One of the lines that hit home in Hillary ClintonHillary Diane Rodham ClintonRepublican Ohio Senate candidate slams JD Vance over previous Trump comments Budowsky: Why GOP donors flock to Manchin and Sinema Countering the ongoing Republican delusion MORE’s acceptance speech in Philadelphia was this: “It’s wrong to take tax breaks with one hand and give out pink slips with the other.”
Here at the bipartisan RATE (Reforming America’s Taxes Equitably) Coalition, a group of 33 American companies and organizations, with members in all 50 states, we agree. We recognize that few issues have resonated more, on both sides of the aisle; during this campaign season, both parties are outraged that companies laying workers off and moving American jobs overseas. Everyone can agree on that. And so the question is what to do about it.
At RATE, we believe in taking on the problem at its root. We believe that the root cause is the flawed corporate tax code, which encourages companies to “invert,” taking jobs and sorely needed tax revenue overseas. Hence the “Reforming” in our name: Yes, we want real reform, closing loopholes, letting the chips fall where they may.
You see, America today has the highest corporate tax rate in the world, a bit more than 39 percent. By contrast, the average corporate tax rate among our major trading partners—the “club” of the 35 most developed nations, the Organization for Economic Cooperation and Development (OECD)—is now below 25 percent and going lower—the United Kingdom, for example, is slated to cut its corporate tax rate all the way down to 17 percent. In other words, if a company moves its headquarters to bustling London, for example, it will soon be paying a tax rate less than half of that in the US. And the corporate tax rate in Ireland, which another nice place to live and work, is a mere 12.5 percent. Indeed, according to the OECD, of all the different kinds of taxes, the corporate income tax is the most harmful to economic growth. It would appear that rival countries are paying closer attention to that wisdom than Uncle Sam!
So immediately, we can see the root of the problem: American companies are struggling to compete on a distinctly un-level playing field—rival foreign companies could be paying a half or a third as much.
To be sure, some American companies pay less than the 35 percent—often because of the loopholes that we would like to see done away with!—but many firms do, in fact, pay the full rate. Indeed, that’s why the RATE Coalition came into existence five years ago, to fix this inequity. Our message has always been easy to state: Reduce the US corporate tax rate to a globally competitive rate, and in return, as part of the deal, loopholes go on the chopping block, to be chopped as needed.
Yes, our plan is that simple. But then of course, the end result of true reform is always simple; true reform means greater fairness, greater transparency—and more jobs and more growth.
In fact, tax reform is tantalizingly close. As President Barack ObamaBarack Hussein ObamaPolitics must accept the reality of multiracial America and disavow racial backlash To empower parents, reinvent schools Senate race in Ohio poses crucial test for Democrats MORE said in 2014,
“Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs here at home.”
That sounded good to us then, and it sounds good to us now. Indeed, the outlines of a bipartisan consensus solution are readily visible: The Republican leadership in Congress, spearheaded by House Ways & Means Committee Chairman Kevin BradyKevin Patrick BradyEconomic growth rate slows to 2 percent as delta derails recovery Democratic retirements could make a tough midterm year even worse Yellen confident of minimum global corporate tax passage in Congress MORE of Texas, has signaled that it is open to a deal—indeed, the GOP put it in its platform; it’s right there on page two: “We propose to level the international playing field by lowering the corporate tax rate to be on a par with, or below, the rates of other industrial nations.” Yes, even in this era of intense polarization, where if one party says “A” the other one instantly says “Z,” tax reform has been one of the few areas where constructive bipartisan agreement between Democrats and Republicans is foreseeable.
And what if tax reform doesn’t happen? What if Washington does nothing? Well, that would be bad; we’ve already seen a hemorrhage of good jobs at good wages: As the accounting firm of Ernst & Young has noted, the number of Fortune Global 500 headquarters in the US decreased from 179 in the year 2000 to 133 in 2011.* Think about what a loss it is, in money and prestige, when an American city loses a corporate HQ.
Indeed, if we don’t see tax reform, then the erosion of jobs and growth here at home will continue. As Peter Morici, an economist at the University of Maryland has noted, the situation is already grim:
“Since 2000, a much smaller percentage of adults are working or looking for work, economic growth is half the pace of the prior 20 years, and average family incomes are down nearly $4,000. Suicides and drug abuse are up . . . millions of recent college graduates are employed at places like Starbucks and living with parents, and home ownership is at a 50-year low.”
Okay, Morici is a Republican, but here’s a not-dissimilar judgment of Ezra Klein, a progressive, writing on August 1 at Vox. As you can see, it's not much different:
“The growth of the US economy keeps falling short of expectations. On Friday, we learned that the US economy grew at an inflation-adjusted rate of 1 percent in the first half of 2016. That’s the slowest six-month growth rate since 2012, and it continues the slow growth that has characterized the recovery since 2009.”
So concern about slow growth, too, is bipartisan—as it should be.
Thus we can see that the continued existence of tax loopholes in our current antiquated code—it has not been reformed since 1986—hasn’t helped growth, and hasn’t slowed the distribution of pink slips. Again, that’s because, while loopholes are part of the problem, the underlying problem is that high corporate tax rate.
So come on Washington: Let’s get rid of the loopholes. Let’s lower the tax rate so we can compete in the world, and then we’ll keep American jobs here at home.
Elaine C. Kamarck and James P. Pinkerton are RATE Coalition Co-Chairs.
The views expressed by authors are their own and not the views of The Hill.