As President Barack Obama prepares to deliver his State of the Union address this week, the focus will no doubt be about generating more economic opportunity for the American worker. Consequently, both the White House and congressional Republicans have begun to approach the issue from a variety of angles and from across the political spectrum.
Some argue that the answers begin with increasing the federal minimum wage or in extending unemployment benefits. Others suggest that worker training and other education initiatives will make the long-term difference.
The debate over these policy options is fierce and likely to continue for the seeable future. But perhaps common ground, and more importantly tangible results, can be found in an unexpected place — comprehensive tax reform.
Economic growth and steady job creation are the best and most effective ways for Americans to increase their prosperity and achieve economic security. Whether we increase the minimum wage or not is irrelevant if someone doesn’t have a job in the first place. And no one will ever become prosperous and secure on unemployment insurance alone. We must therefore do more to increase jobs and opportunity for the American people.
Republicans and Democrats who have studied our tax code, including several bipartisan commissions established by Obama, agree that our tax code is holding the American economy back. Instead of encouraging jobs and investment in the United States, the U.S. corporate tax code does just the opposite. It is outdated, overly complex and out-of-step with the rest of the world and consequently it hurts American competitiveness and American workers.
Recently, Glenn Hubbard, Columbia professor and former chairman of the Council of Economic Advisors under President George W. Bush, argued that the way to achieve “mass prosperity” is through fundamental tax reform.
And on the other side of the aisle, Treasury Secretary Jacob J. Lew has expressed the administration’s desire to foster private sector job creation and stave off competitive foreign headwinds.
By reforming our current corporate tax code to include a modern international tax system, similar to those used by our trading partners, we can take important steps toward creating jobs and mass prosperity here at home, while increasing America’s ability to compete across the globe. But first, the right policies have to be put in place.
Currently, the United States maintains an international tax regime, in which U.S.-headquartered companies pay a toll-like tax when they seek to return their foreign earnings to the United States. In addition, we have the highest combined corporate tax rate in the world.
And in a clear sign that the U.S. is falling behind by standing still, 75 countries have cut their corporate taxes in the past five years in an effort to increase their economic competitiveness. This while the United States has not had any meaningful tax reform since 1986 — a time before technology and trade connected the world’s economies and created the global marketplace.