Time to overhaul the U.S. international tax rules
A Senate hearing this week demonstrated yet again why it's time to modernize U.S. tax rules so companies can compete around the world and in the process create jobs back home in the United States.
The Senate Committee on Homeland Security and Government Affairs, Permanent Subcommittee on Investigations, convened the hearing on Thursday under the title, "Offshore Profit Shifting and the U.S. Tax Code ." The testimony reinforced one of Business Roundtable's major policy points: U.S. international tax rules no longer reflect the modern global marketplace.
More than 63 million American jobs depend on the international competitiveness of globally engaged American companies, so it’s critical that Congress modernize these rules as quickly as possible. With 95 percent of the world's consumers living outside the United States, American companies can create millions of U.S. jobs by producing and selling their products worldwide.
But to do so, American companies require competitive tax rules under which to operate. As noted in the hearing, the United States has the highest corporate tax rate in the OECD and is one of the few developed countries to operate under such an antiquated international tax law (the worldwide system), even as the rest of the world has moved to market-based, territorial tax systems.
Given the significant disadvantage created by this outdated system, over the past several years Congress has enacted some simplifications that allow American companies to sell products and services into the global marketplace in a more competitive way.
However, these rules cannot totally overcome the disadvantage our tax system creates and they can result in further complexity and administrative burden on top of an already complex system. For American companies to grow and sell in today's global economy, they need a modern, competitive tax system. Rather than adding further patches and ad hoc fixes on top of an antiquated and burdensome system, now is the time to thoroughly update the corporate tax system by undertaking comprehensive tax reform, enhancing U.S. competitiveness and creating a clear path to a more vibrant American economy.