Business Roundtable is an association of chief executive officers of leading U.S. companies working to promote a thriving economy and expanded opportunity for all Americans through sound public policy.
LeAnne Redick Wilson
Senior Vice President
Business Roundtable (BRT) is an association of chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy.
Tax reform for all businesses is fundamental to strengthening the U.S. economy and ensuring that American workers and American companies can successfully compete around the globe. A modernized U.S. tax system with competitive tax rates and competitive international tax rules would promote growth through greater investment, higher wages and more jobs in the United States.
Ninety percent of CEOs responding to a Business Roundtable survey say that delaying tax reform will harm the U.S. economy, by causing slower economic growth, hiring and capital investment. Fifty-seven percent of the CEOs say delaying tax reform means their company will delay capital spending, the investment that drives jobs and growth. Fifty-six percent say their companies will delay hiring plans.
This primer on tax reform focuses on the corporate income tax system and the changes needed to update the corporate income tax to allow American companies and their workers to be competitive in markets both at home and abroad and improve.
This Business Roundtable report illustrates how America’s outdated tax code encourages foreign acquisitions of U.S. companies. A 25-percent U.S. corporate tax rate would have kept 1,300 companies in the United States from 2004-13 and created an estimated $590 billion U.S. surplus in cross-border M&A transactions, rather than the $179 million deficit America racked up over that period.
Business Roundtable engaged PricewaterhouseCoopers LLP to examine global effective tax rates of U.S.- and foreign-headquartered companies for the years 2006 to 2009. PwC calculated and compared effective tax rates by country for the 2,000 largest companies in the world as ranked by the 2010 Forbes Global 2000 list. The data for the study are from company financial statements as reported in the S&P Global Vantage database.
The statutory corporate rate in the United States is 35 percent, and the average combined (federal and state) rate is 39 percent. Our OECD competitors have a combined average rate of 24.6 percent. Given this wide disparity, there is bipartisan agreement that America’s current corporate rate is anti-competitive and needs to come down. A competitive tax rate for corporations would make the United States a more attractive location for business investment from both American and foreign companies, helping to create jobs and drive economic growth. Offsetting the revenue loss of the corporate rate reduction will require base broadening, such as elimination or modification of tax credits and deductions.
Every independent U.S. advisory board, working group and federal agency tasked with reviewing and proposing corporate tax reform options has recommended that the United States move toward a more modern and competitive international tax system. Transitioning from the uniquely uncompetitive “worldwide” system to a modern international tax system would end the U.S. taxation of U.S. corporations’ active foreign earnings above and beyond foreign taxes paid and permanently remove the penalty for returning foreign earnings to the United States, thereby aligning the U.S. system with the tax systems of our major trading partners. Reform of the U.S. international tax system should be accompanied by appropriate safeguards to protect America’s tax base, consistent with the rules of our major trading partners.
Tax reform should be permanent to support long-term business decisions and commitments that allow for capital investment and consistent hiring of American workers.
A recent Business Roundtable study shows that globally engaged U.S. companies deliver high-wage jobs and increased economic opportunity in communities across the United States. These companies would invest more, grow faster and increase hiring with tax modernization that levels the playing field for American businesses and workers.
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