With more words dedicated to comprehensive tax reform than the highly-publicized (and politicized) immigration debate during the President’s State of the Union address last night, the President has put a sense of momentum behind the issue - kind of. After all, he’s called for some degree of corporate and individual tax reform in his previous State of the Union’s. Unfortunately, however, other than a few carefully crafted and thoroughly polled sentences dedicated to the issue, the White House has remained silent on any specifics.
As noted by the New York Times following last night’s speech, the “State of the Union address largely focused on economic themes” - an admission which reveals that this administration fully recognizes this is now Obama’s economy and his legacy is (at least by some measure) tied to it’s growth... or continued decline. Comprehensive tax reform that - as the President stated - “encourages job creation” could be this administration’s key to economic growth and a positive economic legacy for Obama. But that requires more than a speech, it requires action.
Studies have found that by significantly reducing America’s corporate tax rate, which is currently the globe’s highest, could create nearly 600,000 jobs every year for the next decade. Moreover, it would boost American competitiveness for decades to come. Meaningful reforms would allow the U.S. to compete with other countries in attracting foreign investment from traditional trading partners in North America and Europe as well as in emerging economies of Latin America and Asia and secure our place as a 21st Century economic leader.
This would have a real impact on American workers - and not even just in terms of job creation. If the U.S. corporate tax rate were reduced to 25 percent, the average family of four could realize additional income of nearly $2,500 annually.
While the President has delivered only verbal promises regarding comprehensive tax reform, House Ways and Means Committee Chairman Dave Camp has begun the policy development process for a comprehensive package that offers solutions for both individuals and corporations.
“We need to make the tax code simpler and fairer for families and small businesses,” said Camp on the House floor in January 2013. “We need to pursue comprehensive and fundamental tax reform to make American businesses and workers more competitive in the global marketplace.”
The fact of the matter is that America’s corporate tax rates are the highest in the industrialized world and employers are facing double taxation compared to their foreign competitors. While the United Kingdom, Canada, Germany and Japan have all recently passed reforms, the United States has remained stagnant for the last 26 years. The impacts are real. The House Ways and Means Committee pointed out in a 2011 press release, “In 1960, U.S.-headquartered companies comprised 17 of the world’s largest 20 companies - that’s 85 percent. By 2010, just six - or a mere 30 percent - U.S.-headquartered companies ranked among the top 20.”
Especially as Washington looks to create policies that push America out of this extended economic recession, we must close the loopholes in order to reduce the tax rate and (yes) cut down on government spending to make America competitive again for the 21st Century.
President Obama’s State of the Union remarks regarding comprehensive tax reform relay the right sentiment, but without meaningful action, our nation will continue to see an exodus of employers, a sagging job market and an ever-weakening standing in the global economy.