President Obama today went after Gov. Mitt Romney for the Republican's support for tax reform that would including moving to a territorial tax system. Who else supports a competitive territorial system?
The overwhelming majority of the President's Council on Jobs and Competitiveness (Jobs Council), which in its year-end report in January included the territorial system among its recommendations for making the U.S. tax system more globally competitive. From "Reform the Outdated Tax System to Enhance American Competitiveness":
As of April 1, when Japan reduces its rate, the U.S. will have the highest statutory corporate income tax rate among the 34 developed countries in the OECD. Yet the corporate tax raises relatively little revenue, because the U.S. code has numerous special deductions, credits, exclusions, and loopholes. At the same time, our worldwide system of corporate taxation discourages companies from investing their foreign earnings in the U.S. The result is an outdated and extremely inefficient system that creates economic distortions and puts U.S. businesses and workers at a disadvantage...
A Territorial System of Corporate Taxation. Many Council members agree that the U.S. should shift to a territorial system of taxation in order to make America more competitive in global markets. While most other developed nations have adopted territorial systems that exempt most or all foreign income from taxes when they are repatriated, the U.S. subjects all worldwide earnings to the corporate income tax when they are brought home to the U.S. This approach actually encourages U.S. companies to keep their earnings abroad rather than investing them here at home. Adopting a territorial tax system would bring us in line with our trading partners and would eliminate the so-called “lock-out” effect in the current worldwide system of taxation that discourages repatriation and investment of the foreign earnings of American companies in the U.S.
The rest of the world increasingly uses territorial system under which foreign earnings -- taxed once in the foreign country -- can be brought back for reinvestment in the domestic economy without incurring additional home country tax. Within the OECE, 25 countries use these territorial systems, with the United Kingdom and Japan adopting territorial systems in 2009. The United States along with only five other OECD countries (Chile, Ireland, Korea, Mexico and Poland) use co-called worldwide tax systems in which foreign earnings are subject to domestic tax when remitted to the domestic economy. Importantly, all five nations have a much lower corporate tax rate than the United States.
Expansion abroad by U.S. companies is vital for establishing export platforms for U.S.-produced goods and expanding the scope of domestic investments in research and other high-paying headquarters operations -- expansions abroad expand domestic operations. A competitive territorial tax system for the United States should broadly follow the practice of our trading partners and should not be designed to raise new revenue, or to destabilize the U.S. corporate tax base, but rather to make the U.S. tax system more competitive with its major trading partners.
The Export Council is chaired by Jim McNerney, Chairman, President and 'CEO of Boeing and chairman of Business Roundtable.
Also members of the Simpson-Bowles Commission.
Motion to proceed to consideration of S. 744, #immigration bill, passes Senate by 84-15. Getting right into amendments.
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