The President’s nominee to be the next U.S. Secretary of the Treasury, Jack Lew, testified at the Senate Finance Committee today and faced questions from Democratic and Republican Senators on the importance of corporate tax reform to job creation. (You can watch the archived hearing on the committee’s site.)
Chairman Max Baucus, D-Mont., set the tone with his opening statement, underscoring that the current corporate tax system is outdated and costing the U.S. economy jobs and investments. Chairman Baucus noted that, if confirmed as Treasury Secretary, Mr. Lew would play an important role in fixing this broken system:
“We need to make the system fair and help make U.S. businesses more competitive in the global marketplace . . . Over the past two years, this committee has been moving steadily forward on tax reform. America’s tax code has become too complex for both individuals and businesses. And the rules have not kept pace with today’s transactions.
“The last tax code overhaul was in 1986. Our world economy has changed drastically in the past three decades. Our tax code has not caught up and is now acting as a drag on America’s economy. This is not some academic exercise. Tax reform is a real opportunity to spark the economy and create more jobs. As secretary, I expect you to be a partner as we tackle tax reform.”
Throughout the hearing, Democratic and Republican Senators zeroed in on tax reform.
Senator Rob Portman, R-Ohio: “This is an area where we can both see strong economic growth and also frankly, find a consensus here between the Administration and the Congress on a nonpartisan basis almost because I think it’s one that we all agree needs to be done . . . Every single one of our competitors, all of them, have not just lowered their rates, but reformed their corporate tax code except us and that puts us at a clear competitive disadvantage. We’re sitting on the sidelines while investment and jobs and headquarters are going overseas.”
Senator Mike Crapo, R-Idaho: “I think that we would have been hard- pressed to create a tax code if we tried that was more unfair, more complex, more expensive to comply with and, frankly, more anticompetitive to our own business interests than we have now and we need to correct that.”
Senator Debbie Stabenow, D-Mich.: “I think it would be wonderful to work together on something that would close loopholes that clearly we’re seeing bipartisan support -- concern about today, which I would love to work with members on . . . And when we look at tax reform and what we need to do to be competitive internationally and so on, I’m very interested and concerned to make sure that we continue to make things in America and we innovate in America.”
Senator John Thune, R-S.D.: “I think the goal in all of this should be getting the rates down, and promoting economic growth. I hear the president talking about raising revenue through tax reform. To me, if you get economic growth, you will get revenue, but you’ll get it the old fashioned way and, at the same time, create lots of jobs, and get this economy expanding again. So, that ought to be the goal.”
In responding to each Senator, Mr. Lew took a pro-growth, pro-job creation position, agreeing that America’s outdated business tax code hurts America’s business competitiveness around the globe. While he didn’t offer or give an endorsement to a specific plan, he committed to working with Senators in both parties to reach agreement on a tax code that would spark innovation and investments in the U.S. economy:
“I think we can do [corporate tax reform]. I think it’s important that we do it. It’s important for competitiveness. It’s important for manufacturing and job creation. It is important in terms of our international competitiveness. And I think it’s something that there’s a bipartisan consensus that we need to do, but there’s an understanding of how hard it is. And I would pledge to work with this committee to try and get that job done.
. . . .
“The major reason for taking on tax reform is to grow the economy, create jobs and improve the environment for manufacturing in the United States . . . The quality of our workforce, the stability of our system and our economy makes the United States a very attractive place to invest. If we fix our tax code, there’s no limit to how much we can grow.
“I think the primary goal in business corporate tax reform is to have the tax code be simplified and to be consistent with a more robust investment environment, particularly as we are in a competitive environment with other countries.
. . . .
“To proceed on tax reform, we’re going to have to work together, both the executive branch and the legislative branch, and in a bipartisan basis and, if confirmed, it would be at the very top of my priorities to work with you and this committee to do that.”
This bipartisan voices for tax reform in the Senate occurred at the same time bipartisan action was occurring in the House of Representatives. The House’s tax-writing body, the Ways and Means Committee, agreed to establish 11 bipartisan working groups to examine a myriad of tax reform topics, including the international tax system. We will continue to work with members of Congress and the Administration to revamp the U.S. corporate tax code. It’s almost been an entire generation since the code was overhauled. Given today’s ultra-competitive global marketplace, the outdated U.S. corporate tax code robs the country of new industries, new investments, and new jobs. A reform blueprint that responsibly lowers the rate, eliminates the double-tax on U.S. companies’ foreign earnings, and promotes investment incentives together would be a major boost for the U.S. economy.