- - Tuesday, May 16, 2017

ANALYSIS/OPINION:

On Thursday, the House Ways and Means Committee will have a hearing examining how tax reform will grow our economy and create jobs.

It’s an important issue, perhaps one of the most important topics to be decided by Congress this year.

There is ample evidence that if Congress would reduce the corporate tax rate, it would grow the economy. America leads the world when it comes to taxing its business sector and that leading position is stifling our economy.

We can’t promise that slashing the corporate tax rate to make it more competitive with the rest of the world will lead to 4 percent growth, but there are plenty examples to point to where such a policy was implemented and did successfully yield such a result.

In Ireland, the growth rate was 7.2 percent. Their corporate tax rate is set at 15 percent and is scheduled to be cut to 10 percent. In the United Kingdom, the corporate tax rate is 19 percent while the economy grew at about double that of the United States.

Japan had a corporate tax rate similar to the United States and last year had anemic growth similar to ours. The Japanese government decided to join with the Irish and the English and slash their corporate tax rate to levels more competitive with their competitors.

Unless we get our own version of corporate tax reform, we will be left behind, in the dust.

For many years now, America has had the highest corporate tax rate in the world — 35 percent. And yet, many people don’t see the connection between the high corporate tax rate and America’s slow economic growth. One of the most frequent responses to this fact is, “Yes, but nobody pays that high rate because there are so many loopholes.”

That’s wrong. Most corporations — indeed, the vast majority, nationwide — actually do pay the high rate, and this puts them at a severe disadvantage in the international arena: If our competitors can enjoy greater returns on investment thanks to their lower rate, then they have a significant advantage. And that significant advantage for them translates into a significant disadvantage for our companies, and our workers.

Now some companies — especially the larger ones, with more internal flexibility — do exercise the ultimate tax avoidance strategy and move their headquarters to other countries where the tax rate is lower. The spate of “inversions” in recent years is testament to the fact that the high corporate tax rate in and of itself is driving businesses and jobs away from America.

Thus, businesses that create jobs in America often find themselves taxed at higher rates than those that don’t. The RATE Coalition’s member companies employ one-third of America’s private-sector workers, and contrary to the conventional wisdom, our membership pays an average effective federal tax rate of 32 percent.

This anti-competitive U.S. corporate tax rate has handicapped us against our international competitors for too long. It has made it more difficult to invest in our American employees and operations, while limiting the value we’re able to create for our shareholders.

So long as our rate remains the highest, American employees, shareholders and suppliers will all be bearing the consequences of our high corporate tax rate — and the result is anemic job creation, dampened economic security, and overall reduced investment in the United States.

For years now, both Democrats and Republicans have supported lowering the corporate tax rate. President Obama spoke about it in most of his State of the Union Addresses. And in their first debate back in 2012, Mr. Obama and Republican candidate Mitt Romney agreed on the need to lower the rate.

Former President Bill Clinton is on the record supporting a lower rate. And, of course, President Trump has made it a centerpiece of his tax plan.

Lowering the rate is a simple and fair way to address the fact that America’s jobs are disappearing. In this polarized era, it is one important step we can take to get the American economy growing in America again. America’s workers need a win. Real tax reform starts with the rate.

• Elaine C. Kamarck and James P. Pinkerton are co-chairs of the RATE Coalition.

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