Why We Need International Tax Reform
One of the most beneficial steps we can take to grow our economy is to reform our broken, outdated tax code. International tax reform is an important part of this overhaul to make the United States a more competitive place to invest and create jobs.
At 39.1 percent, the U.S. has the highest corporate tax rate among OECD countries. The OECD, or the Organization for Economic Cooperation and Development, has recently been recommending tax measures which would disproportionately harm U.S. businesses and further erode our country’s tax base. Additionally, the European Union is conducting state aid investigations which could impose 10 years’ worth of retroactive taxes on American businesses.
These global developments compound the main problem: our federal government is taxing U.S. employers more than other countries tax theirs. The U.S. is also the only major economy where businesses face double taxation, with profits taxed in both the country where they are earned and again when they are returned to be reinvested in domestic operations.
Many nations around the world have been actively reforming their international tax codes, resulting in more job creation and economic growth. This makes competing in an international marketplace more difficult for U.S. companies, both here and abroad. Through international tax reform, an estimated $2 trillion in U.S. profits could be brought home.
When I talk with Nebraskans, many are curious about the potential benefits of international tax reform for our state. According to Business Roundtable, companies which operate internationally provide 40 percent of Nebraska’s total private-sector employment. Incentivizing these employers to stay in the U.S. and invest their earnings into Nebraska communities is crucial.
On Tuesday, I spoke with seniors from Lawrence-Nelson High School. Among many topics, we discussed their dream jobs and the state of our economy. One way we can ensure young people have opportunities to find good jobs is through international tax reform – keeping companies headquartered here to provide employment for generations to come.
The House Ways and Means Committee held a hearing this week to examine the global tax environment and highlight the urgent need for reform. As Chairman Kevin Brady pointed out in his opening statement, “In the first two months of this year, we’ve already heard of three major American companies that have decided they must move overseas.” With our jurisdiction over tax policy, the Committee is pushing for solutions to safeguard American jobs and profits.
International tax reform is only one component of our goal to overhaul the entire tax code. The Tax Foundation has reported Nebraska small business owners can face a tax rate as high as 47.9 percent when combining federal, state and local taxes. Tackling this problem will require broader reform, which I am optimistic we can accomplish under a new president. Right now, it is important to lay the groundwork and address any flawed policies we can.
Our burdensome tax code continues to hurt U.S. businesses and threaten American jobs. It also makes it easier to cheat than to comply. To keep our country competitive in the global economy, we must simplify the tax code for all American families and businesses.