The global race to attract and retain new investments, quality jobs and a better standard of living takes place day in and day out. This race really never stops, and if anything only accelerates as our world becomes more interconnected.
There was a time however, when U.S. companies faced little competition from the rest of the world. Indeed, in 1962 when our international tax laws were last overhauled, 17 of the 20 largest companies in the world called America home. Fast forward a half century and today just six of the largest companies in the world are U.S.-based.
The recently-released World Economic Forum Global Competitive Rating helps to explain this startling trend. The U.S. now ranks as the seventh most competitive country in the world; in 2008, we were ranked first.
In that study, American respondents identified taxes as one of the most difficult aspects of doing business. And when it comes to creating incentives for doing business, the U.S. tax system ranked 69th, behind Ethiopia, Ghana and Bangladesh.
American workers are the most creative and productive in the world, but we’re running the global race with ankle weights. In 2000, 17 OECD countries had yet to reform their international tax systems; today the U.S. is one of just 7 countries without some form of a modern, hybrid international tax system. Furthermore, we are the lone G-8 economy that hasn’t yet pursued international reform in order to encourage more investment.
Under our current system; when a globally engaged American company seeks to return its foreign earnings to the United States, it faces an outdated toll tax. That double tax is a high hurdle and acts as distinctive to invest here at home.
Consequently, our economic competitiveness is threatened each day we stand still on reform – allowing more than $2 trillion (and counting) to remain trapped outside the United States. That is investment that could be used for increased research and development, plant expansions, better worker benefits and the creation of more American jobs.
As the country turns its focus back to Washington and the upcoming debt limit and budget battles, many are wondering whether Congress will have the time and will to take on a politically difficult issue like comprehensive tax reform.
Fortunately, House Ways and Means Committee Chairman David Camp and Senate Finance Committee Chairman Max Baucus are committed to an overhaul. They understand that for the American economy to thrive, we need sensible tax policies and we need them now.
If America is going to regain its position as the most competitive country in the world, we must remove hurdles to economic growth and investment – starting with transitioning to a modern, hybrid international tax system that that would promote increased U.S. investment, while protecting America’s tax base. And at that point it’s time to let our workers do what they do best – win!
