Rep. Kevin Brady took the first step toward international tax reform legislation Wednesday, announcing a hearing on ideas next week.
Citing the number of U.S. companies that have moved their headquarters outside the country for tax purposes, the House Ways and Means Committee chairman said the government’s “outdated international tax rules and sky-high corporate tax rate continue to create an unfriendly environment that ultimately hurts our economy and American workers.”
“Other countries around the world are also targeting American employers and making it even harder for them to create good jobs here at home,” the Texas Republican warned.
Despite the urgency created by the prospect of U.S. companies moving their headquarters outside the U.S. and shrinking the tax base, Brady faces tough obstacles to passing legislation.
Senate Majority Leader Mitch McConnell was cool to a similar effort last year led by Rep. Paul Ryan, then the chairman of the tax-writing Ways and Means Committee. And any bipartisan dealmaking, already difficult given underlying disagreements about whether and how to raise tax revenue, is hard to pull off in an election year.
Nevertheless, Brady appears more worried about the tax situation than other lawmakers. Last week, he sounded the alarm about the damage being inflicted by the U.S. corporate tax code, suggesting that as many as 30 companies could leave the country this year.
U.S. companies face the highest corporate tax rate, 35 percent, of any developed nation. Unusually for major economies, they owe those taxes on all foreign earnings once they are brought back into the country. The result is that U.S. companies have an estimated $2.3 trillion in earnings held overseas and face significant incentives to merge with companies in low-tax jurisdictions and place their headquarters there or to be taken over by foreign companies.
The Ways and Means hearing is scheduled for next Wednesday.
