When it comes to tax policy, we couldn’t agree more that This Is No Time For The U.S. To Hesitate On Corporate Tax Reform, an editorial by Walt Galvin, vice chairman of Emerson that appeared in today’s Investors’ Business Daily. Earlier this month, the United States earned the dubious distinction of having the no.1 corporate tax rate among developed countries, a fact that did not go unnoticed by the Japanese, who previously held the top spot. As Mr. Galvin notes, Mieko Nakabayashi, a member of Japan’s House of Representatives recently commented on the failure of the United States to address our high corporate tax rate and archaic worldwide tax system and said that the United States “will suffer from that hesitancy while we and others outside the U.S. will benefit.”
While our numero uno tax rate generally grabs the headlines, both Mr. Nakabayashi and Mr. Galvin point out another major problem with our current tax code—a worldwide tax system that subjects income earned by U.S. companies and taxpayers to U.S. tax no matter where the income is earned. In contrast, our major trading partners, including Japan, have adopted territorial tax systems that only taxes income earned in the home country.
Tax policy plays a critical role in the ability of companies to prosper, compete and create jobs. In recent years, our trading partners have gotten the message and slashed tax rates and moved to tax systems that encourage global competitiveness. We can’t afford to drag our feet any longer—now’s the time to reform our tax laws, not only for corporations but for businesses of all sizes.