Parker: Tax reform will unlock the economy’s potential
Friday’s jobs report made one thing clear — the current U.S. economy doesn’t have the strength that our companies need and American workers deserve. March saw fewer jobs created than in February, and 2015 has generally marked a slowdown in any gains made at the end of last year.
But there’s more to this story than undershooting month-to-month expectations and losing momentum from one quarter to the next. There’s an overarching issue that, regardless of jobs numbers this quarter or next, will continue to hold us back, forcing U.S. companies and workers to do more with less: They’re operating in a burdensome regulatory and tax climate that provides little flexibility, even less certainty, and hasn’t seen meaningful reform since the 1980s.
It is hard to build economic momentum, and even harder to keep it going, when businesses and workers recognize that U.S. policies that should be helping them compete in a hyper-competitive global marketplace, are actually working against them and our national interests.
Specifically, as our domestic economy becomes more and more intertwined with those beyond our shores, our antiquated international tax laws are putting U.S.-based companies at a major disadvantage on the world stage. In fact, a recent U.S. Senate Finance Committee hearing examined the systematic problem that threatens our economic prospects.
“If we’re serious about keeping assets and companies in the U.S.,” said committee chairman Orrin Hatch, R-Utah, “we should not be looking to increase the burdens imposed by our international tax system. If we want companies to remain in the U.S. or to incorporate here to begin with, we should not build figurative or legal walls around America — we should fix our broken tax code.”
Sen. Hatch’s comments reflect a sobering reality illustrated by two facts: (1) American companies face the highest statutory tax rate among OECD countries and (2) the United States is the only G8 country that taxes globally-engaged, domestic companies twice — first abroad, then at home — on overseas earnings.
Consequently, the U.S. economy is restricted by both the outdated nature of the current tax code, as well as a tangible pessimism about the future. A pessimism based on an underlying concern about the ability of American businesses over the long-term to invest in jobs, innovation, and capital projects right here at home.
It’s a hard truth that casts a shadow over whatever positive indicators our economy might rack up: The U.S. can’t reach its full economic potential with a tax code that was constructed during a time that predates the Digital Age and is particularly onerous in the way it treats globally-engaged U.S. companies trying to compete around the world.
In the same hearing, Sen. Ron Wyden, D-Ore., elaborated on the uncertainty, “Our tax code is deeply broken. The next flaw that exposes itself — the next wave that appears on the horizon — may not be about inversions or hostile takeovers. But whenever one wave breaks, you can bet there’s another one rolling in, ready to pound our economy. … Nothing short of comprehensive tax reform will end the cycle.”
Sen. Wyden is correct on all points. Most importantly, permanent, comprehensive reform that lowers rates and modernizes our international system will unlock more than just foreign earnings stranded outside our borders. It will unlock the long-term investment that American businesses and workers are waiting for — and, in turn, our full economic potential.
Claire Buchan Parker is spokeswoman for the LIFT (Let’s Invest for Tomorrow) America coalition.