Why Corporate Tax Reform Is a Bipartisan Cause

By Laura Tyson. Excerpts:

"Facing the highest corporate tax rate in the developed world—38.9% on average, including state taxes—and a system of taxation that follows them wherever they go, U.S. companies are at a disadvantage in global markets."

"In 2013, U.S.-based multinationals directly employed 23 million Americans and supported another 53 million American jobs through their domestic supply chains and employees’ spending."

"Between 2000 and 2016, the number of U.S.-headquartered companies in the Forbes 500 declined more than 25%. The outdated U.S. corporate tax system was partly to blame.

The U.S. corporate tax rate was among the lowest among developed countries after the 1986 tax reform. It is now the highest."

"even after accounting for deductions, credits and other tax-reducing provisions, U.S. multinationals face among the highest effective tax rates in the world. Many U.S. companies opt out of the corporate tax system by organizing as partnerships and “pass through” businesses. In 2013, corporations accounted for only 44% of business income in the U.S. compared with about 80% in 1980."

"29 of the 35 countries in the Organization for Economic Cooperation and Development have adopted territorial systems, which largely exempt the foreign business earnings of their multinationals from home-country taxation. This puts U.S. multinationals at a competitive disadvantage when doing business abroad. They face the high U.S. corporate rate on their earnings in foreign markets while their global competitors face the much lower local rates."

"An estimated $2.6 trillion of U.S. companies’ foreign earnings is now trapped abroad."

"The combination of a high corporate tax rate and an outdated world-wide system has caused some U.S. companies to move their headquarters overseas or pursue an acquisition by a foreign competitor. It has also reduced U.S. companies’ competitiveness in cross-border acquisitions.

In such acquisitions, a U.S. purchaser of a foreign company owes U.S. tax on the resulting foreign income stream. That’s tax that wouldn’t be owed by a foreign purchaser headquartered in a country with a territorial tax system. According to an analysis of Thomson Reuters data, foreign acquisitions of U.S. companies were more than three times as great in deal value than U.S. acquisitions of foreign companies in 2015." 

"It is time for comprehensive reform that reduces the corporate rate, broadens the tax base, simplifies the system, and adopts a modern territorial approach with safeguards to protect the U.S. tax base."