The Senate Finance Committee held a hearing Tuesday on the current state of corporate taxation, with testimony on the hot topic of "inversions" that some companies are using to pursue a more competitive tax environment. (Hearing: The U.S. Tax Code: Love It, Leave It or Reform It!)

Treasury Secretary Jack Lew anticipated the hearing with a provocative letter that endorsed comprehensive tax reform but called for short-term anti-inversion legislation in the pursuit of "economic patriotism."

Business Roundtable President John Engler commented with a letter that appeared in The Wall Street Journal, part of a package of responses to Lew's letter entitled, "Jack Lew's Strange Definition of 'Economic Patriotism'." Excerpt from Engler letter:

Treasury Secretary Jack Lew gets one thing right in his letter to Congress on corporate "inversions": the recognition that the "best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes and simplifies the tax system" ("Jack Lew's Flee America Plan," Review & Outlook, July 17). If it's the best way, and America's business leaders certainly agree it is, then why pursue an ad hoc, punitive alternative as now being proposed by the administration?

Cross-border mergers in which an American company restructures its legal headquarters abroad (so-called "inversions") are a symptom of both a failing tax system and failed leadership in addressing it. America's business tax system has simply not kept up with the demands of today's global marketplace.

Blogging at The National Review's The Corner, Douglas Holtz-Eakin of the American Action Forum also offered a few edits to Lew's letter, here.

The Administration has expressed support for comprehensive business tax reform to improve U.S. competitiveness, and the hearing provided a useful discussion of the issues involved. A few excerpts:

Chairman Ron Wyden (D-OR), who, to be sure, condemned the "inversion fever." Still, his opening emphasizes the basic point:  

The U.S. tax code is infected with the chronic diseases of loopholes and inefficiency. These infections are hobbling America’s drive to create more good-wage, red, white and blue jobs here at home. They are a significant drag on the economy and are harming U.S. competitiveness.

Ranking Member Sen. Orrin Hatch (R-UT), his prepared opening statement:

Ultimately, the best way to solve this problem will be to reform our corporate and international tax system in a manner that will make our multinationals competitive against their foreign counterparts.

That will mean, among other things, a significant reduction in the corporate tax rate and major changes to make our international tax system more competitive. 

Peter R. Merrill, Director, National Economics and Statistics Group, PricewaterhouseCoopers, who, speaking for himself, offered a thorough analysis of America's current international tax system. He concludes:

U.S. companies are increasingly competing in foreign markets, which account for over 95 percent of the world’s population and over 75 percent of global purchasing power. In many cases, a U.S. company’s sales of goods and services overseas creates jobs and growth in the United States. For U.S. companies to succeed in the global marketplace, they must be able to provide goods and services that are competitive in terms of quality, innovation, and price.

Since the last major reform of the U.S. corporate income tax in 1986, the importance of foreign markets to the success of U.S. business has grown and international competition from foreign-based companies has increased. Over this same period, other advanced economies have reduced their corporate tax rates and moved from worldwide to territorial tax systems. As a result, the U.S. corporate tax system has become an outlier among OECD countries. Reform of the U.S. tax system to bring it more in line with international norms would enhance the ability of U.S. multinationals to continue to compete and succeed in global markets.

Yes, indeed.

(See also Business Roundtable's statement on "inversions.")