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July 31. 2013

ACT Advisor, Dr. Laura Tyson, Calls For Tax Reform at Congressional Economic Committee Hearing

ACT Advisor, Dr. Laura Tyson, Calls For Tax Reform at Congressional Economic Committee Hearing

Expert Tells Congress Reform Would Create Jobs, Boost Competitiveness and Grow our Economy

WASHINGTON, D.C. – Today, Dr. Laura Tyson, an economic advisor to the Alliance for Competitive Taxation (ACT) and former Chair of the Council of Economic Advisers under President Clinton, testified at a Joint Economic Committee hearing on how tax reform can boost economic growth.

Today’s hearing comes as momentum is building for fixing our broken tax system. Earlier this week, President Obama spoke on the need for tax reform.  Senate Finance Committee Chairman Max Baucus and Ways and Means Committee Chairman David Camp have also made commitments to mark up bills in the fall.

In her testimony, Dr. Tyson spoke about the challenges of our current tax system and need for reform, saying: “Today, our corporate tax system is failing our country, reducing the competitiveness of the U.S. economy as a place to do business and create jobs.”

With an statutory corporate tax rate of 39.1 percent, the U.S. rate is higher than any other developed country and putting American businesses and workers at a competitive disadvantage in the global economy. Dr. Tyson discussed the economic benefits of lowering the corporate tax rate, saying “Higher investment in the U.S. by both domestic and foreign companies would foster economic growth and improve productivity, create jobs and boost real wages over time.… Like most economists, I believe that we can and should pay for such a rate reduction by broadening the corporate tax base through the elimination of tax breaks and preferences. This would also reduce the complexity of the corporate tax code and increase efficiency by reducing distorting tax differences across economic activities.”

Adopting a modern tax system would allow American companies to compete more effectively outside of the U.S. – where 95% of the world’s consumers reside – and create jobs and investment at home. With regards to international tax reform, Dr. Tyson stated: “Most other OECD countries have adopted modern international tax systems…The United States, by contrast, taxes U.S. companies when they repatriate the business earnings of their foreign subsidiaries, and this lies far outside international norms. To counter this disadvantage, U.S. companies have a strong incentive to keep their foreign earnings abroad.  That’s a major reason why the foreign affiliates of these companies hold an estimated $2 trillion in accumulated foreign earnings. These earnings are not financing investment and job creation in the United States.”

Dr. Tyson also previewed a report that the Berkeley Research Group is developing, saying the findings suggest “adopting a 95-percent participation exemption system in the U.S.  would increase U.S. employment by about 150,000 jobs a year on a sustained basis, with a short-term employment gain nearly 10 times larger. These gains in employment are the result of a significant increase in the repatriation of income by foreign subsidiaries and that would increase both investment and consumption in the U.S.”

 

Below are Dr. Tyson’s remarks to the committee as prepared for delivery.  Click here to view Dr. Tyson’s written testimony as submitted for the Committee record.