Sometimes the ranking of #1 is a dubious distinction… surely no one wants to be #1 on the “worst companies to work for” list, the “worst Super Bowl Commercial” list, the “worst movie of all time” list or the “worst dressed” list, but one year after Japan’s corporate tax rate cut went into effect, the U.S. continues to be home to the highest corporate tax rate in the world.
We live in a competitive world. Everyone, from executives, to states, to countries, wants to be able to compete for investment and jobs – and that is all the more true in the aftermath of the great recession. Yet, a year after reaching this “pinnacle” of worst tax policy, nothing has changed.
The NAM has long advocated for comprehensive pro-growth, pro-job tax reform that will result in a permanent competitive tax code that will allow the U.S. to compete with our peers around the world. As articulated in in the recently released Growth Agenda, “The United States needs a comprehensive plan for economic growth. A bipartisan commitment in Washington to pro-growth policies will make our nation a more competitive place to do business.” At the heart of this plan is an updated tax code and to improve our competitiveness, it is essential that the United States overhaul its tax system at the corporate and individual levels – something that has not been undertaken in nearly 30 years.
Manufacturers have applauded the stated commitment of the Chairmen of the Congressional tax writing committees – the House Committee on Ways & Means and the Senate Finance Committee – to undertaking comprehensive tax reform. We have high hopes that under the leadership of Chairman Dave Camp (R-MI) and Chairman Max Baucus (D-MT) respectively, the Committees will succeed in this effort this Congress. And we continue to weigh in with both committees as to what manufacturers believe must be included in any comprehensive tax reform plan to make it competitive for manufacturing which at the heart must include creating a national tax climate that enhances the global competitiveness of manufacturers in the United States and the avoidance of policy changes that would increase the tax burden on the manufacturing sector, discouraging job creation and investment.
Central to today’s anniversary, comprehensive tax reform must reduce the corporate tax rate to a level that will make the United States competitive with our major trading partners and recognize the significant reductions made by other competitor nations while also moving from our current worldwide tax system to a territorial tax system similar to systems in most industrial countries, structured to enhance U.S. competitiveness, not raise additional revenue.
We believe that comprehensive tax reform must change the tax treatment of smaller manufacturers which is important because nearly two-thirds of manufacturers are organized as “flow-throughs” and pay taxes at individual rates. Any tax reform effort that includes higher tax rates for these companies would negatively impact their ability to invest in their business and create and retain jobs. An updated code must also provide a strong, permanent and competitive research and development (R&D) incentive to help ensure that manufacturers in the United States continue as global leaders in technology and innovation and also must maintain a robust capital cost-recovery system to spur business investment and expansion.
As the old saying goes, where there is a will there is a way, and for the 12 million Americans who work in manufacturing we hope that the will is enough to get this completed before we reach another anniversary with this most dubious distinction.
Carolyn Lee is senior director of tax policy, National Association of Manufacturers.