The Labor Department data from January 2015 shows the U.S. employment is finally greater than pre-recession levels. However, as the working age population has increased at a faster rate than workers have been able to find jobs, almost 9 million workers remain unemployed and millions more are under-employed, working fewer hours than desired.  Over one-third of the employed have been out of the work force for more than six months.  So what can leaders in Washington do to create jobs and put the U.S. economy on a more secure path to prosperity and growth?
There is no magic bullet, but there is a consensus among experts on both sides of the political aisle that corporate tax reform that creates a modern international tax system will give our economy a much needed boost and show the American public that its leaders are capable of tackling the challenges facing our country. A recent study by ACT advisor Dr. Laura Tyson and the Berkeley Research Group highlighted how the U.S.'s outdated worldwide system of taxation is impeding American competitiveness in foreign markets. According to this new study:
transition to a territorial system will lead U.S. MNCs to repatriate about $1 trillion This additional repatriation will increase domestic consumption and investment. We estimate that the additional consumption and investment will lead to a one-time increase in U.S. GDP by at least $208 billion and create at least 1.46 million new U.S. jobs. Following the transition, we estimate that the treatment of foreign source earnings in the stylized territorial system will increase annual repatriations by about $114 billion, leading to an increase in U.S. GDP by at least $22 billion per year and to the creation of at least 154,000 new U.S. jobs per year.
One factor lawmakers must consider is what the U.S. is losing out on by keeping our current worldwide tax system. Former Tax Foundation fellow Phillip Dittmer released a report in 2012 that illustrates the problems with our outdated international system. His findings were not promising:
Beyond imposing the highest top marginal tax rate in the developed world, the U.S. tax system's treatment of international business income is exceptionally burdensome. It inflicts tremendous compliance costs, creates enormous distortions of economic activity, deters companies from headquartering in the U.S., awards tax preferences to politically connected industries, and traps huge amounts of U.S. corporate profits overseas. To add insult to injury, despite these punitive features, the system captures a meager stream of tax revenue.
Former Obama economic adviser Austan Goolsbee recently echoed Dittmer's findings, noting:  Our tax code is so outdated, it's a motivator just itself to have transactions even if they didn't make economic sense.Our corporate tax system gives an incentive for foreign purchases of U.S. companies so they can then flip where the headquarters is.
The U.S. is one of the few remaining developed countries that has not adopted a modern international tax system tax allowing foreign earnings of foreign subsidiaries to be repatriated at little or no tax cost. In fact, 28 of the 34 OECD member companies have adopted so-called territorial tax systems with half of those switching over since 2000. Today, 93% of the non-U.S. based OECD companies in the global Fortune 500 are headquartered in countries with territorial tax systems.
American multinationals have over $2 trillion of accumulated foreign earnings that is indefinitely reinvested abroad much of it trapped overseas by the 35% tax rate imposed by the U.S. on repatriated earnings.  Under a territorial system, the tax penalty for repatriating these earnings would be largely or wholly eliminated, allowing American businesses to fund research and development and make investments in the United States. ACT economic advisor Doug Holtz-Eakin summed it up:
Currently, American companies have $2 trillion in earnings that they cannot invest in the United States without incurring a tax penalty; that's money our economy desperately needs. The benefits are obvious: That $2 trillion can fund research and development in the U.S. so that the next great product can be American-designed. It can expand domestic production facilities. It can hire American workers. Today, 95 percent of the world's consumers are outside of the U.S. We should want our businesses to sell American workers products to them. And when they do, we should want the profits to come back home.
In 1988, following the rate reduction in the 1986 tax reform act, the combined U.S. federal and average state corporate tax rate was lower than the average for other OECD member countries. In the quarter century since then, however, other developed countries have steadily lowered their rates, turning the tables on what was once an American strength. Today, America's 39.1 percent combined corporate tax rate holds the dubious distinction of being higher than the rate of any other country in the industrialized world, over 14 percentage points higher than the 24.8 percent average of other developed countries.
After looking at the facts about America's tax code, it's clear our current tax system is hanging like an anchor on the U.S. economy, holding back growth and job creation. By adopting a modern international tax system, lowering the corporate tax rate to 25 percent, and offsetting the revenue cost by broadening the tax base, a recent Business Roundtable report shows we could expand annual domestic investment by 6.8 percent and boost after-tax wages for American workers by 6.1 percent over the long term. As we consider plans to get our economy back on track, it's time for Congress to embrace a modern international tax system and a competitive corporate rate it would be good for American workers, level the playing field for American businesses, and finally help our economy create jobs again.