Tax Reform in 2015: Will it Be Purposeful or a Parody? | Commentary

Posted January 12, 2015 at 5:55pm

As the newly installed Chairman Paul D. Ryan, R-Wis., convenes his first House Ways and Means Committee hearing on Tuesday about policies to boost our economy, undoubtedly, tax reform will be a top priority.

Both parties in Congress talking about tax reform is great news for American workers. In the past, the challenge of updating our nation’s complex tax code has been regarded as one of the third rails of politics; now, it appears our system is so badly broken that virtually everyone agrees it’s time to fix it.

But before we break out the champagne, it’s important for us and the 114th Congress to define what meaningful tax reform looks like, and what it doesn’t look like.

Closing loopholes in the fine print without addressing the fundamental deficiencies in our tax code isn’t tax reform. Lowering rates without making essential changes that improve the competitiveness of the tax code isn’t tax reform. Slapping additional burdens on American businesses — large and small — isn’t tax reform. Moving the United States further away from global norms on international taxation isn’t tax reform.

Furthermore, any revenue gained from repatriating the stranded overseas earnings of American companies needs to be used to make tax reform work, and not redirected toward one-time spending on infrastructure or other special projects, regardless of their independent merits.

Simply put, real tax reform involves permanent solutions, not short-term fixes.

We’ve all seen efforts to jump-start the economy by allowing tax holidays or quick and temporary incentives. But businesses don’t make long-term investment decisions based on short-term policies. And they won’t make long-term hiring decisions if they are not confident they will have the ongoing resources to pay their workers or for capital improvements.

What does a real, permanent fix look like?

Real tax reform can and must be done in a way that protects our tax base. It is essential that the government continues to have the revenue it needs to fund important priorities, while providing companies incentives to remain in — or relocate to — the United States.

Effective tax reform has to move us away from an outdated system that taxes U.S. companies twice —first abroad, then at home — on overseas earnings. That’s actually a disincentive for our companies to bring money home and invest in our economy.

Meaningful tax reform will lower the corporate rate. Today, American companies face the highest statutory tax rate in the world, which is no way to spur the economy.

True tax reform that achieves these goals makes sense for American workers. It will remove the restraints from American businesses and allow them to freely invest in the United States. Right now they’re operating in the only G-8 nation where domestically-headquartered companies are punished when they bring their foreign earnings back to home to invest.

We know permanent solutions are possible because we’ve seen it work. Consider the experience of major economies such as Japan and the U.K. After making the types of modern reforms we need, the Japanese saw steady growth in tax revenue, a fall in unemployment and a rise in wages; in the U.K., 22 British companies that had previously planned to re-incorporate to another nation announced they would reconsider.

Being so far out of sync with our trading partners is costing us: tax experts estimate that until we replace our current tax code with a modernized international system, the nation is missing out on the opportunity to create almost 1.5 million new U.S. jobs and more than 150,000 jobs every year after the transition.

So it is to the benefit of American workers, businesses and the U.S. economy that Congress is seriously talking about tax reform. But if our tax code is truly going to serve our national interest, our elected leaders must be prepared to take on the complex and difficult challenge of real, meaningful and lasting reform. Let the work begin.

Claire Buchan Parker is the spokeswoman for the LIFT America Coalition. Parker is also a former deputy White House press secretary and principal economic spokeswoman to President George W. Bush.