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February 10. 2014

Tax Experts Agree: The U.S. Tax Code is Broken and Needs to be fixed

At a panel discussion on January 29th, co-hosted by the American Enterprise Institute and the Alliance for Competitive Taxation, leading voices in the tax discussion argued that the tax code is out of date and stifling economic growth, job creation and competitiveness. Here are some highlights from the event:

Dr. Laura D’Andrea Tyson, Economic Advisor to the Alliance for Competitive Taxation and Professor at the University of California, Berkeley Hass School of Business:

  • The U.S. corporate tax system is not an attraction to the U.S. as a place to do business, either for U.S. companies or for foreign companies. I think that matters to our economic well-being at home.”
  • “Who bears the burden of the corporate tax? … [A] significant and rising share of the corporate tax burden in the U.S. is borne by U.S. workers.
  • “These [U.S.-based multinational companies] are the ACT companies. These are the companies that are leading on corporate tax reform. Okay, what about them? They have sixty-five percent of their sales in the U.S., sixty-eight percent of their employment in the U.S., seventy percent of their capital investment in the U.S. – seventy percent! – and eighty-four percent of their R&D in the U.S. They matter to the U.S. economy. And so if they’re saying ‘we are being disadvantaged by the current system and we would prefer an alternative system which is revenue neutral,’ we should at least give them a hearing.”
  • “There’s a lot of evidence out there among economists that the activity among U.S. multinationals in the U.S. economy and their activities abroad are not substitutes, one for the other, but they’re complementary, one for the other. So if you disadvantage them in foreign markets, that is not a positive for the U.S. economy. If you do something to the U.S. tax system which makes them less competitive vis-à-vis a foreign competitor …that has negative effects on their activity at home.

 

Daniel Shaviro, New York University School of Law:

  • The existing U.S. corporate income tax is such a mess conceptually and practically that the idea of reform is appealing…Clearly there’s a lot that’s wrong with what we have now. It’s difficult to imagine anyone would design it from scratch as the system we should have.”

 

Marty Sullivan, Tax Analysts:

  • “We all have seen the chart where we used to have the lowest corporate tax rate in the world and now we have the highest. By standing still we have fallen behind. And everybody says, quite rightly, ‘why the heck are we in that position?'”
  • “We can all agree that lockout [the tax disincentive to repatriation of foreign subsidiary income] is a really bad thing, and any tax reform worth its salt will get rid of that. That has just got to go. And the economic costs can be quite large, as the Berkeley study shows.”