April 1, 2013 marked the one-year anniversary of America's
dubious distinction of having the highest corporate tax rates in
the world. Yet, Congress is no closer to enacting comprehensive tax
reform that it committed to several years ago. Despite the fact
that both the Chairman and Ranking Member of the House Ways and
Means Committee appear to agree that corporate tax reform is a
legislative priority, U.S. firms are still awaiting a solution.
At the onset of the debate back in 2009, the White House,
Congress and Corporate America all seemed to agree that the
corporate tax rates should be set in the range comparable to other
developed nations, and most everyone thought that lowering the
basic tax rate was likely the best approach. Now, as policymakers
begin to dive into the weeds and discuss specific details
associated with lowering general rates, Congress and the White
House appear to be on different tracks.
Many AFP members still believe that the U.S. tax code should
reflect a rate that encourages American companies to grow wherever
opportunity exists and invest their earnings within the U.S. AFP
believes that achieving this goal will require a comprehensive
reduction in the effective U.S. corporate tax rate to a level on
par with competing developed countries.
With an estimated $1 trillion in U.S. companies' cash and
cash-like investments currently outside U.S. tax jurisdiction,
supporters believe that reforming corporate taxes to be comparable
to other developed-nations could generate nearly $950 billion in
deployable resources within the U.S. and allow those earnings to
stimulate the domestic economy.
Over time, the structural disadvantage resulting from higher tax
burdens will be detrimental to U.S. businesses and will reduce
their investment, employment levels and profitability both
domestically and internationally, even as foreign companies exploit
their lower tax burden to lower prices, capture market share and
reinvest a larger portion of their profits into future growth.
AFP believes that members of Congress should consider
legislation that would implement a permanent change to the tax code
to allow U.S. companies to compete for investment of their earnings
with other countries that tax those earnings at significantly lower
Tax policy that harms the competitiveness of the U.S. will only
encourage companies to further expand their investment and hiring
in other countries.