Fix Our International Tax Laws
Friday's jobs report made one thing clear -- the economy doesn't have the strength that our companies need and workers deserve. Fewer jobs were created in March than had been created in February, and 2015 has generally marked a slowdown for the recovery.
But there's more to this story, an overarching issue that will continue to hold us back regardless of jobs numbers this quarter or next: As our economy becomes more and more intertwined with those beyond our shores, our antiquated international tax laws are putting U.S.-based companies at a major disadvantage. A recent Senate Finance Committee hearing examined the problem.
Two facts illustrate a sobering reality: (1) American companies face the highest statutory tax rate among OECD countries; and (2) the United States is the only G8 country whose globally engaged companies must pay taxes twice on overseas earnings. When companies pay taxes in a foreign country and then bring their earnings home, they still must pay the U.S. tax, though they are given a credit for the amount they paid abroad. In addition to imposing an unfair level of taxation, this system encourages companies to leave their earnings overseas rather than bringing them home.
It's a hard truth that casts a shadow over whatever positive indicators our economy might rack up: The U.S. can't reach its full economic potential with a tax code that was constructed before the Digital Age and is particularly onerous in the way it treats globally engaged companies. Permanent, comprehensive reform that lowers rates and modernizes our international system will unlock more than just foreign earnings stranded outside our borders. It will unlock the long-term investment that American businesses and workers are waiting for.
The time to act is now and Congress holds the key.
Claire Buchan Parker is the Spokeswoman for the LIFT America Coalition. Let's Invest for Tomorrow (LIFT) America is a coalition of U.S.-headquartered companies, trade associations and economic stakeholders representing industries that are critical to the American economy.