The Senate Finance Committee is slated to receive comments on Sens. Max Baucus’ and Orrin G. Hatch’s “blank slate” approach to tax reform later this week. No doubt many senators will share their views about which provisions of the tax code must be preserved and which should be eliminated.
This is an important step in advancing the ball on comprehensive reform, but arguably the most important question to be answered is: How can we reform the tax code to ensure that we have a pro-growth, pro-jobs tax system long into the future?
There is no better place to start than by examining our antiquated international tax rules.
Fortunately, policymakers from across the political spectrum — from Hatch to President Barack Obama, from Treasury Secretary Jacob J. Lew to Ohio GOP Sen. Rob Portman — have called for fundamental changes to our international tax rules to ensure that the United States remains competitive with the rest of the world.
As Lew has said, “Our top priority is to strengthen the recovery by fostering private sector job creation and economic growth at a time when we must make sure our economy remains resilient to headwinds from beyond our shores. That means making it easier to sell American-made goods abroad and expand manufacturing in the United States.”
However, in today’s status quo tax code, when U.S. companies doing business around the world seek to bring their foreign earnings home, they are met with one of the strongest headwinds of them all — a punishing toll charge that discourages U.S. investment. Our international trading partners, on the other hand, are more freely able to return their profits to their home countries.
As a result, U.S. companies are at a disadvantage when competing in the global marketplace. And that hurts U.S. workers and needlessly impedes economic growth in this country.
The policy prescription to this challenge is enacting a modern, hybrid international tax system that would encourage investment in the U.S. while protecting our tax base and preventing abuses. This would unlock nearly $2 trillion in private capital for critical investments like enhanced research and development, plant expansions, business acquisitions and better worker benefits. The blank slate may well incite comments from various special interests about particular provisions of the tax code. But no interest is more important than that of the American worker — who benefits the most from the free flow of investment into the U.S. and making America the most attractive place to hire and invest in the world.
Claire Buchan Parker is the spokeswoman for the LIFT America Coalition.
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.