Judging from the early media accounts of tonight's State of the Union address, President Obama will touch on at least one of the recommendations -- an "all-in" approach toward domestic energy* -- made earlier this month by his Council on Jobs and Competitiveness. Let's hope he goes further by embracing the council's recommendations on corporate U.S. tax policy.
In its Jan. 16th year-end report, "Road Map to Renewal," the Jobs Council recommended, "Reform the Outdated Tax System to Enhance American Competitiveness," summarizing:
The Jobs Council supports measures to create a simpler, more efficient tax system that levels the playing field for businesses and makes the U.S. more competitive internationally. In order to enhance economic efficiency, encourage more investment in the U.S., and boost economic growth, the Council recommends moving from a corporate income tax system with a high tax rate and a narrow base to one with a broader tax base and a lower overall rate.
The United States is set to have the highest corporate tax rate among developed nations (once Japan lowers its rate on April 1), and U.S. investment is also discouraged by its use of the worldwide tax system. Business Roundtable strongly supports a more balanced corporate tax rate and a move to a competitive territorial system. The Jobs Council's recommendation should provide a sense of urgency to this comprehensive reform.
Business Roundtable made that case in a letter sent to President Obama on Monday. BRT President John Engler argued:
One area detailed in the council’s report invites immediate action: Modernization of our antiquated system of corporate taxation. The council’s report recognized that today's hypercompetitive global environment requires that U.S. tax policies be modernized to regain U.S. competitiveness and promote job creation.
As your council's report makes clear, U.S. tax policies for corporations have become increasingly out of date, overly complex and less competitive, making the United States a less attractive destination for new investment and placing U.S. companies at a disadvantage to foreign firms in the global marketplace. The National Commission on Fiscal Responsibility and Reform ("Simpson-Bowles") and your Export Council both recommended corporate tax reform to provide an internationally competitive tax rate and a competitive territorial tax system.
Modernizing the tax code is vital to increasing the competitiveness of the United States as a location for investment and employment by both U.S.-based and foreign-based companies. Our policies should strive not only to make us competitive with the other world economies, but to be the best place in the world to headquarter a business, to hire employees, and to conduct business operations. In that way, we can create a more dynamic economy that encourages job creation.
We'll be watching tonight's SOU with a copy of the Jobs Council report nearby (on the computer screen), checking to see how many of its good ideas the President puts forward and, more importantly, vows (bipartisan) action on. Building a more competitive America requires a change to our tax system, plain and simple and now.
*Although the subsequent rejection of the Keystone pipeline belies the supposed comprehensive approach.
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