HATCH: Keep U.S. competitive

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By Sen. Orrin G. Hatch

COMMENTARY:

Major policy changes in the United States require the support of the business community.

This is exactly as it should be. After all, entrepreneurs, partnerships, family businesses, public corporations and multinational enterprises are the foundation on which our nation has built the greatest economy in the world - an economy that has brought unprecedented prosperity to Americans.

This is exactly what is happening right now, as the business community appears poised to get behind health care reform plans proposed by the Obama administration and congressional Democrats.

There is nothing wrong with supporting health care reform. Our current system spends too much, covers too few and provides too little for the money we invest in it. We need reforms that transform the delivery system into one that favors high-quality outcomes at lower costs; covers more Americans with quality, portable insurance; and provides better tools to help them navigate the choices and decisions in the health care system.

Responsible, bipartisan reform could greatly benefit the business community by reducing the burden of providing health care, strengthening the private insurance system and reining in the runaway federal costs of Medicare and Medicaid, both of which are headed toward insolvency.

However, reform could carry real costs to the business community as well. Employers might face a play-or-pay soft mandate or an even more costly hard mandate to provide politically determined health benefit packages.

Financing expensive coverage options such as a new public plan could mean price controls and higher marginal taxes on businesses organized as pass-through entities. Recently, some also have floated the idea that eliminating the deferral of taxes on foreign-source income could serve to finance health coverage expansion.

Eliminating deferral is a bad idea, as the evidence shows. As of 2008, three countries still used some sort of worldwide system: Japan, Great Britain and the United States. This year, Japan and Great Britain announced plans to shift to a territorial system. At precisely this moment, then, the Obama administration is proposing a dramatic step in exactly the opposite direction.

We know what will happen as a result. After all, the federal government has taken this ill-considered path before. When taxes were reformed in 1986, the United States eliminated deferral for the shipping industry, and in short order, all of the shipping industry fled this country and established headquarters abroad. The same thing will happen across the board if we repeal deferral.

The reality is simple: If the United States wants to continue to prosper, it has to allow American business to compete. When we tax our businesses more heavily than our competitors tax theirs, our firms have the deck stacked against them in capturing the foreign markets where 95 percent of the world's consumers shop. Our jobs and standard of living will suffer.

So eliminating deferral would be unattractive and even devastating to our business community. The same would be true of raising marginal tax rates, stripping workers of a private ballot in unionization decisions, initiating protectionist trade policies and running roughshod and unconstitutionally over the sanctity of private contracts. The business community, which is so central to the success of policy reforms, rightfully would object to the pursuit of these wrongheaded initiatives.

Why, then, is the business community supporting a blank check on health care reform? It can, should and will be a major player in the reform debate. That role should be to ensure that reform adheres to key principles: First, cost and quality must be top priority; second, there must be a path to greater quality insurance coverage, but any new private sector resources must be devoted to expanding private insurance; and finally, every participant must have greater information and support than at present.

Support for the right kind of health reform will meet the dual goals of improving the health care system and preserving the engine of U.S. economic success.

Sen. Orrin G. Hatch, Utah Republican, is a member of the Senate's aging, health, finance and taxation committees.