Defense Business Brief: Defense giants gird for tax battle; $715B skinny budget; Mixed readiness picture; and more...

The first shots in a tax battle were fired this week when Raytheon Technologies CEO Greg Hayes issued a blunt assessment of the White House’s proposal to increase the corporate tax rate from 21% to 28%.

Raytheon’s tax bill would increase by about $1 billion, and that “means I have to reduce my investment budget by about 20 percent,” Hayes said during a virtual Economic Club of Washington event. The company currently spends about $5 billion annually on research and development.

“I’m not sure that’s exactly what the president wants to have us do,” Hayes said. “If you want U.S. companies to invest in technology and innovation, you have to have incentives to do that here in the United States.” 

The proposed increase would leave statutory corporate taxes at their lowest level in more than seven decades. Defense companies have been some of the top benefactors of the Trump administration’s 2017 tax cuts. 

But it seems clear that CEOs will get questions about Biden’s corporate tax proposal from Wall Street analysts on earnings calls in the coming weeks. The question: How will they respond?

The Biden administration released details of the so-called “skinny budget” on Friday. Progressive Democrats say the request is too high. Republican defense hawks say it’s not enough. Wall Street analysts say it is good enough. Read more about it here.

A new Center for International Policy report found that U.S. foreign military sales totaled nearly $111 billion in 2020, which it called “an unprecedented surge in arms offers.” For comparison: “FMS sales averaged $63 billion per year in the first three years of the Trump administration, versus $61.5 billion per year under Obama, measured in 2019 dollars.” Read the whole report here.

Meanwhile, the Army’s plans to develop and buy new combat vehicles is expected to cost about $5 billion annually through 2050, according to the Congressional Budget Office.

Despite defense increases three of the past four years, military readiness is mixed, according to a new Government Accountability Office report. “Readiness increased in the ground domain and declined in the sea domain from fiscal year 2017 through fiscal year 2019, and rating changes were mixed in the air, space, and cyber domains.” Read the whole report here.

More merger and acquisition news: Elbit Systems completed a $380 million acquisition of Sparton from Cerberus Capital Management. Sparton is described as a “premier developer, producer and supplier of systems supporting Undersea Warfare for the U.S. Navy and allied military forces.”

Making moves. Lockheed Martin named Bridget Lauderdale, currently vice president and general manager for Lockheed Martin Aeronautics’ Integrated Fighter Group, the new head of the F-35 fighter program. She succeeds Greg Ulmer who was promoted to executive vice president of Lockheed Martin Aeronautics on Feb. 1.

From Defense One

Biden's $715B Defense Ask: Higher Than Expected, Lower than Trump's Plan // Marcus Weisgerber

"Skinny budget" announcement hints at cuts to troop levels and existing weapons.

Raytheon Giving Employees Bonuses for Getting COVID-19 Vaccine // Marcus Weisgerber

The company is not requiring employees to get the shots, but some facilities could be off-limits to the unvaccinated.

Hypersonic Missile Fails Test-Launch From B-52 Bomber // Marcus Weisgerber

The Air Force called the ARRW failure "a setback."

Biden Taps Current, Former Defense Officials to Oversee Acquisition, Budget, Intel at Pentagon // Marcus Weisgerber

A former comptroller would return to the job if the Senate approves.

The Air Force Is Making an App That Basically Does What a General Does // Patrick Tucker

The nascent app aims to generate options, recommendations, and mission orders.

DOD Workers Want to Keep Teleworking, Despite Early Hiccups, Survey Finds // Mila Jasper

The DoD Inspector General surveyed more than 56,000 employees about telework during the pandemic.

Space Force to Absorb USAF Command to Run Launches, Research // Patrick Tucker

The Space and Missile Systems Center will become Space Systems Command.

Fewer Troops Are Declining the COVID Vaccine. We May Never Know Why // Elizabeth Howe

Defense leaders say education efforts and seeing peers get vaccinated are reducing the reluctance.