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. Key components and principles for business tax reform include:
Setting the corporate tax rate at a competitive level. 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.
Adopting a modern international tax system. 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.
Making U.S. tax policy permanent. Tax reform should be permanent to support long-term business decisions and commitments that allow for capital investment and consistent hiring of American workers.