America needs a new 21st Century tax code that is built for growth -- the growth of families’ paychecks, the growth of local businesses, and the growth of our economy. Ways and Means Republicans believe we have a responsibility to work on this challenge now. That’s why we’re holding a hearing at our committee Wednesday about international tax reform – a critical component of our comprehensive plan to overhaul our tax system from top to bottom.
Since January, three major American companies have decided to move their headquarters, and many American jobs, overseas.
To put this in perspective, in the two decades leading up to 2004, we averaged two “inversions” of substantial American businesses per year. In the decade through 2014, we averaged four per year. In 2015, there were six more. And if the pace so far this year continues, the three in January might become 30 by the end of the year.
When American workers are losing their jobs to people in other countries, Washington cannot afford to ignore this disturbing trend any longer. While Democratic presidential candidates want to just blame U.S. corporations, the reality is that their strategy won’t help protect American workers or save their jobs.
We must address the real root of the problem – our broken tax code that discourages investment and growth. Our hearing Wednesday will examine the driving forces behind inversions and foreign mergers and how we can develop policies that will prevent more American jobs from moving overseas. The policies we develop will also be designed to attract more foreign firms and jobs to locate to the U.S.
Our sky-high 35 percent corporate tax rate bears much of the blame. After all, when a company can move to Ireland and pay a 12.5 percent tax rate, it makes it harder to choose to stay in the United States and pay over three times as much.
We will also examine how other countries are taking actions with their tax systems that disproportionally burden American global businesses and ultimately, our workers.
The Organization for Economic Co-operation and Development (OECD) in its Base Erosion and Profit Shifting (BEPS) project has advanced ideas that will make it harder for our companies to compete and grow. Worldwide American companies are rightly concerned that the BEPS project will result in higher foreign taxes, higher compliance costs, and double taxation. As countries around the world incorporate the BEPS ideas into their tax systems, many more companies could be forced to restructure their business operations and move U.S. activities, such as research and development, overseas.
The European Union state-aid investigations also threaten to impose retroactive taxes going back ten years on American businesses. We cannot allow American taxpayers to foot the bill for tax revenue grabs in Europe and elsewhere.
A direct result of these global developments is the loss of jobs for hardworking Americans. The loss of an American global business to a foreign merger or foreign takeover means many of its headquarters jobs will move to the foreign jurisdiction. Because these companies currently have American suppliers and other local businesses that support their operations, the negative impact will ripple throughout our economy. When business decisions are made in the new foreign headquarters, foreign vendors will replace many of these American small businesses.
This downward spiral will continue until we deliver pro-growth tax reform that includes changes to our international tax system. It’s time to permanently lower America’s tax gate so that the $2 trillion in stranded U.S. profits can flow back into America to be invested in new jobs, research and growth.
To deliver the simpler, fairer and flatter tax system Americans deserve, members of our Committee will think fresh and boldly. We will examine the whole range of tax ideas – consumption tax, reformed income tax, and any other approach that will be pro-growth. There is no perfect way to tax, but there are proven ways to grow investment – and that’s what we will focus on.
Our hearing Wednesday is another step in our plan to bring our tax code into the 21st Century and protect American workers and their jobs.
The American people want leadership on this issue – and the Ways and Means Committee will deliver it.