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Reforming our Tax Code and Revitalizing the Economy

In this age of economic uncertainty, policymakers and pundits alike are searching for a silver bullet to cure our country's economic ills. Yet for all the op-eds and policy papers, a quick conversation with a CEO or CFO of any American company would tell you that there is one thing that business leaders think should be part of any economic strategy:  tax reform. As we proceed further into election season, it is crucial that candidates put forward sensible tax plans that would spur growth and speed economic recovery.

    U.S. companies continue to be frustrated by the unnecessary burdens placed on them by a very complex, outdated tax system.  The U.S. tax code was last revised more than 25 years ago, at a time when companies like eBay, Yahoo, and Google did not event exist.  The world economy has changed dramatically, but our tax code hasn't, with the U.S. going from having one of the lowest tax rates in the industrialized world to, starting on April 1, the highest.  Additionally, another feature of the tax code puts American companies at a competitive disadvantage with companies based overseas.  The U.S. is the only developed country that has a worldwide tax system and a corporate tax rate greater than 30 percent, which means that U.S. companies face high taxes on their overseas earnings, while their foreign competitors face little or no taxes on their overseas earnings.

    The presidential campaign season is an ideal time to have a serious discussion on tax reform, and bring to light how our tax code is hurting the U.S. economy.  Candidates must address three key points that will bring the U.S. into the 21st century and give us a competitive tax system that is similar to that of our major trading partners.  First, the U.S. must move from a worldwide to a territorial tax system and end the double taxation that companies suffer when they wish to invest their overseas profits in the U.S. and create jobs.  Next, we must reduce the corporate income tax rate to 22 percent, which will enable us to compete in global markets, and give innovative companies room to profit, grow, and create jobs.  Finally, we should expand and make permanent current temporary incentives within the tax code that will drive investment in our country.  For example, it is estimated that if the U.S. expanded the current R&D tax credit to 20 percent and also made it permanent, it would lead to the creation of 162,000 jobs in the near term, a $90 billion increase in GDP, an additional 3,850 patents, and pay for itself in terms of increased tax revenues.

     For decades, lawmakers have pledged to undertake tax reform. As the promises have gone unfulfilled, U.S. companies have fallen behind their foreign counterparts, and ordinary Americans have suffered as jobs and opportunities move overseas.  America can't wait any longer - the time for tax reform is now.

Public Policy Tags: Tax Policy