well we'll be ready in 2037 or so. There's not just a federal corporate tax, obviously. There are state taxes companies have to pay. Illinois was in the news this week because it is raising taxes -- the corporate tax there will increase from about 5 to 7 percent. A lot of people are saying companies are going to flee Illinois for neighboring states. Gary Shilling, do you think there's any truth to that?
SHILLING: There is some. Now I don't think Caterpillar is going to pull out of Peoria, Illinois where they've been forever. But it will influence some businesses and divisions of businesses that are based in Illinois on the margin. The interesting thing about this is, we have 50 states with 50 independent governments and economic policies. And they really are laboratories for testing new ideas and in this case testing whether higher taxes will fly, and what it means is the states compete for business on tax rates and so on. Hey I live in New Jersey, and of course we've got the highest taxes in the country by some measures. And the Governor Chris Christie is trying to do something about that. But people are fleeing New Jersey for other states.
HOBSON: Alright Gary Shilling, economist. Thanks so much for talking with us and have a good weekend.
SHILLING: You're welcome.