Sep 22, 2014 - 9:30am

The Tax Debate Must Focus on Competitiveness

President and CEO, U.S. Chamber of Commerce


Photo by Ian Wagreich

The president and some prominent members of his party have decided that now is the time to demagogue so-called tax inversions and demonize U.S. corporations that choose to merge with a foreign company simply to gain equal footing on taxes. Never mind that there’s dwindling time remaining on the congressional calendar before lawmakers recess until the election and job-creating priorities are piling up.

It’s a political sideshow. Worse still, it misses the point. Our own embarrassingly uncompetitive tax code is what’s pushing U.S. companies to pursue alternative tax situations in the first place. And when lawmakers call American companies unpatriotic for taking legal steps to compete in a global economy—while those same leaders refuse to address the shortcomings in our own system—they are adding insult to injury.  

Just last week, the Tax Foundation, a leading nonpartisan tax research group, provided fresh evidence for what is already well known—the United States has one of the least competitive tax systems in the industrialized world. In its International Tax Competitiveness Index, the United States ranked 32 out of the 34 developed nations surveyed, leading only Portugal and France. Our abysmal standing is due largely to our combined state and federal corporate tax rate of 39.1%—the highest of any developed country. On top of that, the U.S. Government subjects overseas earnings to double taxation.

As long as our tax system remains punitive, companies are going to consider their legal options in order to stay competitive and profitable and so that they can keep their operations planted on U.S. soil and staffed by U.S. Workers.

There’s a way, however, to stop corporate tax inversions: Fix our broken tax code. Comprehensive reform would help foster economic growth, increase American global competitiveness, and attract international investment and innovation. The U.S. Chamber of Commerce is advocating for lower rates for corporations and individuals alike, a broader tax base, and reforms to reduce complexity in the system and simplify compliance. These steps would eliminate homegrown incentives for corporate inversions because they would allow businesses to compete on a level playing field—to the great benefit of our economy and our workers.

Through an aggressive new campaign, the Chamber is urging policymakers to keep the focus where it really belongs: making the U.S. tax system competitive. Our leaders can show that they’re serious about addressing shortcomings in our tax code—and not just making hay in the lead-up to an election—if they begin the work of comprehensive tax reform.

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About the Author

About the Author

Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce

Thomas J. Donohue is president and CEO of the U.S. Chamber of Commerce.