Senator Max Baucus, Chairman of the Senate Finance Committee, is well-known and regarded for his depth of knowledge, pragmatism, and bipartisanship. That’s why ITI has been patiently awaiting the release of his plan for comprehensive tax reform. While Christmas did not arrive early in the form of an actual bill, Chairman Baucus did release a staff discussion draft today with proposed reforms for a much-needed overhaul of our international tax system. ITI applauds the Chairman for giving stakeholders a framework that will allow for more constructive discussions on the best approaches for reform. That alone is a necessary and important step.
As Chairman Baucus has noted for quite some time, our international tax system does not fit today’s economy. The basic framework of today’s international system dates back to the Kennedy Administration. Many of ITI’s member companies, and a number of those companies’ CEOs had not even been born yet. We believe that an upgraded, competitive, pro-growth tax system that creates jobs and attracts investments to the US is essential for the long-term success of our economy. It is evident that Chairman Baucus shares this sentiment.
We welcome Senator Baucus’ leadership, but an initial read of the staff draft raises a number of concerns and suggest more work is needed. For example, one of the most important goals of tax reform is to level as much as possible the tax playing field between U.S. companies and their foreign competitors. We are concerned that several key proposals such as the deemed repatriation of past foreign earnings and the proposed minimum tax on a U.S. company’s future foreign earnings would likely result in U.S. companies being subject to a higher effective rate on their foreign earnings – past and future -- than their foreign competition. Most developed countries utilize market-based tax systems that either do not tax foreign earnings or impose a very modest tax. The U.S. tax system has to adjust to that reality or risk losing market opportunities in global markets, as well as jobs and investments here at home. This is especially true in the tech sector where developing technology here in the US to sell abroad has proven to be a model and engine for U.S.-based innovation and economic growth.
Today’s release of the Chairman’s staff draft is a welcome step down the long road to comprehensive tax reform. The draft gets us past concepts and into the realm of specifics. We will continue to review and discuss the staff draft in the coming weeks and months, and we look forward to working with Chairman Baucus and his staff to achieve our shared goal of a modern, competitive tax code that creates jobs, sparks investment, and reflects the realities of today’s global marketplace.